<PAGE>
As filed with the Securities and Exchange Commission on December 6, 1999
Registration No. 333-91557
333-91557-01
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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CONSECO FINANCE CORP.
(Exact name of registrant as specified in its charter)
---------------
Delaware 41-1807858
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CONSECO FINANCE SECURITIZATIONS CORP.
(Exact name of registrant as specified in its charter)
---------------
Minnesota 41-1807858
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 Landmark Towers
345 St. Peter Street
Saint Paul, Minnesota 55102-1639
(651) 293-3400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
BRIAN F. COREY, ESQ.
300 Landmark Towers
345 St. Peter Street
Saint Paul, Minnesota 55102-1639
(651) 293-3400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
CHARLES F. SAWYER, ESQ. CATHY M. KAPLAN, ESQ.
Dorsey & Whitney LLP Brown & Wood LLP
220 South Sixth Street One World Trade Center
Minneapolis, Minnesota 55402 New York, New York 10048
(612) 340-2600 (212) 839-5531
---------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
Pursuant to Rule 429, the Prospectus contained in this Registration
Statement also relates to and constitutes Post-Effective Amendment No. 1 to
Registration Statement No. 333-75375, which was declared effective on June 7,
1999.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
[Conseco Logo]
PROSPECTUS SUPPLEMENT
(To Prospectus dated December , 1999)
$ (Approximate)
Conseco Finance Corp.
Servicer
Conseco Finance Securitizations Corp.
Seller
Conseco Finance Recreational Enthusiast Consumer Trust 1999-B
Floating Rate Asset-Backed Notes
----------------
The trust will issue three classes of securities, two of which are offered
under this prospectus supplement.
<TABLE>
<CAPTION>
Approximate Interest Underwriting Proceeds to
Class Principal Amount Rate Price to Public Discount Seller
----- ---------------- -------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Class A Notes........... (1)
Class M Notes........... (2)
</TABLE>
- --------
(1) One-month LIBOR plus %, except as described more fully in this prospectus
supplement.
(2) One-month LIBOR plus %, except as described more fully in this prospectus
supplement.
The approximate principal amount of the classes of notes listed above may
vary plus or minus 5%. The price to public will be the percentage total in the
table above plus any accrued interest beginning on December 15, 1999.
Consider carefully the risk factors beginning on page S-9 in this prospectus
supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
[Bank legend--not deposit liabilities?]
These notes will be delivered on or about December 15, 1999.
The underwriters named below will offer the notes to the public at the
offering price listed on this cover page and they will receive the discount
listed above. See "Underwriting" on page S-39 in this prospectus supplement and
"Plan of Distribution" on page 54 in the prospectus.
----------------
Credit Suisse First Boston
The date of this prospectus supplement is December , 1999.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Terms of the Notes........................................ S-4
Risk Factors............................................................. S-9
The Trust................................................................ S-12
The Trust Property....................................................... S-13
The Contract Pool........................................................ S-14
Conseco Finance Corp..................................................... S-20
Credit Suisse First Boston............................................... S-22
Yield and Prepayment Considerations...................................... S-23
Description of the Notes................................................. S-26
Description of the Trust Documents and Indenture......................... S-33
Federal and State Income Tax Consequences................................ S-36
ERISA Considerations..................................................... S-37
Underwriting............................................................. S-39
Legal Matters............................................................ S-41
Annex I.................................................................. A-1
Prospectus
Important Notice about Information Presented in this Prospectus and the
Prospectus Supplement................................................... 2
The Trusts............................................................... 3
The Contracts............................................................ 4
Conseco Finance Corp..................................................... 5
Conseco Finance Securitizations Corp..................................... 7
Yield and Prepayment Considerations...................................... 7
Pool Factor.............................................................. 8
Use of Proceeds.......................................................... 9
The Certificates......................................................... 9
The Notes................................................................ 10
Information Regarding the Securities..................................... 17
Description of the Trust Documents....................................... 21
Legal Aspects of the Contracts........................................... 34
Federal Income Tax Consequences.......................................... 39
State Income Tax Consequences............................................ 52
ERISA Considerations..................................................... 53
Plan of Distribution..................................................... 54
Legal Matters............................................................ 55
Experts.................................................................. 55
Glossary................................................................. 56
</TABLE>
You should rely only on the information contained in this prospectus
supplement and prospectus. Conseco Finance and Conseco Securitizations and the
underwriters have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. Conseco Finance and Conseco Securitizations and the
underwriters are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
This document consists of a prospectus supplement and a prospectus. The
prospectus provides general information about Conseco Finance, about its
recreational consumer lending business, and about any series of asset-backed
securities secured by a pool of recreational, equipment and consumer loans that
we may wish to sell. This prospectus
S-2
<PAGE>
supplement contains more detailed information about the specific terms of this
series of securities. If the description of the term of your series of
securities varies between this prospectus supplement and the prospectus, you
should rely on the information in this prospectus supplement.
If you have received a copy of this prospectus supplement and prospectus in
an electronic format, and if the legal prospectus delivery period has not
expired, you may obtain a paper copy of this prospectus supplement and
prospectus from Conseco Finance, Conseco Securitizations or an underwriter by
asking for it.
No prospectus regarding these securities has been or will be prepared in the
United Kingdom pursuant to the United Kingdom Public Offers of Securities
Regulation 1995. These securities may not be offered or sold, or re-offered or
re-sold, to persons in the United Kingdom, except (1) to persons whose ordinary
activities involve them in acquiring, holding, managing and disposing of
investments (as principal or agent) for the purpose of their businesses, or (2)
in circumstances that will not constitute or result in an offer to the public
in the United Kingdom within the meaning of the United Kingdom Public Offers of
Securities Regulation 1995. You may not pass this prospectus supplement and
prospectus, or any other document inviting applications or offers to purchase
securities or offering securities for purchase, to any person in the United
Kingdom who (1) does not fall within article 11 (3) of the Financial Services
Act 1986 (Investment Advisements) (Exemptions) Order 1996 or (2) is not
otherwise a person to whom passing this prospectus supplement and prospectus
would be lawful.
S-3
<PAGE>
SUMMARY OF THE TERMS OF THE NOTES
This summary highlights selected information regarding the notes, and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the notes, read this
entire prospectus supplement and the accompanying prospectus. In particular, we
will refer throughout this summary to sections of this prospectus supplement or
the prospectus, or both, which will contain more complete descriptions of the
matters summarized. All these references will be to sections of this prospectus
supplement only unless we note otherwise.
The two classes of notes listed in the table below will be issued by the
trust. The trust will own a pool of contracts financing the purchase of a
variety of [commercial trucks].
<TABLE>
<CAPTION>
Interest Approximate S&P Fitch
Class Rate Principal Amount Rating Rating
- ----- -------- ---------------- ------ ------
<S> <C> <C> <C> <C>
Class A Notes........................... (1) A-1+ F1+
Class M Notes........................... (2) A-1+ F1+
Class B Certificates.................... -- -- -- --
</TABLE>
- --------
(1) One-month LIBOR plus %, but in no case more than %.
(2) One-month LIBOR plus %, but in no case more than %.
Conseco Securitizations will not issue or sell the notes unless S&P and Fitch
assign each class the rating listed above.
The rating of each class of notes by S&P addresses the likelihood of timely
receipt of interest and ultimate receipt of principal. The rating of each class
of notes by Fitch addresses the likelihood of timely payment of interest and
ultimate payment of principal. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the assigning rating agency. The ratings of the notes are based in
part on an assessment of Credit Suisse First Boston's ability to purchase notes
following the exercise of a noteholder's rights under the note purchase
agreement.
The Class B certificates are not being offered under this prospectus
supplement and prospectus. We are offering all the other classes of securities
listed in the table above. We, or one of our affiliates, initially will retain
the Class B Certificates.
Seller........................ Conseco Finance Securitizations Corp.
Servicer...................... Conseco Finance Corp. Conseco Finance Corp. was
previously named Green Tree Financial
Corporation.
Indenture Trustee............. U.S. Bank Trust National Association, St. Paul,
Minnesota, will be the indenture trustee. For a
more
S-4
<PAGE>
complete description of the indenture trustee's
responsibilities, see "The Notes--The Indenture
Trustee" in the prospectus.
Owner Trustee................. Wilmington Trust Company, Wilmington, Delaware.
For a more complete description of the owner
trustee's responsibilities, see "Description of
the Trust Documents--The Trustee" in the
prospectus.
Note Purchase Agreement
Counterparty..................
Credit Suisse First Boston, New York Branch.
Distribution Date............. The fifteenth day of each month or, if that day
is not a regular business day, the next regular
business day. The first distribution date will
be on January 15, 2000.
Record Date................... The business day just before the related
distribution date.
Description of the Notes...... The trust will issue the notes pursuant to the
indenture between the trust and the indenture
trustee. The notes will be debt obligations of
the trust, secured by the contracts and the
other property of the trust.
Distributions on the Distributions on the notes on any distribution
Securities.................... date will be made primarily from amounts
collected on the contracts during the prior
month. On each distribution date the indenture
trustee will apply the amount available to make
distributions on the securities in the
following order of priority:
(1) Interest on the Class A notes;
(2) Interest on the Class M notes;
(3) Principal on the Class A notes;
(4) Principal on the Class M notes; and
(5) Any remaining amount available will be
distributed to the Class B
certificateholders.
No principal will be paid on the Class M notes
until the Class A notes have been retired. See
"Description of the Trust Documents and
Indenture--Distributions" for a more detailed
description of the amounts that will constitute
the amount available for any distribution date.
S-5
<PAGE>
Note Purchase Agreement and
Call Option...................
On January 5, 2001, each noteholder will have
the right to require Credit Suisse First
Boston, New York Branch to purchase that
noteholder's note for a price equal to the
unpaid principal balance of that note plus all
accrued and unpaid interest thereon. CSFB and
the holder of the Class B certificates will
have the option to purchase all of the
outstanding notes on the same terms and at the
same price on January 5, 2001 and on each
distribution date thereafter.
You will be notified of your right to exercise
your option at least 45 days before January 5,
2001. If you intend to sell your note to CSFB,
you must give written notice to the servicer of
your intention no later than [10] days prior to
January 5, 2001.
Clean-Up Option; Auction
Sale; Additional Principal Beginning on the distribution date when the
Distributions................. pool scheduled principal balance of the
contracts is less than 20% of the cut-off date
pool principal balance of the contracts, the
holder of the Class B certificates will have
the right to repurchase all of the outstanding
contracts, at a price sufficient to pay the
aggregate unpaid principal balance of the notes
plus all accrued and unpaid interest.
If the holder of the Class B certificates does
not exercise this purchase option, then on the
next distribution date the indenture trustee
will begin an auction process to sell the
contracts and the other trust assets, but the
indenture trustee cannot sell the trust assets
and liquidate the trust unless the proceeds of
that sale are sufficient to pay the aggregate
unpaid principal balance of the notes plus all
accrued and unpaid interest. If the first
auction of the trust property is not successful
because the highest bid received was too low,
then the indenture trustee will conduct an
auction of the contracts every third month
after that, unless and until an acceptable bid
is received for the trust property.
If the first auction of the trust property is
not successful because the highest bid received
was too
S-6
<PAGE>
low, then on each remittance date after that
the noteholders will be entitled to receive an
additional principal distribution amount equal
to the remaining amount available after paying
all interest and principal then due on the
notes and payment of the monthly servicing fee.
This additional principal distribution amount
will be paid [sequentially/pro rata]. See
"Description of the Trust Documents and
Indenture--Purchase Option; Auction Sale;
Additional Principal Distribution Amount."
The Contracts................. The contracts are retail installment sales
contracts and promissory notes for the purchase
of a variety of [commercial trucks]. Conseco
Finance and Conseco Securitizations provide
more information about the contracts and the
trucks they financed in "The Contract Pool."
Tax Status.................... In the opinion of Conseco Securitization's
counsel, for federal and Minnesota income tax
purposes, the notes will be characterized as
debt, and the trust will not be characterized
as an association, or publicly traded
partnership, taxable as a corporation. By
purchasing a note, you will agree to treat the
notes as debt. See "Federal Income Tax
Consequences" in this prospectus supplement and
"Federal Income Tax Consequences" and "State
Income Tax Consequences" in the prospectus.
[Pre-Funding Account.......... If the aggregate principal balance of the
contracts that Conseco Securitizations
transfers to the trust on the closing date is
less than $ , the indenture trustee will
deposit that difference in a pre-funding
account, and the trust will use those funds to
purchase contracts from time to time until
, 2000. If those funds are not completely
used by , 2000, the remaining funds will be
distributed as principal on the Class A notes
on the 2000 distribution date.]
Money Market Eligibility...... The notes will be eligible securities for
purchase by money market funds under Rule 2a-7
under the
S-7
<PAGE>
Investment Company Act of 1940. A fund should
consult with its advisor regarding the
eligibility of the notes under Rule 2a-7 and
the fund's investment policies and objectives.
ERISA Considerations.......... Subject to the conditions described under
"ERISA Considerations," employee benefit plans
that are subject to the Employee Retirement
Income Security Act of 1974 may purchase the
notes.
Reports to Holders of the
Securities....................
Conseco Finance will provide to the holders of
the notes monthly and annual reports about the
notes and the trust. For a more complete
description of the reports you will receive,
please read the section entitled "Description
of the Trust Documents and Indenture--
Statements to Noteholders."
S-8
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
The trust has limited assets.
Holders of the notes must primarily rely for repayment upon payments on the
contracts. The trust will not have, nor is it permitted or expected to have,
any significant assets or sources of funds other than the contracts.
The Class M notes are subordinated.
Distributions of interest and principal on the Class M notes will be
subordinated to the rights of the holders of the Class A notes to receive prior
payment of interest and principal. This makes it more likely that the Class M
notes might not receive timely distributions of interest and principal, or may
not receive all the amounts due them.
Conseco Finance has limited delinquency, loan loss and repossession experience.
Conseco Finance began originating installment sales contracts for commercial
trucks in 1994. Although Conseco Finance has calculated and presented its
delinquency and net loss experience for its servicing portfolio of truck loans,
you must not assume that the information presented will reflect actual
experience for the contracts owned by the trust. In addition, you must not
assume that the future delinquency, loan loss or repossession experience of the
trust for the contracts will be better or worse than those described for our
servicing portfolio. See "The Contract Pool--Delinquency, Loan Loss and
Repossession Information." If the delinquency, default and loss experience of
the contracts owned by the trust is worse than expected, you could suffer a
loss on your investment.
Higher than expected delinquencies, higher than expected defaults, or higher
than expected losses after default could result in a loss on your investment.
Payments on the notes will be made primarily from payments on the contracts.
If the obligors on the contracts do not make timely payments, the trust may not
be able to make timely payment of interest and principal on your note. If an
obligor defaults on a contract, then the trust will be relying on the
servicer's ability to repossess and resell the related truck.
You should consider these risks that might cause higher than expected
delinquencies, defaults or losses:
. Geographic concentration of the [initial] contracts increases your exposure
to local economic conditions.
As of the cutoff date, the obligors on approximately % and % of the
[initial] contracts, based on principal balance and billing address of the
obligor, were located in and , respectively. See "The Contract
Pool." Accordingly,
S-9
<PAGE>
adverse economic conditions or other factors particularly affecting these
states could adversely affect the delinquency, loan loss or repossession
experience of the trust with respect to the contracts. If the delinquency,
default and loss experience of the contracts owned by the trust is worse
than expected, you could suffer a loss on your investment.
. The trust may not be able to enforce the contracts.
When Conseco Finance originated each contract, it required the customer
to grant Conseco Finance a security interest in the financed truck. When
Conseco Finance assigns the contracts to Conseco Securitizations, it will
also assign its security interests in the financed trucks. Because of the
administrative burden and expense, the documents reflecting the security
interest in the trucks will not be amended to reflect the assignment of
the security interest. As a result, there is a risk that the trust will
not have a perfected security interest in the trucks. If Conseco Finance
were no longer the servicer of the contracts and the trust had to begin
enforcing contracts in its own name, either directly or through a
replacement servicer, there is a risk that the trust would be unable to
repossess a truck following a default on the related contract, which would
result in higher losses on the contract pool. If losses on the contract
pool exceed expected levels, you may suffer a loss on your investment.
The trust may not own the contracts.
Conseco Finance will hold the files evidencing the contracts, as servicer on
behalf of the trust. To facilitate servicing and save administrative costs, the
documents will not be physically segregated from other similar documents that
are in Conseco Finance's possession. Conseco Finance will file UCC financing
statements reflecting the assignment of the contracts by Conseco Finance to
Conseco Securitizations, and by Conseco Securitizations to the trust, and its
accounting records and computer systems will also reflect that assignment.
Conseco Finance will stamp each contract to indicate that the contract has been
sold. Despite these precautions, if, through inadvertence or otherwise, any of
the contracts were sold or pledged to another party and that party took
possession of those contracts, then that purchaser, or secured party, would
acquire an interest in those contracts superior to that of the trust. If the
trust is unable to collect payments on some or all of the contracts, then you
may suffer a loss on your investment.
Prepayments on the contracts are unpredictable, and will affect your yield.
The contracts may be prepaid in full or in part at any time before their
scheduled maturity due to various factors, including general and regional
economic conditions and prevailing interest rates. The prepayment experience on
similar contracts varies greatly and may affect the average life of the notes.
You must not assume that the contracts will prepay at any particular rate, or
at a constant rate. If any noteholders exercise the put option, or CSFB
exercises its clean-up option, or the Class B certificateholder exercises its
purchase option, these actions would shorten the weighted average life of your
investment, thereby affecting the effective yield to maturity. For more
information, see "Yield and Prepayment Considerations."
S-10
<PAGE>
There may be no secondary market for the notes, which means you may have
trouble selling them when you want to.
We cannot assure to you that a secondary market will develop for the notes
or, if a secondary market does develop, that it will provide the holders of any
of the notes with liquidity of investment. We also cannot assure you that if a
secondary market does develop, that it will continue to exist for the term of
the notes.
If Conseco Finance becomes insolvent, you may suffer delays or reductions in
distributions on your notes.
Conseco Finance intends that each transfer of contracts to Conseco
Securitizations will constitute a sale, rather than a pledge of the contracts
to secure indebtedness. However, if Conseco Finance were to become a debtor
under the federal bankruptcy code, it is possible that its creditors, a
bankruptcy trustee or Conseco Finance as debtor-in-possession, may argue that
the sale of the contracts was a pledge of the contracts rather than a sale.
This position, if presented to or accepted by a court, could result in a delay
in or reduction of distributions to the holders of the notes.
The case of Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993) contains language to the effect that accounts sold by an entity which
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Although the contracts constitute chattel paper rather than accounts
under the UCC, sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If Conseco Finance became a debtor under the federal
bankruptcy code and a court follows the reasoning of the 10th Circuit and
applies this rule to chattel paper, holders of notes could experience a delay
or reduction in distributions.
If CSFB becomes insolvent, your yield to maturity may be lowered.
If CSFB, the note purchase agreement counterparty, becomes insolvent and is
unable to purchase your note when you exercise your option, you will retain
your note and will continue to be entitled to receive payments of interest and
principal in the manner described in this prospectus supplement. But if you
purchase a note and calculate your anticipated yield to maturity expecting to
exercise your option, CSFB's inability to timely purchase your note may result
in an actual yield to maturity that is lower than your anticipated yield.
Other rating agencies could provide unsolicited ratings on the notes that could
be lower than the requested ratings.
Although Conseco Finance has not requested a rating of the notes from any
rating agencies other than S&P and Fitch, other rating agencies may rate the
notes. These ratings could be higher or lower than the ratings S&P and Fitch
initially give to the notes. There is a risk that a lower rating of your notes
from another rating agency could reduce the market value or liquidity of your
notes.
S-11
<PAGE>
We have defined terms in the "Glossary" section at the back of the prospectus.
THE TRUST
The following information supplements the information in the prospectus. You
should consider, in addition to the information below, the information under
"The Trusts" in the prospectus.
General
Conseco Finance Recreational Enthusiast Consumer Trust 1999-B is a business
trust formed under the laws of the State of Delaware pursuant to the trust
agreement for the transactions described in this prospectus supplement. After
its formation, the trust will not engage in any activity other than:
(1) acquiring, holding and managing the contracts and the other assets of
the trust and its proceeds;
(2) issuing the notes and the certificates;
(3) making payments on the notes and the certificates; and
(4) engaging in other activities that are necessary, suitable or convenient
to accomplish the above or are incidental or connected to those
activities.
The trust will initially be capitalized with equity of approximately
$ from the sale of the notes. The Class B certificates will be sold
to Conseco Finance or its affiliate. The equity of the trust will be used by
the trust to purchase the contracts from Conseco Securitizations under the sale
and servicing agreement among Conseco Securitizations, Conseco Finance and the
trust.
The trust's principal offices are in Wilmington, Delaware, at the address
listed below under "--The Owner Trustee."
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
cutoff date, as if the issuance and sale of the notes and certificates had
taken place on that date:
<TABLE>
<S> <C>
Class A notes................................................. $
Class M notes.................................................
Class B certificates..........................................
-----------
Total....................................................... $
===========
</TABLE>
The Owner Trustee
Wilmington Trust Company is the owner trustee under the trust agreement.
Wilmington Trust Company is a Delaware banking corporation and its principal
offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. The
S-12
<PAGE>
owner trustee will perform limited administrative functions under the trust
agreement, including making distributions from the certificate distribution
account. The owner trustee's liability in connection with the issuance and sale
of the certificates and the notes is limited solely to the express obligations
of the owner trustee described in the trust agreement.
THE TRUST PROPERTY
The trust property will consist of:
(1) the contracts;
(2) all rights to receive payments due thereon on or after the cutoff date,
excluding certain insurance premiums, late fees and other servicing
charges;
(3) such amounts as from time to time may be held in the collection account
and any other accounts established and maintained by the servicer
pursuant to the sale and servicing agreement;
(4) an assignment of the security interests by Conseco Finance in the
trucks securing the related contracts;
(5) an assignment of the right to receive proceeds from claims on certain
insurance policies covering the trucks and the obligors; and
(6) all other rights under the trust documents.
See "The Contracts" and "Description of the Trust Documents--Collections" in
the prospectus.
Each certificate will represent a fractional undivided interest in the trust
property. Pursuant to the indenture the trust will grant a security interest in
the trust property in favor of the indenture trustee for the noteholders. Any
proceeds of such security interest in the trust property would be distributed
according to the indenture, as described under "Description of the Trust
Documents and Indenture--Distributions."
Conseco Finance, as custodian on behalf of the trust, will hold each original
contract, as well as copies of documents and instruments relating to such
contract and evidencing the security interest in the product securing that
contract. To protect the trust's ownership interest in the contracts, we will
file UCC-1 financing statements in Minnesota to give notice of the trust's
ownership of the contracts and the related trust property.
Under the indenture, the trust will grant a security interest in favor of the
indenture trustee in the trust property, the rights of the trust under the sale
and servicing agreement, and the collection account and note distribution
account. Any proceeds of the property will be distributed according to the
trust. See "Description of the Trust Documents and Indenture--Distributions" in
this prospectus supplement.
S-13
<PAGE>
Payments and recoveries in respect of principal and interest on the contracts
will be paid into a separate trust account maintained at an eligible
institution, initially U.S. Bank National Association, in the name of the
indenture trustee, no later than one business day after receipt. The indenture
trustee will, on the fifteenth day of each month or, if such day is not a
business day, the next succeeding business day, deposit funds from the
collection account into the note distribution account and the certificate
distribution account. Payments on deposit in the note distribution account will
be applied by the indenture trustee on each payment date to make the
distributions to the noteholders as of the immediately preceding record date
and payments on deposit in the certificate distribution account will be applied
by the owner trustee on each payment date to make the distributions to the
certificateholders as of the immediately preceding record date, all as
described under "Description of the Trust Documents and Indenture--
Distributions."
Following the transfer of the contracts from Conseco Finance to Conseco
Securitizations, and then by Conseco Securitizations to the trust, Conseco
Finance's obligations are limited to:
(1) its obligations as servicer to service the contracts;
(2) representations and warranties in the sale and servicing agreement as
described under "Description of the Trust Documents--Sale and
Assignment of the Contracts" in the prospectus; and
(3) indemnities and the payment of trustees' fees.
Conseco Finance is obligated under the sale and servicing agreement to
repurchase any contract on the first payment date which is more than 90 days
after Conseco Finance becomes aware, or receives written notice from the
indenture trustee or the owner trustee, of any breach of any representation and
warranty in the sale and servicing agreement that materially and adversely
affects the securityholders' interest in the contract if the breach has not
been cured prior to that date. The sale and servicing agreement also provides
that Conseco Finance is obligated to repurchase contracts and to indemnify the
indenture trustee or the owner trustee and the securityholders about other
matters. Conseco Finance is also obligated to pay fees of the owner trustee and
indenture trustee.
THE CONTRACT POOL
General
This prospectus supplement contains information regarding a portion of the
contracts to be included in the pool as of the closing date. These initial
contracts were originated through , 1999 and will be transferred to the
trust by Conseco Securitizations on the closing date. The information for each
initial contract is as of the cutoff date for that initial contract. The
initial contracts had an aggregate principal balance as of the cutoff date of
$ . The sale and servicing agreement provides that additional
contracts will be purchased by the trust on the closing date. We expect that,
on the closing date, the contract pool, which will consist of the initial
contracts and the additional contracts, will have an aggregate principal
balance as of the cutoff date of approximately $ . Although
S-14
<PAGE>
the additional contracts sold to the trust on the closing date will have
characteristics that differ somewhat from the initial contracts described here,
we do not expect that the characteristics of the additional contracts will vary
materially from the initial contracts. In addition, the additional contracts
must conform to the representations and warranties in the sale and servicing
agreement.
Conseco Finance purchased all of the contracts from dealers who regularly
originate and sell such contracts to it, or the contracts were originated by
Conseco Finance directly.
Certain Other Characteristics
The initial contracts:
(1) had a remaining maturity, as of the cutoff date, of at least
months, but not more than months,
(2) had an original maturity of at least five months, but not more than
months,
(3) had an original principal balance of at least $ and not more
than $ ,
(4) had a remaining principal balance as of the cutoff date of at least
$ and not more than $ ,
(5) had a contractual rate of interest of at least % and not more than
%, and
(6) all financed the purchase of a [commercial truck].
Neither Conseco Securitizations nor Conseco Finance may substitute other
contracts for the contracts owned by the trust at any time during the term of
the sale and servicing agreement.
Characteristics of Initial Contracts
<TABLE>
<CAPTION>
% of Weighted Weighted Weighted
Cutoff Average Average Weighted Average
% of Scheduled Date Pool Average Remaining Original Average Loan-to-
Number of Contract Principal Principal Principal Term Scheduled Contract Value
Contracts Pool Balance Balance Balance (1)(2) Term (2) Rate Ratio
--------- -------- ------------ --------- ---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% $ % $ % %
---- --- ------------ ---- ---------- --- --- ----- ---
Total.................. 100% $ 100% $ % %
==== === ============ ==== ========== === === ===== ===
</TABLE>
- --------
(1) Based on scheduled payments due after the cutoff date and assuming no
prepayments on the initial contracts.
(2) Expressed in number of months.
S-15
<PAGE>
Geographic Concentration of Initial Contracts
<TABLE>
<CAPTION>
% of
Aggregate Contracts
Number of % of Number Principal Balance by Outstanding
Contracts as of of Outstanding Principal Balance
State Cutoff Date Contracts as of Cutoff Date as of Cutoff Date
------ --------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama................. 418 5.06% $ 28,514,905.30 4.93%
Alaska.................. 11 0.13 567,247.40 0.10
Arizona................. 146 1.77 7,740,275.66 1.34
Arkansas................ 201 2.43 12,293,325.63 2.13
California.............. 1,307 15.81 76,080,124.91 13.15
Colorado................ 54 0.65 3,661,508.62 0.63
Connecticut............. 24 0.29 2,362,166.22 0.41
Delaware................ 4 0.05 220,932.87 0.04
District of Columbia.... 1 0.01 54,683.37 0.01
Florida................. 939 11.36 56,354,017.84 9.74
Georgia................. 358 4.33 22,227,144.23 3.84
Idaho................... 58 0.70 2,427,296.39 0.42
Illinois................ 100 1.21 9,053,972.03 1.57
Indiana................. 59 0.71 7,009,019.99 1.21
Iowa.................... 33 0.40 2,418,514.09 0.42
Kansas.................. 61 0.74 5,675,527.08 0.98
Kentucky................ 62 0.75 3,735,481.78 0.65
Louisiana............... 196 2.37 13,907,409.48 2.40
Maine................... 15 0.18 1,376,202.19 0.24
Maryland................ 75 0.91 6,382,649.96 1.10
Massachusetts........... 25 0.30 2,640,392.14 0.46
Michigan................ 98 1.19 16,483,566.17 2.85
Minnesota............... 103 1.25 11,483,616.92 1.99
Mississippi............. 281 3.40 20,498,716.11 3.54
Missouri................ 129 1.56 11,948,630.73 2.07
Montana................. 13 0.16 489,316.51 0.08
Nebraska................ 9 0.11 438,249.27 0.08
Nevada.................. 71 0.86 4,037,597.72 0.70
New Hampshire........... 11 0.13 1,108,347.66 0.19
New Jersey.............. 76 0.92 11,874,946.75 2.05
New Mexico.............. 68 0.82 4,386,981.37 0.76
New York................ 100 1.21 12,847,543.20 2.22
North Carolina.......... 145 1.75 10,729,687.08 1.85
North Dakota............ 1 0.01 19,677.33 0.00
Ohio.................... 279 3.37 23,642,922.33 4.09
Oklahoma................ 128 1.55 7,903,588.07 1.37
Oregon.................. 87 1.05 4,270,539.11 0.74
Pennsylvania............ 113 1.37 9,142,303.03 1.58
Rhode Island............ 7 0.08 592,583.79 0.10
South Carolina.......... 219 2.65 13,939,386.54 2.41
South Dakota............ 35 0.42 2,684,121.50 0.46
Tennessee............... 283 3.42 24,640,187.27 4.26
Texas................... 1,302 15.75 84,536,976.22 14.62
Utah.................... 178 2.15 10,067,511.57 1.74
Vermont................. 6 0.07 719,487.81 0.12
Virginia................ 90 1.09 6,883,002.99 1.19
Washington.............. 177 2.14 11,942,738.12 2.06
West Virginia........... 32 0.39 1,731,252.68 0.30
Wisconsin............... 55 0.67 3,356,065.85 0.58
Wyoming................. 25 0.30 1,318,502.31 0.23
----- ------ --------------- ------
Total................. 8,268 100.00% $578,420,843.19 100.00%
===== ====== =============== ======
</TABLE>
The state concentrations described in this table are based on the billing
address of the obligor listed in Conseco Finance's records.
S-16
<PAGE>
Distribution of Original Contract Amounts of Initial Contracts
<TABLE>
<CAPTION>
Aggregate
Principal
Balance % of Contracts
Number of Outstanding by Outstanding
Contracts as of Cutoff Principal Balance
Original Contract Amount as of Cutoff Date Date as of Cutoff Date
------------------------ ----------------- --------------- -----------------
<S> <C> <C> <C>
Less than $10,000......... 38 $ 216,293.37 .04%
Between $10,000 and
$19,999.................. 674 9,205,636.07 1.59
Between $20,000 and
$29,999.................. 1,051 22,533,018.90 3.90
Between $30,000 and
$39,999.................. 807 24,043,238.26 4.16
Between $40,000 and
$49,999.................. 944 37,498,331.30 6.48
Between $50,000 and
$59,999.................. 641 31,051,888.02 5.37
Between $60,000 and
$69,999.................. 471 27,199,724.17 4.70
Between $70,000 and
$79,999.................. 471 31,680,263.91 5.48
Between $80,000 and
$89,999.................. 716 55,424,753.05 9.58
Between $90,000 and
$99,999.................. 846 73,629,111.49 12.73
Between $100,000 and
$109,999................. 701 67,529,451.29 11.67
Between $110,000 and
$119,000................. 233 24,248,829.25 4.19
Between $120,000 and
$129,999................. 101 11,514,294.53 1.99
Between $130,000 and
$139,999................. 46 5,566,070.44 .96
Between $140,000 and
$149,999................. 33 4,180,373.67 .72
Between $150,000 and
$159,999................. 41 5,787,790.20 1.00
Between $160,000 and
$169,999................. 36 5,287,220.41 .91
Between $170,000 and
$179,999................. 47 7,530,439.46 1.30
Between $180,000 and
$189,999................. 33 5,482,532.22 .95
Between $190,000 and
$199,999................. 24 4,382,108.79 .76
Between $200,000 and
$249,999................. 73 13,923,999.53 2.41
Between $250,000 and
$299,999................. 50 12,004,085.75 2.08
Between $300,000 and
$349,999................. 45 13,512,737.62 2.34
Between $350,000 and
$399,999................. 27 9,007,678.74 1.56
Between $400,000 and
$449,999................. 34 12,979,298.49 2.24
Between $450,000 and
$499,999................. 15 6,431,472.52 1.11
Between $500,000 and
$549,999................. 10 4,988,028.59 .86
Between $550,000 and
$599,999................. 11 5,727,107.43 .99
Between $600,000 and
$649,999................. 4 2,291,812.32 .40
Between $650,000 and
$699,999................. 9 5,646,895.21 .98
Between $700,000 and
$749,999................. 5 3,158,190.27 .55
Between $750,000 and
$799,999................. 2 1,377,780.56 .24
Between $800,000 and
$849,999................. 4 3,060,343.92 .53
Between $850,000 and
$899,999................. 3 2,478,949.21 .43
Between $900,000 and
$949,999................. 2 1,640,202.79 .28
Between $950,000 and
$999,999................. 5 4,378,136.16 .76
Over $999,999............. 15 21,822,755.28 3.77
----- --------------- ------
Total................... 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
S-17
<PAGE>
Year of Origination of Initial Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Year of Number of Contracts Balance Outstanding Principal Balance
Oiginationr as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ----------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
1997................... 1 $ 54,848.92 .01%
1998................... 1,730 113,576,439.48 19.64
1999................... 6,537 464,789,554.79 80.35
----- --------------- ------
Total................ 8,268 $578,420,843.19 100.00%
===== =============== ======
Distribution of Original Loan-to-Value Ratios of Initial Contracts
<CAPTION>
% of
Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Loan-to-Value Ratio as of Cutoff Date as of Cutoff Date as of Cutoff Date
------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 61%........... 73 $ 2,229,533.83 .39%
From 61 to 65%.......... 48 1,941,600.91 .34
From 66 to 70%.......... 87 2,913,706.90 .50
From 71 to 75%.......... 127 4,919,801.11 .85
From 76 to 80%.......... 371 15,001,551.83 2.59
From 81 to 85%.......... 672 33,410,433.45 5.78
From 86 to 90%.......... 1,511 80,855,711.17 13.98
From 91 to 95%.......... 2,290 146,446,736.65 25.32
Over 95%................ 3,089 290,701,767.34 50.26
----- --------------- ------
Total................. 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
S-18
<PAGE>
Initial Contract Rates
<TABLE>
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Contract Rate as of Cutoff Date as of Cutoff Date as of Cutoff Date
------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 7.001%.......... 8 $ 705,525.01 .12%
7.001% to 8.000%......... 211 48,184,144.20 8.33
8.001% to 9.000%......... 841 99,132,887.64 17.14
9.001% to 10.000%........ 1,518 117,524,165.22 20.32
10.001% to 11.000%........ 1,421 95,336,408.21 16.48
11.001% to 12.000%........ 1,402 86,384,304.50 14.93
12.001% to 13.000%........ 1,063 57,089,240.99 9.87
13.001% to 14.000%........ 686 30,157,267.58 5.21
14.001% to 15.000%........ 556 22,795,126.60 3.94
15.001% to 16.000%........ 308 11,679,653.09 2.02
16.001% to 17.000%........ 152 6,045,707.54 1.05
Over 17.000%.............. 102 3,386,412.61 .59
----- --------------- ------
Total................... 8,268 $578,420,843.19 100.00%
===== =============== ======
Remaining Months to Maturity of Initial Contracts
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Remaining Months to Maturity as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ---------------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Fewer than 15............. 142 $ 1,847,018.53 .32%
15 to 30................ 1,310 42,601,529.98 7.37
31 to 45................ 2,414 142,199,539.74 24.58
46 to 60................ 4,062 321,689,996.17 55.62
61 to 75................ 265 33,372,791.68 5.77
76 to 90................ 31 12,501,317.98 2.16
91 to 105................ 6 4,864,662.43 .84
106 to 120................ 37 16,962,918.57 2.93
121 to 135................ 0 .00 .00
136 to 150................ 1 2,381,068.11 .41
----- --------------- ------
Total................... 8,268 $578,420,843.19 100.00%
===== =============== ======
</TABLE>
S-19
<PAGE>
CONSECO FINANCE CORP.
The following information supplements and if inconsistent supersedes, the
information in the prospectus under the heading "Conseco Finance Corp." Conseco
Finance Corp. was previously named Green Tree Financial Corporation.
Delinquency, Loan Loss and Repossession Information
The following tables describe information about our delinquency, loan loss
and repossession experience for each period indicated for all truck contracts
it has purchased and continues to service, including the contracts which do not
meet the criteria for selection as a contract. Conseco Finance began
originating installment sales contracts for [commercial trucks] in 1994.
Accordingly, the delinquency, loan loss and repossession experience presented
below may not be indicative of the experience to be expected from a more
seasoned portfolio.
Delinquency Experience
<TABLE>
<CAPTION>
At December 31, At
--------------------------------------- September 30,
1994 1995 1996 1997 1998 1999
------ ------ ------- ------- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Outstanding (1)........
Number of Contracts
Delinquent (2)
30-59 Days............
60-89 Days............
90 Days or More.......
------ ------ ------- ------- ----- -----
Total Contracts
Delinquent.............
====== ====== ======= ======= ===== =====
Delinquencies as a
Percentage of Contracts
Outstanding (3)........ % % % % % %
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquency for the number of contracts delinquent is based
on the number of days payments are contractually past due, assuming 30-day
months. Consequently, a contract due on the first day of a month is not 30
days delinquent until the first day of the next month.
(3) By number of contracts.
S-20
<PAGE>
Loan Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
-------------------------------------------- September 30,
1994 1995 1996 1997 1998 1999
------ ------ ------- ------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)...........
Principal Balance of
Contracts (1).......... $ $ $ $ $ $
Contract Liquidations:
Units...................
Percentage (2).......... % % % % % %
Net Losses:
Dollars (3)............. $ $ $ $ $ $
Percentage (4).......... % % % % % %
</TABLE>
- --------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts being serviced as of
period end.
There can be no assurance that the delinquency, loan loss or repossession
experience of the trust for the contracts will be better than, worse than or
comparable to the experience described above. See "Risk Factors--Delinquency,
Loan Loss and Repossession Experience" in this prospectus supplement.
Recent Developments
Conseco Finance has been served with various lawsuits in the United States
District Court for the District of Minnesota. These lawsuits were filed by a
few of Conseco Finance's stockholders as purported class actions on behalf of
persons or entities who purchased common stock or traded in options of Conseco
Finance during the alleged class periods. These alleged class periods run from
February 1995 to January 1998. One of these lawsuits did not include class
action claims. In addition to Conseco Finance, some of Conseco Finance's
current and former officers and directors are named as defendants in one or
more of the lawsuits. The lawsuits have been consolidated into two complaints,
one relating to an alleged class of purchasers of Conseco Finance's common
stock and the other relating to an alleged class of traders in options for
Conseco Finance's common stock. In addition to these two complaints, a separate
non-class action lawsuit containing similar allegations was also filed.
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 Conseco
Finance and the other defendants violated federal securities laws by, among
other things, making false and misleading statements about Conseco Finance's
current state and Conseco Finance's future prospects, particularly about
prepayment assumptions and performance of some of Conseco Finance's loan
portfolios, which allegedly rendered Conseco Finance's financial statements
false and misleading. Conseco Finance believes that the lawsuits are without
merit and intends to defend the lawsuits vigorously. However, the ultimate
outcome of these lawsuits
S-21
<PAGE>
cannot be predicted with certainty. Conseco Finance filed motions to dismiss
these lawsuits. On August 24, 1999 Conseco Finance's motions to dismiss were
granted with prejudice. On September 21, 22 and 23, 1999 the plaintiffs filed
notices of appeal of these dismissals.
CREDIT SUISSE FIRST BOSTON
[to be added]
S-22
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements the information in the prospectus under
the heading "Yield and Prepayment Considerations."
Weighted Average Life of the Notes
The following information is given solely to illustrate the effect of
prepayments on the contracts on the weighted average life of the notes under
the stated assumptions and is not a prediction of the prepayment rate that
might actually be experienced by the contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the notes will be
influenced by the rate at which principal on the contracts is paid. Principal
payments on the contracts may be in the form of scheduled amortization or
prepayments, including, for this purpose, liquidations due to default.
The base case prepayment model is Conseco Finance management's best estimate
of the prepayment rates that may be experienced on the contracts. Because
Conseco Finance began originating and servicing contracts for trucks only
recently, such estimate is based in part on industry experience with similar
contracts rather than Conseco Finance's experience. There can be no assurance
that the contracts will experience prepayments at such projected rates or in
the manner assumed by the prepayment model used for that type of contract, or
that the contracts in the aggregate will experience prepayments similar to the
overall prepayment rate or in the manner projected in the base case.
The model used in this prospectus supplement is the Absolute Prepayment Model
("ABS"), which represents an assumed rate of prepayment each month relative to
the original number of contracts in the contract pool. The base case prepayment
model used here is % ABS.
As used in the following tables, the columns headed 80%, 90%, 100%, 110% and
120% assume that prepayments on the contracts are made at base case prepayment
rates of 80%, 90%, 100%, 110% and 120%, respectively. For example, 80% base
case prepayment rate and 120% base case prepayment rate mean that contracts
have been assumed to have a prepayment rate equal to 1.12% ABS and 1.68% ABS.
ABS DOES NOT PURPORT TO BE AN HISTORICAL DESCRIPTION OF PREPAYMENT EXPERIENCE
OR A PREDICTION OF THE ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF CONTRACTS,
INCLUDING THE CONTRACTS OWNED BY THE TRUST.
The percentages and weighted average lives in the following tables were
determined assuming that:
(1) scheduled interest and principal payments on the contracts are received
in a timely manner and prepayments are made at the percentages of the
base case prepayment model set forth in the table;
S-23
<PAGE>
(2) no noteholder requires the Note Purchase Counterparty to purchase the
notes, and the Note Purchase Counterparty does not exercise its clean-
up option, as described under "Description of the Trust Documents and
Indenture--Note Purchase Agreement";
(3) the Class B certificateholder exercises its right to purchase the
contracts, as described under "Description of the Trust Documents and
Indenture--Purchase Option; Auction Sale; Additional Principal
Distributions.";
(4) the aggregate principal balance of the initial contracts as of the
cutoff date is $ and the initial contracts have the
characteristics described under "The Contract Pool";
(5) the additional contracts to be transferred to the trust have the
characteristics described in the table following this paragraph and are
assumed to have their first payments due in ;
(6) no interest shortfalls will arise in connection with prepayments in
full of the contracts;
(7) distributions are made on the notes on the 15th day of each month
commencing in January 2000;
(8) the securities are issued on ; and
(9) one-month LIBOR is %.
No representation is made that the contracts will not experience
delinquencies or losses.
Assumed Characteristics of Additional Contracts as of the Cutoff Date
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Aggregate Principal Weighted Average Original Term Remaining Term
Balance Outstanding Contract Rate (Months) (Months)
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ %
------------ ----- --- ---
Total................. $ %
============ ===== === ===
</TABLE>
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each class of notes and shows the
percentages of the original principal balance of each class that would be
outstanding after each of the dates shown, at the indicated percentages of the
base case prepayment model. Investors are urged to make their investment
decisions on a basis that includes their determination as to anticipated
prepayment rates under a variety of the assumptions discussed in this
prospectus supplement.
The weighted average life of each class of the securities listed in the
tables below is determined by (1) multiplying the amount of cash distributions
in reduction of the principal balance of that class of securities by the number
of years from the date of issuance of that security to the stated distribution
date, (2) adding the results, and (3) dividing the sum by the initial principal
balance of that class of securities.
S-24
<PAGE>
Percentage of the Original Principal Balance of the Class A
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
December 15, 2000...................................
Weighted Average Life (Years).......................
Percentage of the Original Principal Balance of the Class M
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
December 15, 2000...................................
December 15, 2001...................................
Weighted Average Life (Years).......................
</TABLE>
S-25
<PAGE>
DESCRIPTION OF THE NOTES
The following information supplements and, if inconsistent supersedes, the
information in the prospectus under "The Notes," "Information Regarding the
Securities," and "Description of the Trust Documents."
General
The notes will be issued under to the terms of the indenture, a form of which
has been filed as an exhibit to the registration statement filed with the SEC.
A copy of the indenture, as executed, will be filed with the SEC following the
issuance of the securities. The following summary describes certain terms of
the notes and the indenture. The summary is not complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the notes
and the indenture. The following summary supplements the description of the
general terms and provisions of the notes of any given series and the related
indenture described in the prospectus. U.S. Bank Trust National Association, a
national banking association headquartered in St. Paul, Minnesota, will be the
indenture trustee.
Distributions
Noteholders will be entitled to receive distributions of interest and
principal on each distribution date commencing in January 2000, to the extent
that sufficient funds available. Distributions on the notes generally will be
made from funds available first in respect of interest on the Class A notes,
then in respect of interest on the Class M notes, then in respect of principal
on the Class A notes and then in respect of principal on the Class M notes, in
the manner and order of priority described in the next two sections.
Class A Interest
Interest on the principal balance of the Class A notes will accrue from
December 15, 1999, or from the most recent distribution date on which interest
has been paid, to but excluding the following distribution date, at the Class A
interest rate. The principal balance of the Class A notes as of any
distribution date for this purpose will be the original principal balance of
that class minus all amounts previously distributed to the noteholders of that
class in respect of principal.
Interest on the Class A notes will be calculated on the basis of the actual
number of days elapsed in a 360-day year.
Interest will be paid on the Class A notes on each distribution date to the
extent of funds available on that distribution date. In the event the funds
available are not sufficient to make a full distribution of interest on the
Class A notes, the amount of the shortfall will be carried forward and added to
the amount of interest payable on the next distribution date. Any amount so
carried forward will bear interest at the Class A interest rate, to the extent
legally permissible. The Class A interest rate for any distribution date prior
to January 5, 2001 (the "Note Purchase Date") will be LIBOR plus %, but in no
case more than %. If LIBOR plus % exceeds % for any distribution date,
then the positive difference
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between LIBOR plus % and %, multiplied by the principal balance of the
Class A notes, which we refer to as the "Class A LIBOR Carryforward Amount" for
that distribution date, will be payable from the remaining amount available
after payment of all interest and principal on the notes. Any Class A LIBOR
Carryforward Amount not paid on that distribution date will be payable on the
following distribution date, plus interest thereon at the Class A interest
rate.
After the Note Purchase Date, the Class A interest rate will be %, except
[to be added]
"LIBOR" ("London Interbank Offered Rate") with respect to any distribution
date will be established by the calculation agent appointed by the Trust (the
"Calculation Agent") and will equal the offered rate for United States dollar
deposits for one month that appears on Telerate Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to such [monthly interest
period] (a "LIBOR Determination Date"). "Telerate Page 3750" means the display
page so designated on the Dow Jones Telerate Service (or such other page as may
replace that page on that service, or such other service as may be designated
by the Calculation Agent as the information vendor, for the purpose of
displaying London interbank offered rates of major banks). If such rate appears
on Telerate Page 3750, LIBOR will be such rate. "LIBOR Business Day" as used
herein means a day that is both a Business Day and a day on which banking
institutions in the City of London, England are not required or authorized by
law to be closed. If on any LIBOR Determination Date the offered rate does not
appear on Telerate Page 3750, the Calculation Agent will request each of the
reference banks (which shall be major banks that are engaged in transactions in
the London interbank market selected by the Calculation Agent) to provide the
Calculation Agent with its offered quotation for United States dollar deposits
for one month to prime banks in the London interbank market as of 11:00 A.M.,
London time, on such date. If at least two reference banks provide the
Calculation Agent with such offered quotations, LIBOR on such date will be the
arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000 of 1%
(.00001%), with five one-millionths of a percentage point rounded upward, of
all such quotations. If on such date fewer than two of the reference banks
provide the Calculation Agent with such offered quotations, LIBOR on such date
will be the arithmetic mean, rounded upwards, if necessary, to the nearest
1/100,000 of 1% (.00001%), with five one-millionths of a percentage point
rounded upward, of the offered per annum rates that one or more leading banks
in New York City selected by the Calculation Agent are quoting as of 11:00
A.M., New York City time, on such date to leading European banks for United
States dollar deposits for one month; provided, however, that if such banks are
not quoting as described above, LIBOR for such date will be LIBOR applicable to
the monthly interest period immediately preceding such monthly interest period.
The "Calculation Agent" will initially be the Indenture Trustee.
Class M Interest
Interest on the principal balance of the Class M notes will accrue from
December 15, 1999, or from the most recent distribution date on which interest
has been paid, to but excluding the following distribution date, at the Class M
interest rate. The principal balance of the Class M notes as of any
distribution date for this purpose will be the original principal
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balance of that class minus all amounts previously distributed to the
noteholders of that class in respect of principal.
Interest on the Class M notes will be calculated on the basis of the actual
number of days elapsed in a 360-day year.
Interest will be paid on the Class M notes on each distribution date to the
extent of the amount available on that distribution after payment of all
interest due on the Class A notes. In the event the funds available are not
sufficient to make a full distribution of interest on the Class M notes, the
amount of the shortfall will be carried forward and added to the amount of
interest payable on the next distribution date. Any amount so carried forward
will bear interest at the Class M interest rate, to the extent legally
permissible. The Class M interest rate for any distribution date prior to the
Note Purchase Date will be LIBOR plus %, but in no case more than %. After
the Note Purchase Date, the Class M interest rate will be %.
If LIBOR plus % exceeds % for any distribution date, then the positive
difference between LIBOR plus % and %, multiplied by the principal balance
of the Class M notes, which we refer to as the "Class M LIBOR Carryforward
Amount" for that distribution date, will be payable from the remaining amount
available after payment of interest and principal on the notes and after
payment of any Class A LIBOR Carryforward Amount. Any Class M LIBOR
Carryforward Amount not paid on that distribution date will be payable on the
following distribution date, plus interest thereon at the Class M interest
rate.
Principal on the Notes
Noteholders will be entitled to receive on each distribution date as payment
of principal, in the manner and order of priority set forth below, an amount
equal to the formula principal distribution amount, described below, for that
distribution date. Principal will be paid on the Class A notes until the Class
A principal balance has been reduced to zero, and then principal will be paid
on the Class M notes.
The formula principal distribution amount for any distribution date will be
an amount equal to the sum of the following amounts for the related monthly
period, in each case computed in accordance with the method specified in each
contract:
(1) all scheduled payments of principal due on each outstanding contract
during the related monthly period, after adjustments for previous partial
principal prepayments and after any adjustments to a contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related obligor,
(2) the scheduled principal balance of each contract which, during the
related monthly period, was purchased by us pursuant to the sale and
servicing agreement on account of a breach of a representation or warranty,
(3) all partial principal prepayments applied and all principal
prepayments in full received on contracts during the related monthly
period,
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(4) the scheduled principal balance of each contract that became a
liquidated contract during the related monthly period, plus the amount of
any reduction in the outstanding principal balance of a contract during
such monthly period ordered as a result of a bankruptcy or similar
proceeding involving the related obligor,
(5) without duplication of the foregoing, all collections in respect of
principal on the contracts received during the current month up to and
including the third business day prior to such distribution date, but in no
event later than the 10th day of the month in which such distribution date
occurs, minus
(6) the amount, if any, included in the formula principal distribution
amount for the preceding distribution date by virtue of clause (5) above.
A monthly period for a distribution date is the calendar month immediately
preceding the month in which that distribution date occurs; provided that the
monthly period for the first distribution date is the two calendar months
immediately preceding the month in which that distribution date occurs. The
scheduled principal balance of a contract for any monthly period is its
principal balance as specified in its amortization schedule, after giving
effect to any previous partial principal prepayments and to the scheduled
payment due on its scheduled payment date in that month, and after giving
effect to any adjustments due to bankruptcy or similar proceedings. A
liquidated contract means any defaulted contract as to which the servicer has
determined that all amounts which it expects to recover from or on account of
such contract through the date of disposition of the related product have been
recovered or any defaulted contract in respect of which the related product has
been realized upon and disposed of and the proceeds of such disposition have
been received.
In the event the remaining funds available for such distribution date are not
sufficient to make a full distribution of the formula principal distribution
amount, the amount of such deficiency--the formula principal shortfall for such
distribution date--will be added to the formula principal distribution amount
for the next distribution date.
Subordination of Class M Notes
Notwithstanding the events of default described in the prospectus under the
caption "The Notes--The Indenture--Events of Default; Rights Upon Event of
Default," until the Class A notes have been paid in full, the failure to pay
interest due on the Class M notes will not be an event of default. Upon the
occurrence and during the continuation of an event of default that has resulted
in an acceleration of the notes or following an insolvency event or dissolution
with respect to the general partner, no distributions of principal and interest
on the Class M notes will be made until payment in full of principal and
interest on the Class A notes.
Note Purchase Agreement and Call Option
On the Note Purchase Date, each noteholder will have the option to require
Credit Suisse First Boston, New York Branch, to purchase that noteholder's note
for a price equal to the unpaid principal balance of that note plus all accrued
and unpaid interest thereon, plus any LIBOR carryforward amount. CSFB and the
Class B certificateholders will have the
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option to purchase all of the outstanding notes on the same terms and at the
same price on the Note Purchase Date and on each subsequent distribution date.
The indenture trustee will mail a notice to each registered noteholder of its
right to exercise this option at least 45 days before January 5, 2001. If you
intend to put your note to CSFB, you must give written notice to the servicer
of your intention no later than [10] days prior to the put date on which you
wish CSFB to purchase your note.
The obligations of CFSB with respect to the Note Purchase Agreement will be
general unsecured obligations of CFSB and will not be guaranteed by or
enforceable against any other entity.
Noteholders will, however, be entitled to exercise their rights under the
Note Purchase Agreement immediately following any failure by CFSB to pay the
purchase price for any notes as to which the option has been validly exercised.
In such event, the noteholders [, or the Indenture Trustee on their behalf,]
may pursue such other remedies as may be available at law or in equity on
account of CFSB's default of its obligations with respect to the Note Purchase
Agreement.
The noteholders' rights under the Note Purchase Agreement will lapse if:
. the trust becomes insolvent;
. there is a payment default on the notes; or
. [other standard events of default occur].
Book-Entry Registration
Holders of the notes may hold through DTC in the United States or CEDEL or
Euroclear in Europe if they are participants of these systems, or indirectly
through organizations that are participants in these systems.
Cede & Co., as nominee for DTC, will hold the notes. CEDEL and Euroclear will
hold omnibus positions in the notes on behalf of the CEDEL Participants and the
Euroclear participants, through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries, which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC.
Transfers between DTC's participating organizations will occur in accordance
with DTC rules. Transfers between CEDEL participants and Euroclear participants
will occur in the ordinary way according to their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through CEDEL participants or
Euroclear participants, on the other, will be effected in DTC according to DTC
rules on behalf of the relevant European international clearing system by its
depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system according to its rules and procedures and within
its established deadlines, European time. The relevant European
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international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment according to normal procedures for same-day
funds settlement applicable to DTC. CEDEL participants and Euroclear
participants may not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities in CEDEL or Euroclear
for a transaction with a participant will be made during the subsequent
securities settlement processing, dated the business day following the DTC
settlement date, and these credits or any transactions in the securities
settled during the processing will be reported to the relevant CEDEL
participant or Euroclear participant on the business day. Cash received in
CEDEL or Euroclear for sales of securities by or through a CEDEL participant or
a Euroclear participant to a participant will be received with value on the DTC
settlement date but will be available in the relevant CEDEL or Euroclear cash
account only as of the business day following settlement in DTC.
For a description of transfers between persons holding directly or indirectly
through DTC, see "Information Regarding the Securities--Book-Entry
Registration" in the prospectus.
Cedel Bank, is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
CEDEL participants through electronic book-entry changes in accounts of CEDEL
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its CEDEL participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
and may include the Underwriters. Indirect access to CEDEL is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a CEDEL Participant, either directly
or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in Euroclear in any of 32 currencies, including
United States dollars. The Euroclear System includes various other services,
including securities lending and borrowing, and interfaces with domestic
markets in several countries generally similar to the arrangements for cross-
market transfers with DTC described in Annex I hereto. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation. All operations are conducted by the
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Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear participants. Euroclear participants include banks,
including central banks, securities brokers and dealers and other professional
financial intermediaries and may include the underwriters. Indirect access to
the Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law, collectively, the terms and conditions. The terms and conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the terms and conditions only on behalf of Euroclear participants
and has no record of or relationship with persons holding through Euroclear
participants.
Distributions with respect to notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants
in accordance with the relevant system's rules and procedures, to the extent
received by its depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Certain Federal Income Tax Consequences" in the prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
prospectus supplement. CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a noteholder under the
Indenture on behalf of a CEDEL participant or Euroclear participant only in
accordance with its relevant rules and procedures and subject to its
depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform the
procedures and the procedures may be discontinued at any time.
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DESCRIPTION OF THE TRUST DOCUMENTS AND INDENTURE
The following summary describes certain terms of the sale and servicing
agreement and the trust agreement, which together form the trust documents and
the indenture. Forms of the trust documents and indenture, as executed, have
been filed as exhibits to the registration statement. A copy of each of the
trust documents and indenture will be filed with the SEC following the issuance
of the securities. The summary is not complete and is subject to, and qualified
in its entirety by reference to, all the provisions of the trust documents and
indenture. The following summary supplements, the description of the general
terms and provisions of the trust documents and indenture under the prospectus.
Accounts
The servicer will establish and maintain one or more accounts, in the name of
the indenture trustee on behalf of the noteholders and the certificateholders,
into which all payments made on or for the contracts will be deposited, the
collection account. The servicer will establish and maintain an account, in the
name of the indenture trustee on behalf of the noteholders, in which amounts
released from the collection account for distribution to noteholders will be
deposited and from which all distributions to noteholders will be made, which
we call the note distribution account. The servicer will also establish and
maintain an account, in the name of the owner trustee on behalf of the
certificateholders, in which amounts released from the collection account for
distribution to certificateholders will be deposited and from which all
distributions to certificateholders will be made. See "Description of the Trust
Documents--Collections" in the prospectus.
Distributions
On each distribution date, the servicer will instruct the indenture trustee
to distribute from the collection account the amount available in the following
order of priority:
(1) if Conseco Finance or an affiliate is no longer the servicer, then to
the servicer, the monthly servicing fee for the related monthly period.
(2) to the servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior monthly period.
(3) to the note distribution account, all accrued interest on the Class A
notes.
(4) to the note distribution account, the formula principal distribution
amount, or the Class A principal balance, if less.
(5) to the note distribution account, all accrued interest on the Class M
notes.
(6) to the note distribution account, the formula principal distribution
amount, or the Class M principal balance, if less.
(7) to the certificate distribution account, the remaining amount
available.
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On each distribution date, the indenture trustee or its paying agent will
distribute all amounts on deposit in the note distribution account in payment
of interest and principal on the notes in the manner described above.
On each distribution date, the owner trustee or its paying agent will
distribute all amounts on deposit in the certificate distribution account in
payment on the Class B certificates.
The amount available with respect to any distribution date means generally
the sum of payments on the contracts due and received during the related
monthly period, prepayments and other unscheduled collections received during
the related monthly period, all collections of principal on the contracts
received during the current month up to and including the third business day
prior to the distribution date but in no event later than the 10th day of the
month in which the distribution date occurs, any amounts deposited in respect
of purchased contracts, any guaranty payment, and all earnings from the
investment of funds in the collection account, minus, with respect to all
distribution dates other than the distribution date in January 2000, all
collections of principal on the contracts received during the related monthly
period up to and including the third business day prior to the preceding
distribution date, but in no event later than the 10th day of the prior month.
Statements to Noteholders
On or before each distribution date, the servicer will prepare and provide to
the indenture trustee a statement to be delivered to the noteholders on such
distribution date. These statements will be based on the information in the
related servicer's report describing information required under the trust
documents. Each statement to be delivered to noteholders will include the
following information as to the notes, for the distribution date or the period
since the previous distribution date, as applicable:
(1) the amount of the distribution allocable to interest on or with
respect to each class of notes;
(2) the amount of the distribution allocable to principal on or with
respect to each class of notes;
(3) the aggregate outstanding principal balance and the pool factor for
each class of notes after giving effect to all payments reported under (2)
above on such date;
(4) the interest shortfall, if any, for each class of notes, and the
change in such amounts from the preceding statement;
(5) the number and aggregate principal balances of delinquent contracts,
the number of trucks repossessed, the number of repossessed trucks
remaining in inventory and the number of contracts that became liquidated
contracts with respect to the immediately preceding monthly period; and
(6) the aggregate amount of servicer advances made by the servicer for
such distribution date, and the aggregate amount paid to the servicer as
reimbursement of servicer advances made on prior distribution dates.
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Each amount shown under subclauses (1) through (4) will be expressed as a
dollar amount per $1,000 of the initial principal amount of the notes.
Unless and until definitive notes are issued, the reports will be sent on
behalf of the trust to Cede & Co., as registered holder of the notes and the
nominee of DTC. Note owners may receive copies of these reports upon written
request, together with a certification that they are note owners and payment of
any expenses associated with the distribution of such reports, from the
indenture trustee. See "Reports to Noteholders" in this prospectus supplement
and "Reports to Securityholders" and "Information Regarding the Securities" in
the prospectus.
Within the required period of time after the end of each calendar year, the
indenture trustee, will furnish to each person who at any time during the
calendar year was a noteholder, a statement as to the aggregate amounts of
interest and principal paid to such noteholder, information regarding the
amount of servicing compensation received by the servicer and other information
as we deem necessary to enable the noteholder to prepare its tax returns. See
"Federal Income Tax Consequences" in this prospectus supplement.
Clean-Up Option; Auction Sale; Additional Principal Distributions
Beginning on the distribution date when the pool scheduled principal balance
is less than 20% of the cut-off date pool principal balance, the holder of the
Class B certificates will have the right to repurchase or arrange for the
repurchase of all outstanding contracts at a price equal to the greater of:
(1)the sum of:
(a) 100% of the scheduled principal balance of each contract, other
than any contract as to which the related equipment has been
repossessed and whose fair market value is included in clause (b)
below as of the final distribution date, and
(b) the fair market value of any acquired property, as determined by
the servicer; and
(2) the aggregate fair market value, as determined by the servicer of
all of the assets of the trust, plus, in each case, any unpaid
interest at the applicable interest rate on each class of notes,
as well as one month's interest at the applicable contract rate on
the scheduled principal balance of each contract.
This amount will be distributed on the distribution date occurring in the
month following the date of repurchase.
If the holder of the Class B certificates does not exercise this purchase
option on or before the following distribution date, then on the next
distribution date the indenture trustee will begin an auction process to sell
the contracts and the other trust assets at the highest possible price, but the
indenture trustee cannot sell the trust assets and liquidate the trust unless
at least two bids are received and the highest bid would be sufficient to pay
the aggregate unpaid principal balance of the notes plus all accrued and unpaid
interest. If the
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first auction of the trust property is not successful because the highest bid
received was too low, then the indenture trustee will conduct an auction of the
contracts every third month after that, until an acceptable bid is received for
the trust property. We cannot assure you that the first auction or any
subsequent auction will be successful. The holder of the Class B certificates
may exercise its purchase option on any distribution date after the first
distribution date described above, unless the indenture trustee has accepted a
qualifying bid for the trust property.
If the first auction of the trust property is not successful because the
highest bid received was too low, then on each remittance date after that the
noteholders will be entitled to receive, pro rata based on the principal
balance of each class of notes, the "Additional Principal Distribution Amount"
for that distribution date, which will be equal to the remaining amount
available after paying all interest and principal then due on the notes and
payment of the monthly servicing fee.
Administrator
Conseco Financial Servicing Corporation, a Delaware corporation, as
administrator, will provide the notices and perform other administrative
obligations required by the indenture and the trust agreement. The
administrator, a subsidiary of Conseco Finance, will enter into an
administration agreement with the trust and the indenture trustee describing
its duties and obligations as administrator.
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of federal and state income tax
consequences relating to the purchase, ownership, and disposition of the notes
and the certificates. The discussion is based upon the current provisions of
the Internal Revenue Code of 1986, the Treasury regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. For additional information regarding
federal and state income tax consequences, see "Federal Income Tax
Consequences--Owner Trust Series" and "State Income Tax Consequences" in the
prospectus.
You should consult your own tax advisors to determine the federal, state,
local and other tax consequences of the purchase, ownership and disposition of
the notes and the certificates. You should note that no rulings have been or
will be sought from the IRS with respect to any of the federal income tax
consequences discussed herein or in the prospectus, and no assurance can be
given that the IRS will not take contrary positions. Moreover, there are no
cases or IRS rulings on transactions similar to those described herein with
respect to the trust, involving both debt and equity interests issued by a
trust with terms similar to those of the notes and the certificates. You are
urged to consult your own tax advisors in determining the federal, state,
local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of the securities.
In the opinion of our counsel, for federal and Minnesota income tax purposes,
the notes will be characterized as debt and the trust will not be characterized
as an association or a
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publicly traded partnership taxable as a corporation. The notes will not be
issued with original issue discount.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, and
Section 4975 of the IRS code, prohibit a pension, profit-sharing or other
employee benefit plan, as well as individual retirement accounts and certain
types of Keogh Plans, each a benefit plan from engaging in certain transactions
with persons that are parties in interest under ERISA or disqualified persons
under the IRS code for that benefit plan. A violation of these prohibited
transaction rules may result in an excise tax or other penalties and
liabilities under ERISA and the IRS code for these persons. Title I of ERISA
also requires that fiduciaries of a benefit plan subject to ERISA make
investments that are prudent, diversified, except if prudent not to do so, and
in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
securities might be deemed to constitute prohibited transactions under ERISA
and the IRS code if assets of the trust were deemed to be assets of a benefit
plan. Under a regulation issued by the United States Department of Labor called
the Plan Assets Regulation, the assets of the trust would be treated as plan
assets of a benefit plan for the purposes of ERISA and the IRS code only if the
Benefit Plan acquires an equity interest in the trust and none of the
exceptions contained in the plan assets regulation is applicable. An equity
interest is defined under the plan assets regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. We believe that the notes should be
treated as indebtedness without substantial equity features for purposes of the
plan assets regulation. However, without regard to whether the notes are
treated as an equity interest for such purposes, the acquisition or holding of
notes by or on behalf of a benefit plan could be considered to give rise to a
prohibited transaction if the trust, the owner trustee or the indenture
trustee, the owner of collateral, the underwriters, or any of their respective
affiliates is or becomes a party in interest or a disqualified person with
respect to the benefit plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type of asset
invested and the position of the plan fiduciary making the decision to acquire
a note. Included among these exemptions are:
. PTCE 90-1, regarding investments by insurance company pooled separate
accounts;
. PTCE 91-38, regarding investments by bank collective investment funds;
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers; and
. PTCE 96-23, regarding transactions effected by in-house asset
managers.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA are
not subject to ERISA requirements. These plans may, however, be subject to the
provisions of other
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applicable federal and state laws, including, for any governmental or church
plan qualified under Section 401(a) of the IRS code and exempt from taxation
under Section 501(a) of the IRS code, the prohibited transaction rules set
forth in Section 503 of the IRS code.
A plan fiduciary considering the purchase of notes should consult its tax
and/or legal advisors regarding whether the assets of the trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
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UNDERWRITING
The underwriter has agreed, subject to the terms and conditions of the
underwriting agreement, to purchase the Class A and Class M notes from Conseco
Securitizations.
The underwriting agreement provides that the underwriter is obligated to
purchase all of the notes, if any of such notes are purchased.
Conseco Securitizations have been advised by the underwriter that they
propose initially to offer the notes to the public at the respective offering
prices shown on the cover page of this prospectus supplement and to certain
dealers at this price less a concession not in excess of the respective amounts
set forth in the table below, expressed as a percentage of the related
principal balance.
The underwriter may allow and dealers may reallow a discount not in excess of
the respective amounts listed in the table below to certain other dealers.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- -----------
<S> <C> <C>
A................................................... % %
M................................................... % %
</TABLE>
Until the distribution of the notes is completed, rules of the SEC may limit
the ability of the underwriter and certain selling group members to bid for and
purchase the notes. As an exception to these rules, the underwriter is
permitted to engage in certain transactions that stabilize the price of the
notes. These transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the notes.
If the underwriter creates a short position in the notes in connection with
the offering, for example, if they sell more notes than are set forth on the
cover page of this prospectus supplement, the underwriter may reduce that short
position by purchasing notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither Conseco Finance, Conseco Securitizations nor the underwriter makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the notes. In
addition, neither Conseco Finance, Conseco Securitizations nor the underwriter
makes any representation that the underwriter will engage in transactions or
that transactions, once commenced, will not be discontinued without notice.
The underwriting agreement provides that Conseco Finance, Conseco
Securitizations will indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933 or will contribute to
payments the underwriter may be required to make.
S-39
<PAGE>
The underwriter has represented, warranted and agreed that:
(1) it has not offered or sold and, prior to the expiration of the period
of six months from the closing date, will not offer or sell any notes to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments,
as principal or agent for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(2) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation
to the notes in, from or otherwise involving the United Kingdom; and
(3) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan and the underwriter has agreed that it will not offer or
sell any of the notes, directly or indirectly, in Japan or to, or for the
benefit of, any resident of Japan, which term means any person resident in
Japan, including any corporation or other entity organized under the laws of
Japan, except under an exemption from the registration requirements of, and
otherwise in compliance with, the Securities and Exchange Law of Japan and any
other applicable laws, regulations and ministerial guidelines of Japan.
Conseco Finance and Conseco Securitizations do not intend to apply for
listing of the notes on a national securities exchange, but has been advised by
the underwriter that the underwriter currently intends to make a market in the
notes, as permitted by applicable laws and regulations. The underwriter is not
obligated, however, to make a market in the notes and any such market may be
discontinued at any time at the sole discretion of the underwriter.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the notes.
Upon receipt of a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, we and the underwriter will
promptly deliver, or cause to be delivered, without charge, a paper copy of the
prospectus supplement and prospectus.
LEGAL MATTERS
The legality of the notes and consequences of the federal and Minnesota
income tax matters discussed under "Federal and State Income Tax Consequences"
will be passed upon for Conseco Finance and Conseco Securitizations by Dorsey &
Whitney LLP. The validity of the notes will be passed upon for the underwriter
by Brown & Wood LLP, New York, New York.
S-40
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The Information contained in this prospectus supplement is not complete and +
+may be changed. We may not sell these securities until the registration +
+statement filed with the Securities and Exchange Commission is effective. +
+This prospectus supplement is not an offer to sell these securities, and it +
+is not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[Conseco Logo]
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 1999)
$ (Approximate)
Conseco Finance Corp.
Servicer
Conseco Finance Securitizations Corp.
Seller
Conseco Finance Recreational Enthusiast Consumer Trust 1999-
-----------
The securities will consist of classes, of which are offered under
this prospectus supplement.
<TABLE>
<CAPTION>
Approximate Interest Underwriting Proceeds to
Class Principal Amount Rate Price to Public Discount Company
----- ---------------- -------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Class A-1
Notes..........
Class A-2
Notes..........
Class A-3
Notes..........
Class A-4
Notes..........
Class A-5
Notes..........
Class A-6
Notes..........
Class A-7
Notes..........
Class B-1
Certificates...
</TABLE>
The approximate principal amount of the classes of securities listed above
may vary plus or minus 5%. The price to public will be the percentage total in
the table above plus any accrued interest beginning on , 1999.
Consider carefully the risk factors beginning on page S-9 in this prospectus
supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
These securities will be delivered on or about , 1999.
The underwriters named below will offer classes of notes listed in the
table above to the public at the offering price listed on this cover page and
they will receive the discount listed above. [There is currently no
underwriting arrangement for the other class of offered notes.] See
"Underwriting" on page S-49 in this prospectus supplement and "Plan of
Distribution" on page 54 in the prospectus.
-----------
[Underwriters]
The date of this prospectus supplement is , 1999.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Terms of the Offered Securities........................... S-4
Risk Factors............................................................. S-10
The Trust................................................................ S-13
The Trust Property....................................................... S-14
The Contract Pool........................................................ S-15
Conseco Finance Corp..................................................... S-21
Yield and Prepayment Considerations...................................... S-24
Description of the Notes................................................. S-30
Description of the Certificates.......................................... S-38
Description of the Trust Documents and Indenture......................... S-41
Federal and State Income Tax Consequences................................ S-45
ERISA Considerations..................................................... S-46
Underwriting............................................................. S-49
Legal Matters............................................................ S-51
Annex I.................................................................. A-1
Prospectus
Important Notice about Information Presented in this Prospectus and the
Prospectus Supplement................................................... 2
The Trusts............................................................... 3
The Contracts............................................................ 4
Conseco Finance Corp..................................................... 5
Conseco Finance Securitizations Corp..................................... 7
Yield and Prepayment Considerations...................................... 7
Pool Factor.............................................................. 8
Use of Proceeds.......................................................... 9
The Certificates......................................................... 9
The Notes................................................................ 10
Information Regarding the Securities..................................... 17
Description of the Trust Documents....................................... 21
Legal Aspects of the Contracts........................................... 34
Federal Income Tax Consequences.......................................... 39
State Income Tax Considerations.......................................... 52
ERISA Considerations..................................................... 53
Plan of Distribution..................................................... 54
Legal Matters............................................................ 55
Experts.................................................................. 55
</TABLE>
You should rely only on the information contained in this prospectus
supplement and prospectus. Conseco Finance and Conseco Securitizations and the
underwriters have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. Conseco Finance and Conseco Securitizations and the
underwriters are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
This document consists of a prospectus supplement and a prospectus. The
prospectus provides general information about Conseco Finance, about its
recreational consumer lending business, and about any series of asset-backed
securities secured by a pool of recreational, equipment and consumer loans that
we may wish to sell. This prospectus
S-2
<PAGE>
supplement contains more detailed information about the specific terms of this
series of securities. If the description of the term of your series of
securities varies between this prospectus supplement and the prospectus, you
should rely on the information in this prospectus supplement.
If you have received a copy of this prospectus supplement and prospectus in
an electronic format, and if the legal prospectus delivery period has not
expired, you may obtain a paper copy of this prospectus supplement and
prospectus from Conseco Finance, Conseco Securitizations or an underwriter by
asking for it.
No prospectus regarding these securities has been or will be prepared in the
United Kingdom pursuant to the United Kingdom Public Offers of Securities
Regulation 1995. These securities may not be offered or sold, or re-offered or
re-sold, to persons in the United Kingdom, except (1) to persons whose ordinary
activities involve them in acquiring, holding, managing and disposing of
investments (as principal or agent) for the purpose of their businesses, or (2)
in circumstances that will not constitute or result in an offer to the public
in the United Kingdom within the meaning of the United Kingdom Public Offers of
Securities Regulation 1995. You may not pass this prospectus supplement and
prospectus, or any other document inviting applications or offers to purchase
securities or offering securities for purchase, to any person in the United
Kingdom who (1) does not fall within article 11 (3) of the Financial Services
Act 1986 (Investment Advisements) (Exemptions) Order 1996 or (2) is not
otherwise a person to whom passing this prospectus supplement and prospectus
would be lawful.
S-3
<PAGE>
SUMMARY OF THE TERMS OF THE OFFERED SECURITIES
This summary highlights selected information regarding the offered
securities, and does not contain all of the information that you need to
consider in making your investment decision. To understand all of the terms of
the offered securities, read this entire prospectus supplement and the
accompanying prospectus. In particular, we will refer throughout this summary
to sections of this prospectus supplement or the prospectus, or both, which
will contain more complete descriptions of the matters summarized. All these
references will be to sections of this prospectus supplement only unless we
note otherwise.
The classes of securities listed in the table below will be issued by the
trust. The trust will own a pool of contracts financing the purchase of a
variety of consumer products and equipment.
<TABLE>
<CAPTION>
Interest Approximate S&P Fitch
Class Rate Principal Amount Rating Rating
- ----- -------- ---------------- ------ ------
<S> <C> <C> <C> <C>
Class A-1 Notes........................
Class A-2 Notes........................
Class A-3 Notes........................
Class A-4 Notes........................
Class A-5 Notes........................
Class A-6 Notes........................
Class A-7 Notes........................
Class B-1 Certificates.................
Class B-2 Certificates.................
Class C Certificates...................
</TABLE>
Conseco Securitizations will not issue or sell the securities unless S&P and
Fitch assign each class the rating listed above.
The rating of each class of securities by S&P addresses the likelihood of
timely receipt of interest and ultimate receipt of principal. The rating of
each class of securities by Fitch addresses the likelihood of timely payment of
interest and ultimate payment of principal. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency. The ratings of the
Class B-2 certificates are based in part on an assessment of our ability to
make payments under the Class B-2 limited guaranty.
The Class B-2 certificates are not being offered under this prospectus
supplement and prospectus. We are offering all the other classes of securities
listed in the table above. We, or one of our affiliates, initially will retain
the Class B-2 Certificates.
Seller........................
Conseco Finance Securitizations Corp.
Servicer...................... Conseco Finance Corp.
S-4
<PAGE>
Indenture Trustee.............
[Indenture Trustee], will be the indenture
trustee. For a more complete description of the
indenture trustee's responsibilities, see "The
Notes--The Indenture Trustee" in the
prospectus.
Owner Trustee................. [Owner Trustee] For a more complete description
of the owner trustee's responsibilities, see
"Description of the Trust Documents--The
Trustee" in the prospectus.
Distribution Date.............
The fifteenth day of each month or, if that day
is not a regular business day, the next regular
business day. The first distribution date will
be on 15, 2000.
Record Date................... The business day just before the related
distribution date.
Description of the Notes...... The trust will issue the notes pursuant to the
indenture between the trust and the indenture
trustee. The notes will be debt obligations of
the trust, secured by the contracts and the
other property of the trust.
Description of the
Certificates.................. The trust will issue the certificates pursuant
to the trust agreement between us, as
depositor, and the owner trustee. The
certificates will represent undivided ownership
interests in the trust, and will be
subordinated to the notes.
Distributions on the Distributions on the securities on any
Securities.................... distribution date will be made primarily from
amounts collected on the contracts during the
prior month. On each distribution date the
indenture trustee will apply the amount
available to make distributions on the
securities in the following order of priority:
(1) Interest on the Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5
notes, which we refer to as the senior
notes;
(2) An amount of principal will be due on
the senior notes, if the performance of
the contracts is far worse than we
expect, to the senior notes;
S-5
<PAGE>
(3) Interest on the Class A-6 notes;
(4) An amount of principal will be due on
the notes, if the performance of the
contracts is worse than we expect;
(5) Interest on the Class A-7 notes;
(6) An amount of principal will be due on
the notes, if the performance of the
contracts is worse than we expect;
(7) Interest on the Class B-1 certificates;
(8) An amount of principal will be due on
the notes or the Class B-1
certificates, if the performance of the
contracts is worse than we expect;
(9) A formula principal amount to be paid
on the notes or the Class B-1
certificates;
(10) Interest on the Class B-2
certificates; and
(11) The formula principal amounts to be
paid on the Class B-2 certificates if
the notes and the Class B-1
certificates have been paid in full.
See "Description of the Trust Documents and
Indenture--Distributions" for a more detailed
description of the amounts that will constitute
the amount available for any distribution date.
Class B-2 Limited Guaranty....
Conseco Finance will guarantee payment of
principal and interest on the Class B-2
certificates. See "Description of the
Certificates--Limited Guaranty" for a more
detailed description of this guaranty.
Initial The sum of the aggregate cut-off date principal
Overcollateralization......... balance of the contracts included in the trust
as of the closing date plus the amount on
deposit in the pre-funding account on the
closing date will exceed the aggregate
principal balance of the securities on the
closing date by approximately $ , which
represents approximately 1.5% of the aggregate
cut-off date principal balance of the contracts
included in
S-6
<PAGE>
the trust as of the closing date plus the
amount on deposit in the pre-funding account on
the closing date.
Repurchase Option............. After the aggregate principal balance of the
contracts is less than 10% of their aggregate
principal balance at the time Conseco
Securitizations transferred them to the trust,
Conseco Finance will have the option to
purchase all of the outstanding contracts. See
"Description of the Trust Documents and
Indenture--Termination" for a more detailed
description of the terms of this repurchase
option.
Purchase Option; Auction
Sale; Additional Principal Beginning on the remittance date when the pool
Distributions................. scheduled principal balance of the contracts is
less than 20% of cut-off date pool principal
balance of the contracts, the holder of the
Class C certificates will have the right to
repurchase all of the outstanding contracts, at
a price sufficient to pay the aggregate unpaid
principal balance of the certificates plus all
accrued and unpaid interest.
If the holder of the Class C certificates does
not exercise this purchase option, then on the
next remittance date the trustee will begin an
auction process to sell the contracts and the
other trust assets, but the trustee cannot sell
the trust assets and liquidate the trust unless
the proceeds of that sale are sufficient to pay
the aggregate unpaid principal balance of the
notes plus all accrued and unpaid interest. If
the first auction of the trust property is not
successful because the highest bid received was
too low, then the trustee will conduct an
auction of the contracts every third month
after that, unless and until an acceptable bid
is received for the trust property.
If the first auction of the trust property is
not successful because the highest bid received
was too low, then on each remittance date after
that the Class B-1 and Class B-2 certificates
will be entitled to receive, pro rata based on
the then outstanding principal balance of those
classes of certificates, an additional
principal distribution amount equal to the
S-7
<PAGE>
remaining amount available after paying all
interest and principal then due on the
certificates and payment of the monthly
servicing fee. See "Description of the Trust
Documents and Indenture--Purchase Option;
Auction Sale; Additional Principal Distribution
Amount."
The Contracts................. The contracts are retail installment sales
contracts and promissory notes for the purchase
of a variety of consumer products and
equipment. Conseco Finance and Conseco
Securitizations provide more information about
the contracts and the products they financed in
"The Contract Pool."
Tax Status.................... In the opinion of our counsel, for federal and
Minnesota income tax purposes, the notes will
be characterized as debt, and the trust will
not be characterized as an association, or
publicly traded partnership, taxable as a
corporation. By purchasing a note, you will
agree to treat the notes as debt. By purchasing
a certificate, you will agree to treat the
trust as a partnership in which the
certificateholders are partners for federal
income tax purposes. Alternative
characterizations of the trust and the
certificates are possible, but would not result
in materially adverse tax consequences to
certificateholders. See "Federal Income Tax
Consequences" in this prospectus supplement and
"Federal Income Tax Consequences" and "State
Income Tax Consequences" in the prospectus.
Pre-Funding Account........... If the aggregate principal balance of the
contracts that Conseco Securitizations
transfers to the trust on the closing date is
less than $ , the indenture trustee will
deposit that difference in a pre-funding
account, and the trust will use those funds to
purchase contracts from time to time until
, 2000. If those funds are not completely
used by , 2000, the remaining funds will be
distributed as principal on the Class A-1 notes
on the 2000 distribution date.
Money Market Eligibility...... The Class A-1 notes will have a final maturity
of , 200 . The Class A-1 notes will be
eligible securities for purchase by money
market funds under
S-8
<PAGE>
Rule 2a-7 under the Investment Company Act of
1940. A fund should consult with its advisor
regarding the eligibility of the Class A-1
notes under Rule 2a-7 and the fund's investment
policies and objectives.
ERISA Considerations.......... Subject to the conditions described under
"ERISA Considerations," employee benefit plans
that are subject to the Employee Retirement
Income Security Act of 1974 may purchase the
notes. An employee benefit plan may not
purchase any class of certificates, unless it
satisfies the conditions described under "ERISA
Considerations" in this prospectus supplement
and in the prospectus.
Reports to Holders of the
Securities....................
Conseco Finance will provide to the holders of
the securities of each series monthly and
annual reports about the securities and the
trust. For a more complete description of the
reports you will receive, please read the
section entitled "Information Regarding the
Securities--Statements to Securityholders."
S-9
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the securities.
The more subordinate classes of securities have a greater risk of loss from
delinquency and defaults on the contracts.
The trust has limited assets.
Holders of the notes and the certificates must primarily rely for repayment
upon payments on the contracts. The trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
contracts and, for payment of losses absorbed by the Class B-2 certificates,
the limited guaranty of Conseco Finance.
The Class A-6 and Class A-7 notes and the certificates are subordinated.
Distributions of interest and principal on the Class A-6 and Class A-7 notes
will be subordinated to the rights of the holders of the senior notes to
receive prior payment of interest and principal. Distributions of interest and
principal on the certificates will be subordinated in priority of payment to
interest and principal due on the notes. This makes it more likely that the
Class A-6 and Class A-7 notes and the certificates might not receive timely
distributions of interest and principal, or may not receive all the amounts due
then.
Conseco Finance has limited delinquency, loan loss and repossession experience.
Conseco Finance began originating installment sales contracts for
recreational vehicles in 1985 and for motorcycles in 1988, but have less
extensive underwriting and servicing experience with other types of products
financed by the contracts. Although Conseco Finance has calculated and
presented its delinquency and net loss experience for its servicing portfolio
of consumer contracts, you must not assume that the information presented will
reflect actual experience for the contracts owned by the trust. In addition,
you must not assume that the future delinquency, loan loss or repossession
experience of the trust for the contracts will be better or worse than those
described for our servicing portfolio. See "The Contract Pool--Delinquency,
Loan Loss and Repossession Information." If the delinquency, default and loss
experience of the contracts owned by the trust is worse than expected, you
could suffer a loss on your investment.
Higher than expected delinquencies, higher than expected defaults, or higher
than expected losses after default could result in a loss on your investment.
Payments on the securities will be made primarily from payments on the
contracts. If the obligors on the contracts do not make timely payments, the
trust may not be able to make timely payment of interest and principal on your
note or certificate. If an obligor defaults on a contract, then the trust will
be relying on the servicer's ability to repossess and resell the related
product.
S-10
<PAGE>
You should consider these risks that might cause higher than expected
delinquencies, defaults or losses:
. Geographic concentration of initial contracts increases your exposure to
local economic conditions.
As of the cutoff date, the obligors on approximately % and % of the
initial contracts, based on principal balance and billing address of the
obligor were located in and , respectively. See "The Contract
Pool." Accordingly, adverse economic conditions or other factors
particularly affecting these states could adversely affect the
delinquency, loan loss or repossession experience of the trust with
respect to the contracts. If the delinquency, default and loss experience
of the contracts owned by the trust is worse than expected, you could
suffer a loss on your investment.
. The trust may not be able to enforce the contracts.
When Conseco Finance originated each contract, it required the customer
to grant Conseco Finance a security interest in the financed product. When
Conseco Finance assigns a pool of contracts to Conseco Securitizations, it
will also assign its security interests in the financed products. Because
of the administrative burden and expense, the documents reflecting the
security interest in the products will not be amended to reflect the
assignment of the security interest. As a result, there is a risk that the
trust will not have a perfected security interest in the products. If
Conseco Finance were no longer the servicer of the contracts and the trust
had to begin enforcing contracts in its own name, either directly or
through a replacement servicer, there is a risk that the trust would be
unable to repossess a product following a default on the related contract,
which would result in higher losses on the contract pool. If losses on the
contract pool exceed expected levels, you may suffer a loss on your
investment.
The trust may not own the contracts.
Conseco Finance will hold the files evidencing the contracts, as servicer on
behalf of the trust. To facilitate servicing and save administrative costs, the
documents will not be physically segregated from other similar documents that
are in our possession. Conseco Finance will file UCC financing statements
reflecting the assignment of the contracts to the trustee, and its accounting
records and computer systems will also reflect that assignment. Conseco Finance
will stamp each contract to indicate that the contract has been sold. Despite
these precautions, if, through inadvertence or otherwise, any of the contracts
were sold or pledged to another party and that party took possession of those
contracts, then that purchaser, or secured party, would acquire an interest in
those contracts superior to that of the trustee. If the trust is unable to
collect payments on some or all of the contracts, then you may suffer a loss on
your investment.
Prepayments on the contracts are unpredictable, and will affect your yield.
The contracts may be prepaid in full or in part at any time before their
scheduled maturity due to various factors, including general and regional
economic conditions and
S-11
<PAGE>
prevailing interest rates. The prepayment experience on similar contracts
varies greatly and may affect the average life of the securities. You must not
assume that the contracts will prepay at any particular rate, or at a constant
rate. For more information, see "Yield and Prepayment Considerations."
There may be no secondary market for the securities which means you may have
trouble selling them when you want to.
We cannot assure to you that a secondary market will develop for the
securities or, if a secondary market does develop, that it will provide the
holders of any of the securities with liquidity of investment. We also cannot
assure you that if a secondary market does develop, that it will continue to
exist for the term of the securities.
If Conseco Finance becomes insolvent, you may suffer delays or reductions in
distributions on your securities.
Conseco Finance intends that each transfer of contracts to the related trust
will constitute a sale, rather than a pledge of the contracts to secure our
indebtedness. However, if Conseco Finance were to become a debtor under the
federal bankruptcy code, it is possible that its creditors, a bankruptcy
trustee or Conseco Finance as debtor-in-possession, may argue its the sale of
the contracts was a pledge of the contracts rather than a sale. This position,
if presented to or accepted by a court, could result in a delay in or reduction
of distributions to the holders of the securities.
The case of Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993) contains language to the effect that accounts sold by an entity which
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Although the contracts constitute chattel paper rather than accounts
under the UCC, sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If Conseco Finance became a debtor under the federal
bankruptcy code and a court follows the reasoning of the 10th Circuit and
applies this rule to chattel paper, holders of certificates could experience a
delay or reduction in distributions.
Other rating agencies could provide unsolicited ratings on the certificates
that could be lower than the requested ratings.
Although Conseco Finance has not requested a rating of the securities from
any rating agencies other than S&P and Fitch, other rating agencies may rate
the certificates. These ratings could be higher or lower than the ratings S&P
and Fitch initially give to the securities. There is a risk that a lower rating
of your securities from another rating agency could reduce the market value or
liquidity of your securities. There is a risk that a lower rating of your
securities from another rating agency could reduce the market value on
liquidity of your securities.
S-12
<PAGE>
We have defined terms in the "Glossary" section at the back of the prospectus.
THE TRUST
The following information supplements the information in the prospectus. You
should consider, in addition to the information below, the information under
"The Trusts" in the prospectus.
General
Conseco Finance Recreational Enthusiast Consumer Trust 1999- is a business
trust formed under the laws of the State of Delaware pursuant to the trust
agreement for the transactions described in this prospectus supplement. After
its formation, the trust will not engage in any activity other than:
(1) acquiring, holding and managing the contracts and the other assets of
the trust and its proceeds;
(2) issuing the notes and the certificates;
(3) making payments on the notes and the certificates; and
(4) engaging in other activities that are necessary, suitable or convenient
to accomplish the above or are incidental or connected to those
activities.
The trust will initially be capitalized with equity of approximately
$ from the sale of the certificates. The Class B-2 certificates will
be sold to Conseco Finance or its affiliate and the Class B-1 certificates will
be sold to third party investors that is not affiliated with Conseco Finance or
its affiliates. The equity of the trust, together with the proceeds of the
initial sale of the notes, will be used by the trust to purchase the contracts
from Conseco Securitizations under the sale and servicing agreement among
Conseco Securitizations, Conseco Finance and the trust.
The trust's principal offices are in [City, State], at the address listed
below under""--The Owner Trustee."
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
cutoff date, as if the issuance and sale of the notes and certificates had
taken place on that date:
<TABLE>
<S> <C>
Class A-1 notes............................................... $
Class A-2 notes...............................................
Class A-3 notes...............................................
Class A-4 notes...............................................
Class A-5 notes...............................................
Class A-6 notes...............................................
Class A-7 notes...............................................
Class B-1 certificates........................................
Class B-2 certificates........................................
Class C certificates..........................................
-----------
Total....................................................... $
===========
</TABLE>
S-13
<PAGE>
The Owner Trustee
[Owner Trustee] is the owner trustee under the trust agreement. [Owner
Trustee] is a Delaware banking corporation and its principal offices are
located at [Address]. The owner trustee will perform limited administrative
functions under the trust agreement, including making distributions from the
certificate distribution account. The owner trustee's liability in connection
with the issuance and sale of the certificates and the notes is limited solely
to the express obligations of the owner trustee described in the trust
agreement.
THE TRUST PROPERTY
The trust property will consist of:
(1) the contracts;
(2) all rights to receive payments due thereon on or after the cutoff date,
excluding certain insurance premiums, late fees and other servicing
charges;
(3) such amounts as from time to time may be held in the collection account
and any other accounts established and maintained by the servicer
pursuant to the sale and servicing agreement;
(4) an assignment of the security interests by us in the products securing
the related contracts;
(5) an assignment of the right to receive proceeds from claims on certain
insurance policies covering the products and the obligors; and
(6) all other rights under the trust documents.
See "The Contracts" and "Description of the Trust Documents--Collections" in
the prospectus.
Each certificate will represent a fractional undivided interest in the trust
property. Pursuant to the indenture the trust will grant a security interest in
the trust property in favor of the indenture trustee for the noteholders. Any
proceeds of such security interest in the trust property would be distributed
according to the indenture, as described under "Description of the Trust
Documents and Indenture--Distributions."
Conseco Finance, as custodian on behalf of the trust, will hold each original
contract, as well as copies of documents and instruments relating to such
contract and evidencing the security interest in the product securing that
contract.
To protect the trust's ownership interest in the contracts, we will file a
UCC-1 financing statement in Minnesota and Delaware to give notice of the
trust's ownership of the contracts and the related trust property.
Under the indenture, the trust will grant a security interest in favor of the
indenture trustee in the trust property, the rights of the trust under the sale
and servicing agreement, and the collection account and note distribution
account. Any proceeds of the property will
S-14
<PAGE>
be distributed according to the trust. See "Description of the Trust Documents
and Indenture--Distributions" in this prospectus supplement.
The indenture trustee or its custodian will hold each original contract or
promissory note, as well as copies of documents and instruments relating to
that contract and evidencing the security interest securing the contract.
Payments and recoveries in respect of principal and interest on the contracts
will be paid into a separate trust account maintained at an eligible
institution, initially [Indenture Trustee], in the name of the indenture
trustee, no later than one business day after receipt. The indenture trustee
will, on the fifteenth day of each month or, if such day is not a business day,
the next succeeding business day, deposit funds from the collection account
into the note distribution account and the certificate distribution account.
Payments on deposit in the note distribution account will be applied by the
indenture trustee on each payment date to make the distributions to the
noteholders as of the immediately preceding record date and payments on deposit
in the certificate distribution account will be applied by the owner trustee on
each payment date to make the distributions to the certificateholders as of the
immediately preceding record date, all as described under "Description of the
Securities--Distributions on the Securities."
Following the transfer of the loans from Conseco Finance to Conseco
Securitizations, and then by Conseco Securitizations to the trust, Conseco
Finance's obligations are limited to:
(1) its obligations as servicer to service the contracts;
(2) representations and warranties in the sale and servicing agreement as
described under "Description of the -- " in this prospectus
supplement;
(3) indemnities and the payment of trustees' fees; and
(4) the Class B-2 limited guaranty.
Conseco Finance is obligated under the sale and servicing agreement to
repurchase any loan on the first payment date which is more than 90 days after
Conseco Finance becomes aware, or receives written notice from the indenture
trustee or the owner trustee, of any breach of any representation and warranty
in the sale and servicing agreement that materially and adversely affects the
securityholders' interest in the loan if the breach has not been cured prior to
that date. The sale and servicing agreement also provides that Conseco Finance
is obligated to repurchase loans and to indemnify the indenture trustee or the
owner trustee and the securityholders about other matters. Conseco Finance is
also obligated to pay fees of the owner trustee and indenture trustee.
THE CONTRACT POOL
General
This prospectus supplement contains information regarding a portion of the
contracts to be included in the pool as of the closing date. These initial
contracts were originated through
S-15
<PAGE>
, 1999 and will be transferred to the trust by Conseco Securitizations on
the closing date. The information for each initial contract is as of the cutoff
date for that initial contract. The initial contracts had an aggregate
principal balance as of the cutoff date of $ . The sale and
servicing agreement provides that additional contracts will be purchased by the
trust on the closing date. We expect that, on the closing date, the contract
pool, which will consist of the initial contracts and the additional contracts,
will have an aggregate principal balance as of the cutoff date of approximately
$ . Although the additional contracts sold to the trust on the
closing date will have characteristics that differ somewhat from the initial
contracts described here, we do not expect that the characteristics of the
additional contracts will vary materially from the initial contracts. In
addition, the additional contracts must conform to the representations and
warranties in the sale and servicing agreement.
Conseco Finance purchased all of the contracts from dealers who regularly
originate and sell such contracts to it, or the contracts were originated by
Conseco Finance directly.
Certain Other Characteristics
The initial contracts:
(1) had a remaining maturity, as of the cutoff date, of at least
months, but not more than months,
(2) had an original maturity of at least five months, but not more than
months,
(3) had an original principal balance of at least $ and not more
than $ ,
(4) had a remaining principal balance as of the cutoff date of at least
$ and not more than $ and
(5) had a contractual rate of interest of at least % and not more than
%.
Neither Conseco Securitizations nor Conseco Finance may substitute other
contracts for the contracts owned by the trust at any time during the term of
the sale and servicing agreement.
Characteristics of Initial Contracts
<TABLE>
<CAPTION>
% of Weighted Weighted Weighted
Cutoff Average Average Weighted Average
% of Scheduled Date Pool Average Remaining Original Average Loan-to-
Number of Contract Principal Principal Principal Term Scheduled Contract Value
Asset Type Contracts Pool Balance Balance Balance (1)(2) Term (2) Rate Ratio
---------- --------- -------- ------------ --------- ---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Recreational Vehicles... % $ % $ % %
Motorcycles.............
Keyboard Instruments....
Marine Products.........
Horsetrailers...........
Sport Vehicles..........
Trucks..................
---- --- ------------ ---- ---------- --- --- ----- ---
Total.................. 100% $ 100% $ % %
==== === ============ ==== ========== === === ===== ===
</TABLE>
- --------
(1) Based on scheduled payments due after the cutoff date and assuming no
prepayments on the initial contracts.
(2) Expressed in number of months.
S-16
<PAGE>
Geographic Concentration of Initial Contracts
<TABLE>
<CAPTION>
% of
Aggregate Contracts
Number of % of Number Principal Balance by Outstanding
Contracts as of of Outstanding Principal Balance
State Cutoff Date Contracts as of Cutoff Date as of Cutoff Date
------ --------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama................. % $ %
Alaska..................
Arizona.................
Arkansas................
California..............
Colorado................
Connecticut.............
Delaware................
District of Columbia....
Florida.................
Georgia.................
Hawaii..................
Idaho...................
Illinois................
Indiana.................
Iowa....................
Kansas..................
Kentucky................
Louisiana...............
Maine...................
Maryland................
Massachusetts...........
Michigan................
Minnesota...............
Mississippi.............
Missouri................
Montana.................
Nebraska................
Nevada..................
New Hampshire...........
New Jersey..............
New Mexico..............
New York................
North Carolina..........
North Dakota............
Ohio....................
Oklahoma................
Oregon..................
Pennsylvania............
Rhode Island............
South Carolina..........
South Dakota............
Tennessee...............
Texas...................
Utah....................
Vermont.................
Virginia................
Washington..............
West Virginia...........
Wisconsin...............
Wyoming.................
----- ------ -------------- ------
Total................. 100.00% $ 100.00%
===== ====== ============== ======
</TABLE>
The state concentrations described in this table are based on the billing
address of the obligor listed in Conseco Finance's records.
S-17
<PAGE>
Distribution of Original Contract Amounts of Initial Contracts
<TABLE>
<CAPTION>
Aggregate
Principal
Balance % of Contracts
Number of Outstanding by Outstanding
Contracts as of Cutoff Principal Balance
Original Contract Amount as of Cutoff Date Date as of Cutoff Date
------------------------ ----------------- ------------- -----------------
<S> <C> <C> <C>
Less than $10,000........... $ %
Between $10,000 and
$19,999....................
Between $20,000 and
$29,999....................
Between $30,000 and
$39,999....................
Between $40,000 and
$49,999....................
Between $50,000 and
$59,999....................
Between $60,000 and
$69,999....................
Between $70,000 and
$79,999....................
Between $80,000 and
$89,999....................
Between $90,000 and
$99,999....................
Between $100,000 and
$109,999...................
Between $110,000 and
$119,000...................
Between $120,000 and
$129,999...................
Between $130,000 and
$139,999...................
Between $140,000 and
$149,999...................
Between $150,000 and
$159,999...................
Between $160,000 and
$169,999...................
Between $170,000 and
$179,999...................
Between $180,000 and
$189,999...................
Between $190,000 and
$199,999...................
Between $200,000 and
$249,999...................
Between $250,000 and
$299,999...................
Between $300,000 and
$349,999...................
Between $350,000 and
$399,999...................
Between $400,000 and
$449,999...................
Between $450,000 and
$499,999...................
Between $500,000 and
$549,999...................
Between $550,000 and
$599,999...................
Between $600,000 and
$649,999...................
Between $650,000 and
$699,999...................
Between $700,000 and
$749,999...................
Between $750,000 and
$799,999...................
Between $800,000 and
$849,999...................
Between $850,000 and
$899,999...................
Between $900,000 and
$949,999...................
Between $950,000 and
$999,999...................
Over $999,999...............
----- ------------- ------
Total..................... $ 100.00%
===== ============= ======
</TABLE>
S-18
<PAGE>
Year of Origination of Initial Contracts
<TABLE>
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Year of Number of Contracts Balance Outstanding Principal Balance
Oiginationr as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ----------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
1986................... $ %
1987...................
1988...................
1989...................
1990...................
1991...................
1992...................
1993...................
1994...................
1995...................
1996...................
1997...................
1998...................
----- ------------ ------
Total................ $ 100.00%
===== ============ ======
Distribution of Original Loan-to-Value Ratios of Initial Contracts
<CAPTION>
% of
Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Loan-to-Value Ratio as of Cutoff Date as of Cutoff Date as of Cutoff Date
------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 61%...........
From 61 to 65%..........
From 66 to 70%..........
From 71 to 75%..........
From 76 to 80%..........
From 81 to 85%..........
From 86 to 90%..........
From 91 to 95%..........
Over 95%................
----- ------------ ------
Total................. $ 100.00%
===== ============ ======
</TABLE>
S-19
<PAGE>
Initial Contract Rates
<TABLE>
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Contract Rate as of Cutoff Date as of Cutoff Date as of Cutoff Date
------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Less than 7.001%.......... $ %
7.001% to 8.000%.........
8.001% to 9.000%.........
9.001% to 10.000%........
10.001% to 11.000%........
11.001% to 12.000%........
12.001% to 13.000%........
13.001% to 14.000%........
14.001% to 15.000%........
15.001% to 16.000%........
16.001% to 17.000%........
Over 17.000%..............
----- ------------ ------
Total................... $ 100.00%
===== ============ ======
Remaining Months to Maturity of Initial Contracts
<CAPTION>
% of Contracts
Aggregate Principal by Outstanding
Number of Contracts Balance Outstanding Principal Balance
Remaining Months to Maturity as of Cutoff Date as of Cutoff Date as of Cutoff Date
- ---------------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C>
Fewer than 31............. $ %
31 to 60................
61 to 90................
91 to 120................
121 to 150................
151 to 180................
181 to 210................
211 to 240................
----- ------------ ------
Total................... $ 100.00%
===== ============ ======
</TABLE>
S-20
<PAGE>
CONSECO FINANCE CORP.
The following information supplements and if inconsistent supersedes, the
information in the prospectus under the heading "Conseco Finance Corp." Conseco
Finance Corp. was previously named Green Tree Financial Corporation.
Delinquency, Loan Loss and Repossession Information
The following tables describe information about our delinquency, loan loss
and repossession experience for each period indicated for all consumer product
and equipment contracts it has purchased and continues to service, including
the contracts which do not meet the criteria for selection as a contract.
Conseco Finance began originating installment sales contracts for recreational
vehicles in 1985 and for motorcycles in 1988, but has less extensive
underwriting and servicing experience with other types of consumer products and
recreational products financed by the contracts. Accordingly, the delinquency,
loan loss and repossession experience presented below largely represents
experience only with recreational vehicle and motorcycle contracts. In
addition, because of the rapid growth of our portfolio of consumer product and
recreational products contracts, the experience shown in more recent periods
may not be indicative of the experience to be expected from a more seasoned
portfolio.
Delinquency Experience
<TABLE>
<CAPTION>
At December 31, At
--------------------------------------- March 31,
1994 1995 1996 1997 1998 1999
------ ------ ------- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Outstanding (1)............ 21,137 49,998 104,698 158,418
Number of Contracts
Delinquent (2)
30-59 Days................ 181 643 1,390 1,613
60-89 Days................ 50 219 494 692
90 Days or More........... 134 350 934 1,532
------ ------ ------- ------- ----- -----
Total Contracts Delinquent.. 365 1,212 2,818 3,837
====== ====== ======= ======= ===== =====
Delinquencies as a
Percentage of Contracts
Outstanding (3)............ 1.73% 2.42% 2.69% 2.42% % %
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquency for the number of contracts delinquent is based
on the number of days payments are contractually past due, assuming 30-day
months. Consequently, a contract due on the first day of a month is not 30
days delinquent until the first day of the next month.
(3) By number of contracts.
S-21
<PAGE>
Loan Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended
------------------------------------------------------ Marchr 31,
1994 1995 1996 1997 1998 1999
-------- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)........... 21,283 50,265 105,369 159,496
Principal Balance of
Contracts (1).......... $148,734 $506,459 $1,350,964 $2,352,141 $ $
Contract Liquidations:
Units................... 145 379 1,968 3,601
Percentage (2).......... 0.68% 0.75% 1.87% 2.26% % %
Net Losses:
Dollars (3)............. $ 884 $ 1,907 $ 9,249 $ 15,050 $ $
Percentage (4).......... 0.59% 0.38% 0.68% 0.64% % %
</TABLE>
- --------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts being serviced as of
period end.
There can be no assurance that the delinquency, loan loss or repossession
experience of the trust for the contracts will be better than, worse than or
comparable to the experience described above. See "Risk Factors--Delinquency,
Loan Loss and Repossession Experience" in this prospectus supplement.
Ratio of Earnings to Fixed Charges for Conseco Finance
The table below shows our ratios of earnings (losses) to fixed charges for
the past five years and the six months ended June 30, 1999. For the purposes of
compiling these ratios, earnings (losses) consist of earnings (losses) before
both income taxes and fixed charges. Fixed charges consist of interest expense
and the interest portion of rent expense.
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended December 31, June 30,
------------------------ --------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings (Losses) to Fixed Charges 7.98 7.90 5.44 3.94 .62* 4.32
</TABLE>
- --------
* For 1998, adjusted earnings were $83.4 million less than fixed charges.
Adjusted earnings for 1998 included an impairment charge of $549.4 million
and nonrecurring charges of $108.0 million related to Green Tree Financial
Corporation's merger with Conseco, Inc.
Recent Developments
Conseco Finance has been served with various lawsuits in the United States
District Court for the District of Minnesota. These lawsuits were filed by a
few of Conseco Finance's stockholders as purported class actions on behalf of
persons or entities who purchased common stock or traded in options of Conseco
Finance during the alleged class periods. These alleged class periods run from
February 1995 to January 1998. One of these lawsuits did not include class
action claims. In addition to Conseco Finance, some of Conseco
S-22
<PAGE>
Finance's current and former officers and directors are named as defendants in
one or more of the lawsuits. The lawsuits have been consolidated into two
complaints, one relating to an alleged class of purchasers of Conseco Finance's
common stock and the other relating to an alleged class of traders in options
for Conseco Finance's common stock. In addition to these two complaints, a
separate non-class action lawsuit containing similar allegations was also
filed. 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
Conseco Finance and the other defendants violated federal securities laws by,
among other things, making false and misleading statements about Conseco
Finance's current state and Conseco Finance's future prospects, particularly
about prepayment assumptions and performance of some of Conseco Finance's loan
portfolios, which allegedly rendered Conseco Finance's financial statements
false and misleading. Conseco Finance believes that the lawsuits are without
merit and intends to defend the lawsuits vigorously. However, the ultimate
outcome of these lawsuits cannot be predicted with certainty. Conseco Finance
filed motions to dismiss these lawsuits. On August 24, 1999 Conseco Finance's
motions to dismiss were granted with prejudice. On September 21, 22 and 23, the
plaintiffs filed notices of appeal of these dismissals.
S-23
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements the information in the prospectus under
the heading "Yield and Prepayment Considerations."
Conseco Securitizations and Conseco Finance each have the option to purchase
from the trust all remaining contracts, and thereby effect early redemption of
the notes and early retirement of the certificates, on any distribution date
when the pool scheduled principal balance is 10% or less of the cutoff date
pool principal balance. In addition, if neither we nor the servicer has
exercised such repurchase option, then on the third distribution date as of
which the pool scheduled principal balance is 10% or less of the cutoff date
pool principal balance, the indenture trustee, or the owner trustee, if the
notes have been paid in full must solicit bids for the purchase of the
contracts remaining in the trust. See "Description of the Trust Documents--
Termination" in the prospectus and "Description of the Trust Documents and
Indenture--Termination" in this prospectus supplement.
Weighted Average Life of the Notes and the Class B-1 Certificates
The following information is given solely to illustrate the effect of
prepayments on the contracts on the weighted average life of the notes and the
Class B-1 certificates under the stated assumptions and is not a prediction of
the prepayment rate that might actually be experienced by the contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the notes and the
certificates will be influenced by the rate at which principal on the contracts
is paid. Principal payments on the contracts may be in the form of scheduled
amortization or prepayments, including, for this purpose, liquidations due to
default.
The base case prepayment model is our management's best estimate of the
prepayment rates that may be experienced on the contracts. Because we began
originating and servicing contracts for many of the products only recently,
such estimate is based in part on industry experience with similar contracts
rather than our experience. There can be no assurance that the contracts will
experience prepayments at such projected rates or in the manner assumed by the
prepayment model used for that type of contract, or that the contracts in the
aggregate will experience prepayments similar to the overall prepayment rate or
in the manner projected in the base case.
<TABLE>
<CAPTION>
Base Case
Product Prepayment Rate
------- ---------------
<S> <C>
Horse Trailers, Sport Vehicles, Keyboard Instruments
and Recreational Vehicles............................. % CPR
Marine Products........................................ %(1)
Motorcycles............................................ % CPR
Trucks................................................. % ABS
</TABLE>
- --------
(1) As a percentage of the prepayment assumption for contracts secured by
marine products.
S-24
<PAGE>
The models used in this prospectus supplement are the constant prepayment
rate (CPR) and the prepayment assumption for contracts secured by marine
products.
The CPR represents an assumed constant rate of prepayment each month,
expressed as a per annum percentage of the outstanding principal balance of the
contracts secured by all products other than marine products and trucks.
The 100% prepayment assumption for contracts secured by marine products
assumes a constant prepayment of 0% per annum of the then outstanding principal
balance of such loans in the first month of the life of such loans and an
additional 1.27% precisely, 14/11% per annum in each month thereafter until the
twelfth month. Beginning in the twelfth month and in each month thereafter
during the life of such loans, the 100% prepayment assumption for contracts
secured by marine products assumes a constant prepayment rate of 14% per annum
each month.
As used in the following tables, the columns headed 80%, 90%, 100%, 110% and
120% assume that prepayments on the contracts are made at base case prepayment
rates of 80%, 90%, 100%, 110% and 120%, respectively. For example, 80% base
case prepayment rate and 120% base case prepayment rate mean that contracts
related to horse trailers, sport vehicles, keyboard instruments and
recreational vehicles have been assumed to have a prepayment rate equal to
14.4% CPR and 21.6% CPR, respectively; contracts related to marine products
have been assumed to have a prepayment rate equal to 80% and 120%,
respectively, of the prepayment assumption for contracts secured by marine
products; and contracts related to motorcycles have been assumed to have a
prepayment rate equal to 24% CPR and 36% CPR, and contracts related to trucks
have been assumed to have a prepayment rate equal to 1.12% ABS and 1.68% ABS.
NEITHER CPR NOR ABS PURPORTS TO BE AN HISTORICAL DESCRIPTION OF PREPAYMENT
EXPERIENCE OR A PREDICTION OF THE ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF
CONTRACTS, INCLUDING THE CONTRACTS OWNED BY THE TRUST.
The percentages and weighted average lives in the following tables were
determined assuming that:
(1) scheduled interest and principal payments on the contracts are received
in a timely manner and prepayments are made at the percentages of the
base case prepayment model set forth in the table;
(2) either we or the servicer exercises its right of optional repurchase
described above;
(3) the aggregate principal balance of the initial contracts as of the
cutoff date is $ and the initial contracts have the
characteristics described under "The Contract Pool";
(4) the additional contracts to be transferred to the trust have the
characteristics described in the table following this paragraph and are
assumed to have their first payments due in ;
(5) no interest shortfalls will arise in connection with prepayments in
full of the contracts;
S-25
<PAGE>
(6) distributions are made on the notes and the certificates on the 15th
day of each month commencing in ; and
(7) the securities are issued on .
No representation is made that the contracts will not experience
delinquencies or losses.
Assumed Characteristics of Additional Contracts as of the Cutoff Date
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Aggregate Principal Weighted Average Original Term Remaining Term
Balance Outstanding Contract Rate (Months) (Months)
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Horse Trailers.......... $ %
Marine Products.........
Motorcycles.............
Sport Vehicles..........
Keyboard Instruments....
Recreational Vehicles...
Trucks..................
------------ ----- --- ---
Total................. $ %
============ ===== === ===
</TABLE>
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each class of notes and the Class B-1
certificates and shows the percentages of the original principal balance of
each class that would be outstanding after each of the dates shown, at the
indicated percentages of the base case prepayment model. Investors are urged to
make their investment decisions on a basis that includes their determination as
to anticipated prepayment rates under a variety of the assumptions discussed in
this prospectus supplement.
The weighted average life of each class of the securities listed in the
tables below is determined by (1) multiplying the amount of cash distributions
in reduction of the principal balance of that class of securities by the number
of years from the date of issuance of that security to the stated distribution
date, (2) adding the results, and (3) dividing the sum by the initial principal
balance of that class of securities.
S-26
<PAGE>
Percentage of the Original Principal Balance of the Class A-1
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
Weighted Average Life (Years).......................
Percentage of the Original Principal Balance of the Class A-2
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
Weighted Average Life (Years).......................
Percentage of the Original Principal Balance of the Class A-3
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
[Month] 15, 2002....................................
Weighted Average Life (Years).......................
</TABLE>
S-27
<PAGE>
Percentage of the Original Principal Balance of the Class A-4
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................. 100% 100% 100% 100% 100%
[Month] 15, 2000...................................
[Month] 15, 2001...................................
[Month] 15, 2002...................................
[Month] 15, 2003...................................
Weighted Average Life (Years)......................
Percentage of the Original Principal Balance of the Class A-5
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................. 100% 100% 100% 100% 100%
[Month] 15, 2000...................................
[Month] 15, 2001...................................
[Month] 15, 2002...................................
[Month] 15, 2003...................................
[Month] 15, 2004...................................
[Month] 15, 2005...................................
Weighted Average Life (Years)......................
</TABLE>
S-28
<PAGE>
Percentage of the Original Principal Balance of the Class A-6
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
[Month] 15, 2002....................................
[Month] 15, 2003....................................
[Month] 15, 2004....................................
[Month] 15, 2005....................................
[Month] 15, 2006....................................
[Month] 15, 2007....................................
Weighted Average Life (Years).......................
Percentage of the Original Principal Balance of the Class A-7
Notes at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
[Month] 15, 2002....................................
[Month] 15, 2003....................................
[Month] 15, 2004....................................
[Month] 15, 2005....................................
[Month] 15, 2006....................................
[Month] 15, 2007....................................
Weighted Average Life (Years).......................
</TABLE>
Percentage of the Original Principal Balance of the
Class B-1 Certificates at the Respective Percentages of the
Base Case Prepayment Model Listed Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
[Month] 15, 2002....................................
[Month] 15, 2003....................................
[Month] 15, 2004....................................
[Month] 15, 2005....................................
[Month] 15, 2006....................................
[Month] 15, 2007....................................
Weighted Average Life (Years).......................
</TABLE>
S-29
<PAGE>
DESCRIPTION OF THE NOTES
The following information supplements and, if inconsistent supersedes, the
information in the prospectus under "The Notes," "Information Regarding the
Securities," and "Description of the Trust Documents."
General
The notes will be issued under to the terms of the indenture, a form of which
has been filed as an exhibit to the registration statement filed with the SEC.
A copy of the indenture, as executed, will be filed with the SEC following the
issuance of the securities. The following summary describes certain terms of
the notes and the indenture. The summary is not complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the notes
and the indenture. The following summary supplements the description of the
general terms and provisions of the notes of any given series and the related
indenture described in the prospectus. Indenture Trustee, a national banking
association headquartered in [city, state], will be the indenture trustee.
Distributions
Noteholders will be entitled to receive distributions of interest and
principal on each distribution date commencing in , to the extent that
sufficient funds available. Distributions on the notes generally will be made
from funds available first in respect on interest on the notes, then in respect
of principal on the notes, in the manner and order of priority described in the
next two sections.
Interest
Interest on the principal balance of each class of notes will accrue from
, 2000, or from the most recent distribution date on which interest has
been paid, to but excluding the following distribution date, at the interest
rate for that class specified on the cover page. The principal balance of any
class of notes as of any distribution date for this purpose will be the
original principal balance of that class minus all amounts previously
distributed to the noteholders of that class in respect of principal.
Interest on the Class A-1 and Class A-2 notes will be calculated on the basis
of the actual number of days elapsed in a 360-day year. Interest on all the
other classes of notes will be calculated on the basis of a 360-day year of
twelve 30-day months.
Interest will be paid on the senior notes on each distribution date to the
extent of funds available on that distribution date. In the event the funds
available are not sufficient to make a full distribution of interest on the
senior notes, the funds available will be applied pro rata to each class of
senior notes based on the amount payable to each such class and the amount of
the shortfall will be carried forward and added to the amount of interest
payable on the next distribution date. Any amount so carried forward will bear
interest at the interest rate for that class, to the extent legally
permissible.
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<PAGE>
Interest will be paid on the Class A-6 notes on each distribution date, to
the extent of the remaining funds available on that distribution date after
payment of:
(1) all interest accrued on the senior notes and
(2) the first priority principal distribution amount, as described under
"--Principal" below.
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class A-6 notes, the remaining funds available
will be applied to the payment of interest on the Class A-6 notes and the
amount of the shortfall will be added to the amount of interest payable on the
Class A-6 notes on the next distribution date. Any amount so carried forward
will bear interest at the Class A-6 interest rate, to the extent legally
permissible.
Interest will be paid on the Class A-7 notes on each distribution date, to
the extent of the remaining funds available on that distribution date after
payment of:
(1) all interest accrued on the senior notes,
(2) any first priority principal distribution amount,
(3) all interest accrued on the Class A-6 notes, and
(4) any second priority principal distribution amount, as described under
"--Principal" below.
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class A-7 notes, the remaining funds available
will be applied to the payment of interest on the Class A-7 notes and the
amount of the shortfall will be added to the amount of interest payable on the
Class A-7 notes on the next distribution date. Any amount so carried forward
will bear interest at the Class A-7 interest rate, to the extent legally
permissible.
Principal
Noteholders will be entitled to receive on each distribution date as payment
of principal, in the manner and order of priority set forth below, an amount
equal to the total principal distribution amount, described in the second
paragraph below, for that distribution date. This amount will paid as principal
on the Class A-1 notes until the Class A-1 notes have been paid in full, then
on the Class A-2 notes until the Class A-2 notes have been paid in full, and so
on for the remaining classes of notes until the Class A-7 notes have been paid
in full.
To the extent not paid in full prior to such date, the outstanding principal
amount of each class of notes will be payable on the following final scheduled
distribution date for such class:
Class A-1:
Class A-2:
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<PAGE>
Class A-3:
Class A-4:
Class A-5:
Class A-6:
Class A-7:
Total Principal Distribution Amount
The total principal distribution amount for any distribution date will equal:
(1) the formula principal distribution amount for that distribution date,
plus
(2) the aggregate of all formula principal shortfalls, if any, for prior
distribution dates, plus
(3) the first priority principal distribution amount, if any (described
in the subsection below), the second priority principal distribution
amount, if any (described in the subsection below), the third priority
principal distribution amount, if any (described in the subsection below),
and the fourth priority principal distribution amount, if any (described in
the subsection below), for such distribution date, minus
(4) all amounts actually paid on the notes and certificates on prior
distribution dates in respect of a first priority principal distribution
amount, second priority principal distribution amount, third priority
principal distribution amount, or fourth priority principal distribution
amount.
Formula Principal Distribution Amount
The formula principal distribution amount for any distribution date will be
an amount equal to the sum of the following amounts for the related monthly
period, in each case computed in accordance with the method specified in each
contract:
(1) all scheduled payments of principal due on each outstanding contract
during the related monthly period, after adjustments for previous partial
principal prepayments and after any adjustments to a contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related obligor,
(2) the scheduled principal balance of each contract which, during the
related monthly period, was purchased by us pursuant to the sale and
servicing agreement on account of a breach of a representation or warranty,
(3) all partial principal prepayments applied and all principal
prepayments in full received on contracts during the related monthly
period,
(4) the scheduled principal balance of each contract that became a
liquidated contract during the related monthly period, plus the amount of
any reduction in the outstanding principal balance of a contract during
such monthly period ordered as a result of a bankruptcy or similar
proceeding involving the related obligor,
S-32
<PAGE>
(5) without duplication of the foregoing, all collections in respect of
principal on the contracts received during the current month up to and
including the third business day prior to such distribution date, but in no
event later than the 10th day of the month in which such distribution date
occurs, minus
(6) the amount, if any, included in the formula principal distribution
amount for the preceding distribution date by virtue of clause (5) above.
A monthly period for a distribution date is the calendar month immediately
preceding the month in which that distribution date occurs; provided that the
monthly period for the first distribution date is the two calendar months
immediately preceding the month in which that distribution date occurs. The
scheduled principal balance of a contract for any monthly period is its
principal balance as specified in its amortization schedule, after giving
effect to any previous partial principal prepayments and to the scheduled
payment due on its scheduled payment date in that month, and after giving
effect to any adjustments due to bankruptcy or similar proceedings. A
liquidated contract means any defaulted contract as to which the servicer has
determined that all amounts which it expects to recover from or on account of
such contract through the date of disposition of the related product have been
recovered or any defaulted contract in respect of which the related product has
been realized upon and disposed of and the proceeds of such disposition have
been received.
In the event the remaining funds available for such distribution date are not
sufficient to make a full distribution of the formula principal distribution
amount, the amount of such deficiency the formula principal shortfall for such
distribution date will be added to the total principal distribution amount for
the next distribution date.
First Priority Principal Distribution Amount
In the unlikely event that on any distribution date,
(A) the aggregate principal balance of the senior notes
is greater than
(B) the pool scheduled principal balance as of the immediately preceding
distribution date, minus the aggregate scheduled principal balance of all
defaulted contracts,
the amount of such deficiency the first priority principal distribution amount
will be payable as an additional payment of principal on the class of notes
then entitled to receive the total principal distribution amount, from funds
available for distribution on that distribution date after the payment of all
interest then payable on the senior notes but before the payment of interest
then payable on the Class A-6 notes.
The pool scheduled principal balance as of any distribution date is the
aggregate scheduled principal balance of all contracts. A defaulted contract is
any contract as to which the servicer has commenced repossession procedures or
assigned that contract to a third party for repossession or other enforcement,
but which has not become a liquidated contract.
S-33
<PAGE>
Second Priority Principal Distribution Amount
Similarly, in the event that on any distribution date,
(A) the aggregate principal balance of the senior notes, plus the
principal balance of the Class A-6 notes, minus the amount of any first
priority principal distribution amount paid on such distribution date,
is greater than
(B) the pool scheduled principal balance as of the immediately preceding
distribution date, minus the aggregate scheduled principal balance of all
defaulted contracts,
the amount of such deficiency, the second priority principal distribution
amount will be payable as an additional payment of principal on the class of
notes then entitled to receive the total principal distribution amount, from
funds available for distribution on that distribution date after the payment of
all interest then payable on the senior notes, the first priority principal
distribution amount and all interest then payable on the Class A-6 notes, but
prior to the payment of interest then payable on the Class A-7 notes.
Third Priority Principal Distribution Amount
Similarly, in the event that on any distribution date,
(A) the aggregate principal balance of the notes, minus the amount of any
first priority principal distribution amount paid on such distribution
date, and minus the amount of any second priority principal distribution
amount paid on such distribution date,
is greater than
(B) the pool scheduled principal balance as of the immediately preceding
distribution date, minus the aggregate scheduled principal balance of all
defaulted contracts,
the amount of such deficiency, the third priority principal distribution amount
will be payable as an additional payment of principal on the class of notes
then entitled to receive the total principal distribution amount, from funds
available for distribution on that distribution date after the payment of all
interest then payable on the senior notes, the first priority principal
distribution amount, all interest then payable on the Class A-6 notes, the
second priority principal distribution amount and all interest then payable on
the Class A-7 notes, but prior to the payment of interest then payable on the
Class B-1 certificates.
Fourth Priority Principal Distribution Amount
Similarly, in the event that on any distribution date,
(A) the aggregate principal balance of the notes, plus the principal
balance of the Class B-1 certificates, minus the amount of any first
priority principal distribution amount paid on that distribution date,
minus the amount of any second priority principal
S-34
<PAGE>
distribution amount paid on that distribution date, and minus the amount of
any third priority principal distribution amount paid on that distribution
date,
is greater than
(B) the pool scheduled principal balance as of the immediately preceding
distribution date, minus the aggregate scheduled principal balance of all
defaulted contracts,
the amount of such deficiency the fourth priority principal distribution amount
will be payable as an additional payment of principal on the class of
securities then entitled to receive the total principal distribution amount,
from funds available for distribution on that distribution date after the
payment of all interest then payable on the senior notes, the first priority
principal distribution amount, all interest then payable on the Class A-6
notes, the second priority principal distribution amount, all interest then
payable on the Class A-7 notes, the third priority principal distribution
amount and all interest then payable on the Class B-1 certificates, but prior
to the payment of the formula principal distribution amount.
Subordination of Class A-6 and Class A-7 Notes
Notwithstanding the events of default described in the prospectus under the
caption "The Notes--The Indenture--Events of Default; Rights Upon Event of
Default," until the senior notes have been paid in full, the failure to pay
interest due on the Class A-6 or Class A-7 notes will not be an event of
default. Upon the occurrence and during the continuation of an event of default
that has resulted in an acceleration of the notes or following an insolvency
event or dissolution with respect to the general partner, no distributions of
principal and interest on the Class A-6 or Class A-7 notes will be made until
payment in full of principal and interest on the senior notes.
Similarly, if the senior notes have been paid in full but the Class A-6 notes
have not been paid in full, the failure to pay interest due on the Class A-7
notes will not be an event of default. Upon the occurrence and during the
continuation of an event of default that has resulted in an acceleration of the
notes or following an insolvency event or dissolution with respect to the
general partner, no distributions of principal and interest on the Class A-7
notes will be made until payment in full of principal and interest on the Class
A-6 notes.
Book-Entry Registration
Holders of the notes may hold through DTC in the United States or CEDEL or
Euroclear in Europe if they are participants of these systems, or indirectly
through organizations that are participants in these systems.
Cede & Co., as nominee for DTC, will hold the notes. CEDEL and Euroclear will
hold omnibus positions in the notes on behalf of the CEDEL Participants and the
Euroclear participants, through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries, which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC.
S-35
<PAGE>
Transfers between DTC's participating organizations will occur in accordance
with DTC rules. Transfers between CEDEL participants and Euroclear participants
will occur in the ordinary way according to their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through CEDEL participants or
Euroclear participants, on the other, will be effected in DTC according to DTC
rules on behalf of the relevant European international clearing system by its
depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system according to its rules and procedures and within
its established deadlines, European time. The relevant European international
clearing system will, if the transaction meets its settlement requirements,
deliver instructions to its depositary to take action to effect final
settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment according to normal procedures for same-day funds
settlement applicable to DTC. CEDEL participants and Euroclear participants may
not deliver instructions directly to the depositaries.
Because of time-zone differences, credits of securities in CEDEL or Euroclear
for a transaction with a participant will be made during the subsequent
securities settlement processing, dated the business day following the DTC
settlement date, and these credits or any transactions in the securities
settled during the processing will be reported to the relevant CEDEL
participant or Euroclear participant on the business day. Cash received in
CEDEL or Euroclear for sales of securities by or through a CEDEL participant or
a Euroclear participant to a participant will be received with value on the DTC
settlement date but will be available in the relevant CEDEL or Euroclear cash
account only as of the business day following settlement in DTC.
For a description of transfers between persons holding directly or indirectly
through DTC, see "Information Regarding the Securities--Book-Entry
Registration" in the prospectus.
Cedel Bank, is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
CEDEL participants through electronic book-entry changes in accounts of CEDEL
participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its CEDEL participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. CEDEL interfaces with domestic markets in several countries. As a
professional depository, CEDEL is subject to regulation by the Luxembourg
Monetary Institute. CEDEL participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations
and may include the Underwriters. Indirect access to CEDEL is also available to
others, such as banks, brokers,
S-36
<PAGE>
dealers and trust companies that clear through or maintain a custodial
relationship with a CEDEL Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in Euroclear in any of 32 currencies, including
United States dollars. The Euroclear System includes various other services,
including securities lending and borrowing, and interfaces with domestic
markets in several countries generally similar to the arrangements for cross-
market transfers with DTC described in Annex I hereto. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
participants. Euroclear participants include banks, including central banks,
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law, collectively, the terms and conditions. The terms and conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the terms and conditions only on behalf of Euroclear participants
and has no record of or relationship with persons holding through Euroclear
participants.
Distributions with respect to notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants
in accordance with the relevant system's rules and procedures, to the extent
received by its depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Certain Federal Income Tax Consequences" in the prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
prospectus supplement. CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a noteholder under the
Indenture on behalf of a CEDEL
S-37
<PAGE>
participant or Euroclear participant only in accordance with its relevant rules
and procedures and subject to its depositary's ability to effect such actions
on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform the
procedures and the procedures may be discontinued at any time.
DESCRIPTION OF THE CERTIFICATES
The following information supplements, and, if inconsistent, supersedes, the
information contained in the prospectus under "The Certificates," "Information
Regarding the Securities," and "Description of the Trust Documents."
General
The certificates will be issued under the terms of the trust agreement, a
form of which has been filed as an exhibit to the registration statement filed
with the SEC. A copy of the trust agreement, as executed, will be filed with
the SEC following the issuance of the securities. The following summary
describes certain terms of the certificates and the trust agreement. The
summary is not complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the certificates and the trust agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
certificates of any given series and the related trust agreement described in
the prospectus, to which description reference is made.
Distributions
Certificateholders will be entitled to receive on each distribution date
commencing in , to the extent that funds available together with the
guaranty payment described below are sufficient therefor, distributions of
interest and principal in the manner and order of priority described below.
To the extent not paid in full prior to such date, the outstanding principal
amount of each class of certificates will be payable on the following final
scheduled distribution date for the class:
Class B-1:
Class B-2:
Class B-1 Interest
Interest on the principal balance of the Class B-1 certificates will accrue
from , or from the most recent distribution date, to but excluding the
following distribution date, at the interest rate specified on the cover page.
The principal balance of the Class B-1 certificates as of any distribution date
will be the original principal balance of the Class B-1 certificates minus all
amounts previously distributed to the Class B-1 certificateholders in respect
of principal.
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<PAGE>
Interest will be paid on the Class B-1 certificates on each distribution date
to the extent of funds available on such distribution date, after payment of:
(1) interest on the notes,
(2) the first priority principal distribution amount,
(3) the second priority principal distribution amount and
(4) the third priority principal distribution amount.
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class B-1 certificates, the remaining funds
available will be applied to the payment of interest and the amount of the
shortfall will be carried forward and added to the amount of interest payable
on the next distribution date. Any amount so carried forward will bear interest
at the Class B-1 interest rate to the extent legally permissible. See
"Description of the Certificates."
Class B-1 Principal
No distributions of principal on the Class B-1 certificates will be payable
until all of the notes have been paid in full. On each distribution date
commencing on the distribution date on which the notes are paid in full,
principal will be paid on the Class B-1 certificates in an amount equal to the
total principal distribution amount for such distribution date, to the extent
of funds available on that distribution date after payment of interest on the
Class B-1 certificates. The total principal distribution amount is described
under "Description of the Notes--Principal."
Class B-2 Interest
Interest on the principal balance of the Class B-2 certificates will accrue
from , or from the most recent distribution date, to but excluding the
following distribution date, at the Class B-2 interest rate. The principal
balance of the Class B-2 certificates as of any distribution date will be the
original principal balance of the Class B-2 certificates minus all amounts
previously distributed to the Class B-2 certificateholders in respect of
principal.
Interest will be paid on the Class B-2 certificates on each distribution date
to the extent of funds available on such distribution date, after payment of
all interest and principal then payable on the notes and the Class B-1
certificates.
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class B-2 certificates, the remaining funds
available will be applied to the payment of interest and the amount of the
shortfall will be carried forward and added to the amount of interest payable
on the next distribution date. Any amount so carried forward will bear interest
at the Class B-2 interest rate, to the extent legally permissible.
Class B-2 Principal
No distributions of principal on the Class B-2 certificates will be payable
until all of the Class B-1 certificates have been paid in full, except for any
Class B-2 principal liquidation
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<PAGE>
loss paid by us pursuant to the limited guaranty. On each distribution date
commencing on the distribution date on which the Class B-1 certificates are
paid in full, principal will be paid on the Class B-2 certificates in an amount
equal to the total principal distribution amount for such distribution date, to
the extent of funds available on that distribution date after payment of
interest on the Class B-2 certificates. The total principal distribution amount
is described under "Description of the Notes--Principal."
Limited Guaranty
To mitigate the effect of the subordination of the Class B-2 certificates and
the effect of liquidation losses and delinquencies on the contracts, the Class
B-2 certificateholders are entitled to receive on each distribution date the
amount equal to the guaranty payment, if any, under our limited guaranty. The
guaranty payment for any distribution date will equal the difference, between
the Class B-2 distributable amount and the remaining funds available in the
collection account after payment of all interest and principal on the notes and
Class B-1 certificates. The Class B-2 distributable amount equals the unpaid
and accrued interest on the Class B-2 certificates, plus on each distribution
date commencing on the distribution date on which the notes and the Class B-1
certificates are paid in full, principal in an amount equal to the total
principal distribution amount for that distribution date, less, on the
distribution date on which the Class B-1 certificates are paid in full, the
portion thereof payable on the Class B-1 certificates, plus any Class B-2
principal liquidation loss for that distribution date, described below under
"--Losses on Liquidated Contracts.
The limited guaranty will be an unsecured general obligation and will not be
supported by any letter of credit or other enhancement arrangement. The limited
guaranty will not benefit in any way, or result in any payment to, the
noteholders or the Class B-1 certificateholders.
As compensation for servicing the contracts and providing the limited
guaranty, we will be entitled to receive the monthly servicing and guaranty fee
on each distribution date, which will be equal to the amount available
remaining after payment of the Class B-2 distributable amount.
Optional Prepayment
If the Class C certificateholder exercises its option to purchase the
contracts when the pool scheduled principal balance declines to 20% or less of
the cutoff date pool principal balance, certificateholders will receive an
amount for the certificates equal to the outstanding principal amount together
with accrued interest at the applicable interest rate, which distribution will
effect early retirement of the certificates. See "Description of the Trust
Documents and Indenture--Purchase Option; Auction Sale; Additional Principal
Distributions" in the prospectus.
Transfers of Certificates
Certificateholders, other than individuals or entities holding certificates
through a broker who reports sales of securities on Form 1099-B, are required
under the trust agreement to notify the owner trustee of any transfer of their
certificates in a taxable sale or exchange within 30 days of such transfer.
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<PAGE>
Overcollateralization
For any remittance date, the overcollateralization amount will be the excess
if any, of (a) the sum of the aggregate principal balance of the manufactured
housing contracts immediately following that remittance date and the amount on
deposit in the pre-funding account, if any, over (b) the aggregate principal
balances of the Class A notes and Class B certificates as of that remittance
date (after taking into account principal payments). As of the closing date,
the sum of the aggregate principal balance of the contracts as of the cut-off
date and the original pre-funded amount will exceed the aggregate original
principal balances of the certificates by an amount equal to approximately
$ , which represents approximately 1.5% of the aggregate cut-off date
principal balance of the contracts included in the trust as of the closing date
plus the amount on deposit in the pre-funding account on the closing date.
Losses on Liquidated Contracts
As described in the paragraphs above, the distribution of principal to the
securities is intended to equal the total principal distribution amount. This
amount includes the scheduled principal balance of each contract that became a
liquidated contract during the monthly period preceding that distribution date.
If the net liquidation proceeds from the liquidated contract are less than the
scheduled principal balance of the liquidated contract, the deficiency will, in
effect, be absorbed first by the monthly servicing and guaranty fee otherwise
payable to us and then by the Class B-2 certificateholders although we will be
obligated to make a guaranty payment equal to any shortfall in the distribution
to the Class B-2 certificateholders.
If the pool scheduled principal balance for any distribution date is less
than the sum of the aggregate outstanding principal balance of the notes and
the certificates after giving effect to all distributions of principal on the
distribution date, then we will be obligated to pay the amount of the
deficiency, a Class B-2 principal liquidation loss under the limited guaranty.
If we fail to pay such amount, however, the Class B-2 principal balance would
not be reduced and interest would continue to accrue on the full Class B-2
principal balance. Securityholders would, however, be entitled to receive such
unpaid amount as part of the total principal distribution amount prior to any
payment of the monthly servicing and guaranty fee to us on any subsequent
distribution date.
DESCRIPTION OF THE TRUST DOCUMENTS AND INDENTURE
The following summary describes certain terms of the sale and servicing
agreement and the trust agreement, which together form the trust documents and
the indenture. Forms of the trust documents and indenture, as executed, have
been filed as exhibits to the registration statement. A copy of each of the
trust documents and indenture will be filed with the SEC following the issuance
of the securities. The summary is not complete and is subject to, and qualified
in its entirety by reference to, all the provisions of the trust documents and
indenture. The following summary supplements, the description of the general
terms and provisions of the trust documents and indenture under the prospectus.
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Accounts
The servicer will establish and maintain one or more accounts, in the name of
the indenture trustee on behalf of the noteholders and the certificateholders,
into which all payments made on or for the contracts will be deposited, the
collection account. The servicer will establish and maintain an account, in the
name of the indenture trustee on behalf of the noteholders, in which amounts
released from the collection account for distribution to noteholders will be
deposited and from which all distributions to noteholders will be made, which
we call the note distribution account. The servicer will also establish and
maintain an account, in the name of the owner trustee on behalf of the
certificateholders, in which amounts released from the collection account for
distribution to certificateholders will be deposited and from which all
distributions to certificateholders will be made. See "Description of the Trust
Documents--Collections" in the prospectus.
Distributions
On each distribution date, the servicer will instruct the indenture trustee
to distribute from the collection account the amount available in the following
order of priority:
(1) if we or our affiliate is no longer the servicer, then to the
servicer, the monthly servicing fee for the related monthly period.
(2) to the servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior monthly period.
(3) to the note distribution account, all accrued interest on the senior
notes.
(4) to the note distribution account, the first priority principal
distribution amount.
(5) to the note distribution account, all accrued interest on the Class
A-6 notes.
(6) to the note distribution account, the second priority principal
distribution amount.
(7) to the note distribution account, all accrued interest on the Class
A-7 notes.
(8) to the note distribution account, the third priority principal
distribution amount.
(9) to the certificate distribution account, all accrued interest on the
Class B-1 certificates;
(10) to the note distribution account or, if all the notes have been paid
in full, to the certificate distribution account, the fourth priority
principal distribution amount, if any.
(11) to the note distribution account or, if all the notes have been paid
in full, to the certificate distribution account, the remaining total
principal distribution amount.
(12) to the certificate distribution account, all accrued interest on the
Class B-2 certificates.
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(13) to the certificate distribution account, the remaining total
principal distribution amount for payment to the Class B-2 certificates, if
the notes and the Class B-1 certificates have been paid in full.
(14) any remaining amount of the monthly servicing and guaranty fee to
us.
On each distribution date, the indenture trustee or its paying agent will
distribute all amounts on deposit in the note distribution account in payment
of interest and principal on the notes in the manner described above.
On each distribution date, the owner trustee or its paying agent will
distribute all amounts on deposit in the certificate distribution account, plus
any guaranty payment made by us, in payment of interest and principal on the
certificates in the manner described above.
The amount available with respect to any distribution date, means generally
the sum of payments on the contracts due and received during the related
monthly period, prepayments and other unscheduled collections received during
the related monthly period, all collections of principal on the contracts
received during the current month up to and including the third business day
prior to the distribution date but in no event later than the 10th day of the
month in which the distribution date occurs, any amounts deposited in respect
of purchased contracts, any guaranty payment, and all earnings from the
investment of funds in the collection account, minus, with respect to all
distribution dates other than the distribution date in , all collections
of principal on the contracts received during the related monthly period up to
and including the third business day prior to the preceding distribution date,
but in no event later than the 10th day of the prior month.
Statements to Securityholders
On or before each distribution date, the servicer will prepare and provide to
the indenture trustee a statement to be delivered to the noteholders and to the
owner trustee a statement to be delivered to the certificateholders on such
distribution date. These statements will be based on the information in the
related servicer's report describing information required under the trust
documents. Each statement to be delivered to noteholders will include the
following information as to the notes, and each statement to be delivered to
certificateholders will include the following information as to the
certificates, for the distribution date or the period since the previous
distribution date, as applicable:
(1) the amount of the distribution allocable to interest on or with
respect to each class of notes and certificates;
(2) the amount of the distribution allocable to principal on or with
respect to each class of notes and certificates;
(3) the aggregate outstanding principal balance and the pool factor for
each class of notes and the principal balance and the pool factor for each
class of certificates after giving effect to all payments reported under
(2) above on such date;
(4) the interest shortfall, if any, for each class of notes, the interest
shortfall, if any, for each class of certificates, and the change in such
amounts from the preceding statement;
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(5) the amount, if any, of Class B-2 principal liquidation losses,
aggregate unreimbursed Class B-2 principal liquidation losses since the
closing date and the amount of the distribution allocable to such losses
for the Class B-2 certificates;
(6) the amount, if any, of the guaranty payment;
(7) the amount of the monthly servicing and guaranty fee paid to the
servicer;
(8) the number and aggregate principal balances of delinquent contracts,
the number of products repossessed and repossessed and remaining in
inventory and the number of contracts that became liquidated contracts with
respect to the immediately preceding monthly period; and
(9) the aggregate amount of servicer advances made by the servicer for
such distribution date, and the aggregate amount paid to the servicer as
reimbursement of servicer advances made on prior distribution dates.
Each amount shown under subclauses (1) through (6) for notes or certificates
will be expressed as a dollar amount per $1,000 of the initial principal amount
of the notes or certificates, as applicable.
Unless and until definitive notes are issued, the reports will be sent on
behalf of the trust to Cede & Co., as registered holder of the notes and the
nominee of DTC. Note owners may receive copies of these reports upon written
request, together with a certification that they are note owners and payment of
any expenses associated with the distribution of such reports, from the
indenture trustee. See "Reports to Securityholders" in this prospectus
supplement and "Reports to Securityholders" and "Information Regarding the
Securities" in the prospectus.
Within the required period of time after the end of each calendar year, the
indenture trustee and the owner trustee, as applicable, will furnish to each
person who at any time during the calendar year was a noteholder or
certificateholder, a statement as to the aggregate amounts of interest and
principal paid to such noteholder or certificateholder, information regarding
the amount of servicing compensation received by the servicer and other
information as we deem necessary to enable the noteholder or certificateholder
to prepare its tax returns. See "Federal Income Tax Consequences" in this
prospectus supplement.
Purchase Option; Auction Sale; Additional Principal Distributions
Beginning on the payment date when the pool scheduled principal balance is
less than 20% of the cut-off date pool principal balance, the holder of the
Class C certificates will have the right to repurchase or arrange for the
repurchase of all outstanding contracts at a price equal to the greater of:
(1)the sum of:
(a) 100% of the scheduled principal balance of each contract, other
than any contract as to which the related equipment has been
repossessed and whose fair market value is included to clause
below as of the final remittance date, and
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(b) the fair market value of any acquired property, as determined by
the servicer; and
(2) the aggregate fair market value, as determined by the servicer of
all of the assets of the trust, plus, in each case, any unpaid
interest at the applicable interest rate on each class of
securities, as well as one month's interest at the applicable
contract rate on the scheduled principal balance of each contract.
This amount will be distributed on the distribution date occurring in the
month following the date of repurchase.
If the holder of the Class C certificates does not exercise this purchase
option on or before the following remittance date, then on the next remittance
date the indenture trustee will begin an auction process to sell the contracts
and the other trust assets at the highest possible price, but the trustee
cannot sell the trust assets and liquidate the trust unless at least two bids
are received and the highest bid would be sufficient to pay the aggregate
unpaid principal balance of the certificates plus all accrued and unpaid
interest. If the first auction of the trust property is not successful because
the highest bid received was too low, then the trustee will conduct an auction
of the contracts every third month after that, until an acceptable bid is
received for the trust property. We cannot assure you that the first auction or
any subsequent auction will be successful. The holder of the Class C
certificates may exercise its purchase option on any remittance date after the
first remittance date described above, unless the trustee has accepted a
qualifying bid for the trust property.
If the first auction of the trust property is not successful because the
highest bid received was too low, then on each remittance date after that the
securities will be entitled to receive, pro rata based on the principal balance
of those classes of securities, the "Additional Principal Distribution Amount"
for that distribution date, which will be equal to the remaining amount
available after paying all interest and principal then due on the securities
and payment of the monthly servicing fee.
Administrator
Conseco Financial Servicing Corporation, a Delaware corporation, as
administrator, will provide the notices and perform other administrative
obligations required by the indenture and the trust agreement. The
administrator, a subsidiary of ours, will enter into an administration
agreement with the trust and the indenture trustee describing its duties and
obligations as administrator.
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of federal and state income tax
consequences relating to the purchase, ownership, and disposition of the notes
and the certificates. The discussion is based upon the current provisions of
the Internal Revenue Code of 1986, the Treasury regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. For additional information regarding
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federal and state income tax consequences, see "Federal Income Tax
Consequences--Owner Trust Series" and "State Income Tax Consequences" in the
prospectus.
You should consult your own tax advisors to determine the federal, state,
local and other tax consequences of the purchase, ownership and disposition of
the notes and the certificates. You should note that no rulings have been or
will be sought from the IRS with respect to any of the federal income tax
consequences discussed herein or in the prospectus, and no assurance can be
given that the IRS will not take contrary positions. Moreover, there are no
cases or IRS rulings on transactions similar to those described herein with
respect to the trust, involving both debt and equity interests issued by a
trust with terms similar to those of the notes and the certificates. You are
urged to consult your own tax advisors in determining the federal, state,
local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of the securities.
In the opinion of our counsel, for federal and Minnesota income tax purposes,
the notes will be characterized as debt and the trust will not be characterized
as an association or a publicly traded partnership taxable as a corporation.
Each certificateholder, by the acceptance of a certificate, agrees to treat the
trust as a partnership in which the certificateholders are partners for federal
income tax purposes. The notes will not be issued with original issue discount.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, and
Section 4975 of the IRS code, prohibit a pension, profit-sharing or other
employee benefit plan, as well as individual retirement accounts and certain
types of Keogh Plans, each a benefit plan from engaging in certain transactions
with persons that are parties in interest under ERISA or disqualified persons
under the IRS code for that benefit plan. A violation of these prohibited
transaction rules may result in an excise tax or other penalties and
liabilities under ERISA and the IRS code for these persons. Title I of ERISA
also requires that fiduciaries of a benefit plan subject to ERISA make
investments that are prudent, diversified, except if prudent not to do so, and
in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
securities might be deemed to constitute prohibited transactions under ERISA
and the IRS code if assets of the trust were deemed to be assets of a benefit
plan. Under a regulation issued by the United States Department of Labor called
the Plan Assets Regulation, the assets of the trust would be treated as plan
assets of a benefit plan for the purposes of ERISA and the IRS code only if the
Benefit Plan acquires an equity interest in the trust and none of the
exceptions contained in the plan assets regulation is applicable. An equity
interest is defined under the plan assets regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. We believe that the notes should be
treated as indebtedness without substantial equity features for purposes of the
plan assets regulation. However, without regard to whether the notes are
treated as an equity interest for such purposes, the acquisition or holding of
notes by or on behalf of a
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benefit plan could be considered to give rise to a prohibited transaction if
the trust, the owner trustee or the indenture trustee, the owner of collateral,
the underwriters, or any of their respective affiliates is or becomes a party
in interest or a disqualified person with respect to the benefit plan. In such
case, certain exemptions from the prohibited transaction rules could be
applicable depending on the type of asset invested and the position of the plan
fiduciary making the decision to acquire a note. Included among these
exemptions are:
. PTCE 90-1, regarding investments by insurance company pooled separate
accounts;
. PTCE 91-38, regarding investments by bank collective investment funds;
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers; and
. PTCE 96-23, regarding transactions effected by in-house asset
managers.
The certificates may not be acquired by:
(1) an employee benefit plan as defined in Section 3(3) of ERISA that is
subject to the provisions of Title I of ERISA,
(2) a plan described in Section 4975(e)(1) of the IRS code or
(3) any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity including an insurance company acting on
behalf of its general account.
Before purchasing a certificate, each certificateholder must certify in writing
to us, the owner trustee, the underwriters and the servicer that its purchase
of that certificate will satisfy certain conditions specified in the exemptive
relief granted by, and regulations proposed by, the Department of Labor. In
this regard, purchasers that are insurance companies should consult with their
counsel with respect to the United States Supreme Court case interpreting the
fiduciary responsibility rules of ERISA, John Hancock Mutual Life Insurance Co.
v. Harris Trust and Savings Bank (decided December 13, 1993). In John Hancock,
the Supreme Court ruled that assets held in an insurance company's general
account may be deemed to be plan assets for ERISA purposes under certain
circumstances. You should determine whether the decision affects your ability
to make purchases of the certificates. In particular, an insurance company
should consider the exemptive relief granted by the Department of Labor for
transactions involving insurance company general accounts in PTCE 95-60 and
proposed by the Department of Labor in proposed ERISA regulation Section
2550.401(c)-1, 62 Fed. Reg. 66908 (December 22, 1997). For additional
information regarding treatment of the certificates under ERISA, See "ERISA
Considerations" in the prospectus.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA are
not subject to ERISA requirements. These plans may, however, be subject to the
provisions of other applicable federal and state laws, including, for any
governmental or church plan qualified
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under Section 401(a) of the IRS code and exempt from taxation under Section
501(a) of the IRS code, the prohibited transaction rules set forth in Section
503 of the IRS code.
A plan fiduciary considering the purchase of notes should consult its tax
and/or legal advisors regarding whether the assets of the trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
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UNDERWRITING
The underwriters have agreed, subject to the terms and conditions of the
underwriting agreement, to purchase from Conseco Securitizations the respective
principal amounts of notes and Class B-1 certificates set forth opposite their
names below:
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
[Underwriters].................... $ $ $ $
[Underwriters]....................
[Underwriters]....................
[Underwriters]....................
---------- ---------- ---------- ----------
Totals.......................... $ $ $ $
========== ========== ========== ==========
<CAPTION>
Class A-5 Class A-6 Class A-7 Class B-1
Notes Notes Notes Certificates
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
[Underwriters].................... $ $ $ $
[Underwriters]....................
[Underwriters]....................
[Underwriters]....................
---------- ---------- ---------- ----------
Totals.......................... $ $ $ $
========== ========== ========== ==========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of the securities offered in this prospectus, if any of such
offered securities are purchased.
Conseco Securitizations have been advised by the underwriters that they
propose initially to offer the offered securities to the public at the
respective offering prices shown on the cover page of this prospectus
supplement and to certain dealers at this price less a concession not in excess
of the respective amounts set forth in the table below, expressed as a
percentage of the related principal balance.
The underwriters may allow and dealers may reallow a discount not in excess
of the respective amounts listed in the table below to certain other dealers.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- -----------
<S> <C> <C>
A-1................................................. % %
A-2................................................. % %
A-3................................................. % %
A-4................................................. % %
A-5................................................. % %
A-6................................................. % %
A-7................................................. % %
B-1................................................. % %
</TABLE>
Until the distribution of the offered securities is completed, rules of the
SEC may limit the ability of the underwriters and certain selling group members
to bid for and purchase the offered securities. As an exception to these rules,
the underwriters are permitted to engage in certain transactions that stabilize
the price of the offered securities. These transactions
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consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the offered securities.
If the underwriters create a short position in the offered securities in
connection with the offering, for example, if they sell more offered securities
than are set forth on the cover page of this prospectus supplement, the
underwriters may reduce that short position by purchasing offered securities in
the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither Conseco Finance, Conseco Securitizations nor any of the underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the prices of the
offered securities. In addition, neither Conseco Finance, Conseco
Securitizations nor any of the underwriters makes any representation that the
underwriters will engage in transactions or that transactions, once commenced,
will not be discontinued without notice.
The underwriting agreement provides that Conseco Finance, Conseco
Securitizations will indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933 or will contribute to
payments the underwriters may be required to make.
Each of the underwriters has represented, warranted and agreed that:
(1) it has not offered or sold and, prior to the expiration of the period
of six months from the closing date, will not offer or sell any notes to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments,
as principal or agent for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(2) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation
to the notes in, from or otherwise involving the United Kingdom; and
(3) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued
or passed on.
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan and each of the underwriters has agreed that it will not
offer or sell any of the notes, directly or indirectly, in Japan or to, or for
the benefit of, any resident of Japan, which term means any person resident in
Japan, including any corporation or other entity organized
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under the laws of Japan, except under an exemption from the registration
requirements of, and otherwise in compliance with, the Securities and Exchange
Law of Japan and any other applicable laws, regulations and ministerial
guidelines of Japan.
Conseco Finance and Conseco Securitizations do not intend to apply for
listing of the offered securities on a national securities exchange, but has
been advised by the underwriters that the underwriters currently intend to make
a market in the offered securities, as permitted by applicable laws and
regulations. The underwriters are not obligated, however, to make a market in
the offered securities and any such market may be discontinued at any time at
the sole discretion of the underwriters. Accordingly, no assurance can be given
as to the liquidity of, or trading markets for, the offered securities.
Upon receipt of a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, we and the underwriters will
promptly deliver, or cause to be delivered, without charge, a paper copy of the
prospectus supplement and prospectus.
LEGAL MATTERS
The legality of the notes and certificates and consequences of the federal
and Minnesota income tax matters discussed under "Federal and State Income Tax
Consequences" will be passed upon for Conseco Finance and Conseco
Securitizations by [counsel to Conseco Finance]. The validity of the notes and
certificates will be passed upon for the underwriters by Brown & Wood LLP, New
York, New York.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the notes will be available only in
book-entry form, which are called global notes. Investors in the global notes
may hold such global notes through any of DTC, CEDEL or Euroclear. The global
securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding global notes through CEDEL
and Euroclear will be conducted in the ordinary way in accordance with their
normal rules and operating procedures and according to conventional eurobond
practice for example, seven calendar day settlement.
Secondary market trading between investors holding global notes through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
participants holding notes will be effected on a delivery-against-payment basis
through the respective Depositaries of CEDEL and Euroclear, in such capacity
and DTC participants.
Non-U.S. holders of global notes will be subject to U.S. withholding taxes
unless the holders meet certain requirements and deliver appropriate U.S. tax
documents to the securities clearing organizations or their participants.
Initial Settlement
All global notes will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the global notes will be
represented through financial institutions acting on their behalf as direct and
indirect participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
depositaries, which in turn will hold such positions in accounts as DTC
participants.
Investors electing to hold their global notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investors securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their global notes through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no lock-
up or restricted period. Global notes will be credited to the securities
custody accounts on the settlement date against payments in same-day funds.
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Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to be sure that settlement can be made on the desired
value date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear participants. Secondary market trading
between CEDEL participants or Euroclear participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When global
notes are to be transferred from the account of a DTC participant to the
account of a CEDEL participant or a Euroclear participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL participant or
Euroclear participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its depositary to receive the global
notes against payment. Payment will include interest accrued on the global
notes from and including the last coupon payment date to and excluding the
settlement date. Payment will then be made by such depositary to the DTC
participant's account against delivery of the global notes. After settlement
has been completed, the global notes will be credited to the applicable
clearing system and by the clearing system, in accordance with its usual
procedures, to the CEDEL participant's or Euroclear participant's account. The
global notes credit will appear the next day European time and the cash debit
will be back-valued to, and the interest on the global notes will accrue from,
the value date, which would be the preceding day when settlement occurred in
New York. If settlement is not completed on the intended value date, for
example, the trade fails, the CEDEL or Euroclear cash debit will be valued
instead as of the actual settlement date.
CEDEL participants and Euroclear participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the global
securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL participants or Euroclear participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL participants or Euroclear participants
purchasing global notes would incur overdraft charges for one day, assuming
they cleared the overdraft when the global notes were credited to their
accounts. However, interest on the global notes would accrue from the value
date. Therefore, in many cases the investment income on the global notes earned
during that one-day period may
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substantially reduce or offset the amount of such overdraft charges, although
this result will depend on each CEDEL participant's or Euroclear participant's
particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global notes to the
respective Depositary for the benefit of CEDEL participants or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time zone
differences in their favor, CEDEL participants and Euroclear participants may
employ their customary procedures for transactions in which global notes are to
be transferred by the respective clearing systems, through their respective
depositaries, to a DTC participant. The seller will send instructions to CEDEL
or Euroclear through a CEDEL participant or Euroclear participant at least one
business day prior to settlement. In these cases, CEDEL or Euroclear will
instruct their respective depositaries, as appropriate, to deliver the notes to
the DTC participant's account against payment. Payment will include interest
accrued on the global notes from and including the last coupon payment date to
and excluding the settlement date. The payment will then be reflected in the
account of the CEDEL participant or Euroclear participant the following day,
and receipt of the cash proceeds in the CEDEL participant's or Euroclear
participant's account would be back-valued to the value date, which would be
the preceding day, when settlement occurred in New York. Should the CEDEL
participant or Euroclear participant have a line of credit with its clearing
system and elect to be in debit in anticipation of receipt of the sale proceeds
in its account, the bank-valuation will extinguish any overdraft charges
incurred over that one-day period. If settlement is not completed on the
intended value date, for example the trade fails, receipt of the cash proceeds
in the CEDEL participant's or Euroclear participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase global notes from DTC participants for delivery to
CEDEL participants or Euroclear participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through CEDEL or Euroclear for one day, until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts in
accordance with the clearing system's customary procedures;
(b) borrowing the global notes in the U.S. from a DTC participant no
later than one day prior to settlement, which would give the global notes
sufficient time to be reflected in their CEDEL or Euroclear account in
order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC participant is at least
one day prior to the value date for the sale to the CEDEL participant or
Euroclear participant.
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U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global notes holding securities through CEDEL or
Euroclear, or through DTC if the holder has an address outside the U.S. will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest, including original issue discount on registered debt issued by U.S.
persons, unless
(1) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in
the chain of intermediaries between such beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements and
(2) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of notes that
are non-U.S. persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 Certificate of Foreign Status
and a certificate under penalties of perjury, the Tax Certificate that such
beneficial owner is,
. not a controlled foreign corporation within the meaning of Section
957(a) of the IRS code that is related, within the meaning of
Section 864(d)(4) of the code) to the trust or the Transferor and
. not a 10 percent shareholder within the meaning of Section
871(h)(3)(B) of the IRS code of the trust or the transferor. If the
information shown on Form W-8 or the Tax Certificate changes, a new
Form W-8 or Tax Certificate, as the case may be, must be filed
within 30 days of such change.
Exemption for non-U.S. person with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224, Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States.
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001).Non-U.S. persons that are beneficial owners of notes
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate, depending on the treaty terms by
filing Form 1001, Ownership, Exemption or Reduced Rate Certificate. If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the beneficial owner of notes or such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9 Payer's Request for
Taxpayer Identification Number and Certification.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
global security or, in the case of a Form 1001 or a Form 4224 filer, the
owner's agent, files by
A-4
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submitting the appropriate form to the person through whom it holds the
security, the clearing agency, in the case of persons holding directly on
the books of the clearing agency. Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
A U.S. person is:
(1) a citizen or resident of the United States,
(2) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, or
(3) an estate or trust the income of which is includible in gross income
for United States tax purposes, regardless of its source.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the global notes. You
are advised to consult your own tax advisors for specific tax advice concerning
your holding and disposing of global notes.
A-5
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained in this prospectus is not complete and may be changed. +
+We may not sell these securities until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[Conseco Logo]
PROSPECTUS (BASE PROSPECTUS--ALL ASSETS)
Conseco Finance Corp.
Servicer
Conseco Finance Securitizations Corp.
Seller
Conseco Finance Recreational Enthusiast Consumer Trusts
Asset-Backed Certificates
Asset-Backed Notes
------------
We are offering asset-backed certificates and asset-backed notes under this
prospectus and a prospectus supplement. A prospectus supplement will be
prepared separately for each series of securities offered. A prospectus
supplement may offer asset-backed certificates, or asset-backed notes, or both.
Conseco Finance Securitizations Corp. will form a trust for each series and
deposit a pool of contracts in the trust, and the trust will issue the
securities of that series. Payments of principal and interest on the securities
of any series will depend primarily on payments made on the related pool of
contracts. The securities of any series may comprise several different classes.
A trust may also issue one or more other classes of certificates or notes that
will not be offered under this prospectus.
The right of each class of securities within a series to receive payments may
be senior or subordinate to the rights of one or more of the other classes of
securities. In addition, a series of securities may include one or more classes
which on the one hand are subordinated to one or more classes of securities,
while on the other hand are senior to one or more classes of securities. The
rate of principal and interest payment on the securities of any class will
depend on the priority of payment of that class and the rate and timing of
payments on the contracts owned by that trust.
------------
The securities will represent interests in, or obligations of, the related
trust and will not represent any interest in or obligation of Conseco Finance
Corp., Conseco Finance Securitizations Corp. or any of their affiliates, except
as specified in the prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
------------
This prospectus may not be used to consummate sales of any securities unless
accompanied by a prospectus supplement for that series.
Prospectus date is , 1999.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate documents that progressively
provide more detail: (1) this prospectus, which provides general information,
some of which may not apply to a particular series of securities, including
your series; and (2) the prospectus supplement for the particular terms of your
series of securities.
If the terms of your series of securities described in the prospectus
supplement varies from this prospectus, you should rely on the information in
your prospectus supplement.
You should rely only on the information contained in this document or
information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities.
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To understand all of the terms of the certificates, read this entire
prospectus and the accompanying prospectus supplement. We have also defined
terms in the "Glossary" section at the back of this prospectus.
THE TRUSTS
For each series of securities, Conseco Securitizations will establish a trust
under either (1) a pooling and servicing agreement among Conseco Finance as
servicer, Conseco Securitizations, as seller, and a trustee specified in the
prospectus supplement, the trustee, or (2) a trust agreement between Conseco
Finance, as depositor, and a trustee specified in the related prospectus
supplement, the owner trustee, and a related sale and servicing agreement among
Conseco Securitizations, as seller, Conseco Finance, as servicer, and the
trust. For any trust, the related pooling and servicing agreement, or the
related trust agreement and sale and servicing agreement, as applicable, are
referred to herein as the related trust documents. Before the sale and
assignment of the related contracts under the related trust documents, the
trust will have no assets or obligations. The trust will not engage in any
business activity other than acquiring and holding the trust property issuing
the certificates and the notes, if any, of such series and distributing
payments thereon.
Each certificate will represent a fractional undivided interest in, and each
note, if any, will represent an obligation of, the related trust. The property
of each trust will include:
(1) a contract pool, as described in "The Contracts";
(2) all monies paid or payable thereon on or after the cutoff date;
(3) such amounts as from time to time may be held in the collection
account, including all investments in the collection account and all
income from the investment of funds and all proceeds and certain
other accounts, as described in "Description of the Trust Documents--
Collections";
(4) an assignment of our security interests in the products securing the
related contracts, as described in "The Contracts";
(5) an assignment of the right to receive proceeds from claims on some
insurance policies covering the products or obligors; and
(6) specific other rights under the related trust documents.
The trust property will also include, if so specified in the prospectus
supplement, monies on deposit in a pre-funding account to be established with
the indenture trustee or the trustee, which will be used to purchase subsequent
contracts from Conseco Securitizations from time to time, and as frequently as
daily, during the pre-funding period specified in the related prospectus
supplement. Any subsequent contracts so purchased will be included in the
related contract pool forming part of the trust property, subject to the prior
rights of the related indenture trustee and the noteholders therein. In
addition, to the extent specified in the prospectus supplement, a form of
credit enhancement may be issued to or held by the trustee or the indenture
trustee for the benefit of holders of one or more classes of securities.
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<PAGE>
The servicer will service the contracts held by each trust and will receive
fees for such services. See "Description of the Trust Documents--Servicing
Compensation." Unless we specify otherwise in the prospectus supplement,
Conseco Finance, on behalf of each trust, will hold the original installment
sales contract or promissory note as well as copies of documents and
instruments relating to each contract and evidencing the security interest in
the product securing each contract. In order to protect the trust's ownership
interest in the contracts, we will file a UCC-1 financing statement in
Minnesota and Delaware to give notice of such trust's ownership of the related
contracts and the related trust property.
The Trustee
The trustee or owner trustee, as applicable, for each trust will be specified
in the prospectus supplement. The trustee's liability in connection with the
issuance and sale of the securities of such series will be limited solely to
the express obligations of such trustee set forth in the related trust
documents. A trustee may resign at any time, in which event the general
partner, if the related trust is structured as an owner trust or the servicer
or its successor, if the related trust is structured as a grantor trust will be
obligated to appoint a successor trustee. The general partner, if the related
trust is structured as an owner trust or the servicer, if the related trust is
structured as a grantor trust may also remove the trustee if the trustee ceases
to be eligible to continue as trustee under the related trust documents or if
the trustee becomes insolvent. In such circumstances, the general partner, if
the related trust is structured as an owner trust or the servicer, if the
related trust is structured as a grantor trust will be obligated to appoint a
successor trustee. Any resignation or removal of a trustee and appointment of a
successor trustee will be subject to any conditions or approvals specified in
the prospectus supplement and will not become effective until acceptance of the
appointment by the successor trustee.
THE CONTRACTS
Each pool of contracts in a trust will consist of retail installment sales
contracts and promissory notes to finance the purchase of products to the types
described in the next paragraph. The contracts will be originated or purchased
by us on an individual basis in the ordinary course of business. Except as we
specify otherwise in the prospectus supplement, the contracts will be fully
amortizing and will bear interest at a fixed or variable rate.
The products financed by the contracts included in a contract pool are
expected to include all the types of consumer products we are financing for
retail customers, subject to the availability of such contracts and subject to
any eligibility criteria specified in the trust documents. Currently, we
provide financing for the purchase of motorcycles; marine products, including
boats, boat trailers and outboard motors; pianos and organs; horse trailers;
sport vehicles including snowmobiles, personal watercraft and all-terrain
vehicles; recreational vehicles; and trucks. Any trust whose securities are
offered under this prospectus will include only contracts secured by the
foregoing types of products. The types of products securing a contract pool and
the relative concentrations of each such type will be specified in
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the prospectus supplement. Because we have less extensive experience in
underwriting and servicing retail installment sales contracts for items such as
the products, we have no basis upon which to distinguish the expected
delinquency, default or prepayment experience of contracts secured by different
types of products.
CONSECO FINANCE CORP.
General
Conseco Finance Corp. was formerly known as Green Tree Financial Corporation.
It is a Delaware corporation that, as of December 31, 1998, had stockholders'
equity of approximately $2.2 billion. Through its various divisions, it
purchases, pools, sells and services retail conditional sales contracts for
manufactured housing and retail installment sales contracts for home
improvements, a variety of consumer products and equipment finance, and home
equity loans. Conseco Finance is the largest servicer of government-insured
manufactured housing contracts and conventional manufactured housing contracts
in the United States. Servicing functions are performed through Conseco Finance
Servicing Corp., its wholly owned subsidiary. Through its principal offices in
St. Paul, Minnesota, and service centers throughout the United States, it
serves all 50 states. It began financing FHA-insured home improvement loans in
April 1989 and conventional home improvement loans in September 1992. It also
purchases, pools and services installment sales contracts for various consumer
products. Its principal executive offices are located at 1100 Landmark Towers,
St. Paul, Minnesota 55102-1639 (telephone (651) 293-3400). Its annual report on
Form 10-K for the year ended December 31, 1998 and, when available, subsequent
quarterly and annual reports are available upon written request.
The SEC allows Conseco Finance to incorporate by reference some of the
information it files with it, which means that it can disclose important
information to you by referring you to those documents. The information that it
incorporates by reference is considered to be part of this prospectus, and
later information filed with the SEC will automatically update and supersede
this information. Conseco Finance is incorporating by reference the following
documents into this prospectus and the prospectus supplement:
. Conseco Finance Corp.'s annual report on Form 10-K for the year ended
December 31, 1998.
. Conseco Finance Corp.'s quarterly report on Form 10Q for the quarter
ended June 30, 1999.
Conseco Finance will provide you, upon your written or oral request, a copy
of any or all of the documents incorporated by reference in this prospectus,
exhibits to those documents. Please direct your requests for copies to John
Dolphin, Director of Investor Relations, 11825 Pennsylvania Street, Carmel,
Indiana 46032, telephone number (317) 817-6100.
All documents filed by the servicer, on behalf of any trust, under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the
date of this prospectus and before the termination of the offering of the
securities issued by that trust, will be incorporated by reference into this
prospectus.
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<PAGE>
Federal securities law requires the filing of information with the
Securities and Exchange Commission, including annual, quarterly and special
reports and other information. You can read and copy these documents at the
public reference facility maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. You can also read and copy
such reports, proxy statements and other information at the following regional
offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite
New York, NY 10048 1400
Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
Purchase of Contracts
Conseco Finance arranges to purchase qualifying contracts originated by
dealers located throughout the United States. Conseco Finance's personnel
contact dealers and explain Conseco Finance's available financing plans,
terms, prevailing rates and credit and financing policies. If the dealer
wishes to utilize Conseco Finance's available customer financing, the dealer
must make an application for dealer approval.
Currently, Conseco Finance's consumer finance division finances the purchase
of motorcycles; marine products, including boats, boat trailers and outboard
motors; pianos and organs; horse trailers; sport vehicles, including
snowmobiles, personal watercraft and all-terrain vehicles; and recreational
vehicles. The products financed by contracts included in any trust whose
securities are offered pursuant to this prospectus will include only the
products listed above.
All contracts that Conseco Finance purchases are written on forms provided
or approved by Conseco Finance and are purchased on an individually approved
basis in accordance with Conseco Finance's guidelines. The dealer submits the
customer's credit application and purchase order to Conseco Finance's office
where an analysis of the creditworthiness of the proposed buyer is made. The
analysis includes a review of the applicant's paying habits, length and
likelihood of continued employment and certain other procedures. Conseco
Finance's underwriting guidelines for consumer products focus primarily on the
obligor's ability to repay the loan rather than the collateral value of the
product financed. The maximum loan amount for an obligor will depend on a
variety of factors, including the type of product, whether the product is new
or used, the obligor's debt-to-income ratio, and the manufacturer's invoice
price of the product, plus certain dealer-installed accessories, sales taxes,
title fees, registration fees, and other items. Generally, the maximum
permissible debt-to-income ratio, based on the monthly loan payments, is
between 55% and 65%, the maximum loan-to-invoice ratio, for new products,
ranges from 100% to 125%, and the maximum loan-to-sales-price ratio, for used
products is typically 90% subject to further limitation based on a standard
assumed value for such a used product. Management may revise these guidelines
from time to time,
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and the underwriting guidelines may be exceeded in some cases with the approval
of Conseco Finance's management. Accordingly, some of the contracts included in
a trust may not conform in all respects to the criteria described above.
Conseco Finance will generally finance premiums for the term of the contract on
optional credit life, accident and health and extended warranty insurance, up
to 20% of the sales price of the product, and may finance premiums for required
physical damage insurance on the product. If the application meets our
guidelines and the credit is approved, we purchase the contract when the
customer accepts delivery of the product.
Loss and Delinquency Information
Each prospectus supplement will include loss and delinquency experience for
our entire servicing portfolio of consumer product contracts. However, there
can be no assurance that the experience will be indicative of the performance
of the contracts included in a particular contract pool.
CONSECO FINANCE SECURITIZATIONS CORP.
Conseco Securitizations is a wholly owned subsidiary of Conseco Finance. It
was formed on September 10, 1999. Conseco Securitizations may only engage in
the business of acquiring pools of loans from Conseco Finance and transferring
those loans to trusts such as the trusts described in this prospectus, and
activities incidental or related thereto. The principal executive offices of
Conseco Securitizations are located at 300 Landmark Towers, St. Paul, Minnesota
55102-1639 and its telephone number is (651) 293-3400.
Conseco Securitizations has taken and will take steps in conducting its
business that are intended to make it unlikely that a bankruptcy of Conseco
Finance would result in the consolidation of the assets and liabilities of
Conseco Finance and Conseco Securitizations. These steps include the creation
of Conseco Securitizations as a separate, limited-purpose corporation pursuant
to a certification of incorporation containing restrictions on the permissible
business activities of Conseco Securitizations, requiring that Conseco
Securitizations have on its board of directors at least two directors who are
independent of Conseco Finance, and requiring that all business transactions or
corporate actions outside of the ordinary course of business be approved by the
independent directors.
YIELD AND PREPAYMENT CONSIDERATIONS
The remittance rates and the weighted average contract rate of the contracts
for each series of certificates are listed in the prospectus supplement.
Unless Conseco Finance specifies otherwise in the prospectus supplement, many
of the contracts will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays an
installment before its due date, the portion of the payment
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<PAGE>
allocable to interest for the period will be less than if the payment had been
made on the due date, the portion of the payment applied to reduce the
principal balance will be correspondingly greater, and the principal balance
will be amortized more rapidly than scheduled. Conversely, if an obligor pays
an installment after its due date, the portion of the payment allocable to
interest will be greater than if the payment had been made on the due date, the
portion of the payment applied to reduce the principal balance will be
correspondingly less, and the principal balance will be amortized slower than
scheduled, in which case a larger portion of the principal balance may be due
on the final scheduled payment date. Any interest shortfalls resulting from
early payment or prepayment of a contract will be funded by collections on
other contracts or, to the extent collections are insufficient, by payments
under the applicable form of credit enhancement, if any, described in the
prospectus supplement.
The contracts will be prepayable, without premium or penalty, by obligors at
any time. Prepayments, or, for this purpose, equivalent payments to a trust,
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by us due to breach of a representation or
warranty, or as a result of our or the servicer exercising its option to
purchase the contract pool. See "Description of the Trust Documents." The rate
of prepayments on the contracts may be influenced by a variety of economic,
social and other factors. No assurance can be given that prepayments on the
contracts will conform to any estimated or actual historical experience, and no
prediction can be made as to the actual prepayment rates which will be
experienced on the contracts. certificateholders and noteholders will bear all
reinvestment risk resulting from the timing of payments of principal on the
certificates or the notes, as the case may be.
POOL FACTOR
The pool factor for each class of certificates will be an eight-digit decimal
which the servicer will compute indicating the principal balance for the
certificates as of each distribution date, after giving effect to all
distributions of principal made on each distribution date, as a fraction of the
original principal balance of for the certificates. The pool factor for each
class of notes, if any, will be an eight-digit decimal which the servicer will
compute indicating the remaining outstanding principal balance for the notes as
of each distribution date, after giving effect to all distributions of
principal on such distribution date as a fraction of the initial outstanding
principal balance of the class of notes. Each pool factor will initially be
1.00000000; after that, the pool factor will decline to reflect reductions in
the outstanding principal balance of the applicable class of certificates or
notes, as the case may be. The amount of a certificateholder's pro rata share
of the principal balance for the related class of certificates can be
determined by multiplying the original denomination of the certificateholder's
certificate by the then applicable pool factor. The amount of a noteholder's
pro rata share of the aggregate outstanding principal balance of the applicable
class of notes can be determined by multiplying the original denomination of
such noteholder's note by the then applicable pool factor.
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For each trust, on each distribution date, the related certificateholders and
noteholders will receive periodic reports from the trustee stating the pool
factor and containing various other items of information. Unless and until
definitive certificates or definitive notes are issued, the reports will be
sent on behalf of the trust to the trustee and the indenture trustee, if any,
and Cede & Co., as registered holder of the certificates and the notes and the
nominee of DTC. Certificate owners and note owners may receive such reports,
upon written request, together with a certification that they are certificate
owners or note owners and payment of any expenses associated with the
distribution of such reports, from the trustee and the indenture trustee, if
any, at the addresses specified in the prospectus supplement. See "Information
Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless we specify otherwise in the prospectus supplement, the net proceeds to
be received by the trust from the sale of each series of securities will be
used to pay to us the purchase price for the contracts and to make the deposit
of the pre-funded amount into the pre-funding account, if any, to repay
warehouse lenders and/or to provide for other forms of credit enhancement
specified in the prospectus supplement. The net proceeds to be received by us
will be used to pay our warehouse loans, and any additional proceeds will be
added to our general funds and used for general corporate purposes.
THE CERTIFICATES
General
For each trust, one or more classes of certificates of a given series will be
issued under the trust documents to be entered into among Conseco
Securitizations, as seller, Conseco Finance, as servicer, and the trustee,
forms of which have been filed as exhibits to the registration statement of
which this prospectus forms a part. Where particular provisions of or terms
used in the trust documents are referred to, the actual provisions are
incorporated by reference as part of this summary.
Unless we specify otherwise in the prospectus supplement, each class of
certificates will initially be represented by a single certificate registered
in the name of the nominee of DTC, together with any successor depository
selected by Conseco Securitizations, the depository. See "Information Regarding
the Securities--Book-Entry Registration." Unless we specify otherwise in the
prospectus supplement, the certificates evidencing interests in a trust will be
available for purchase in denominations of $1,000 initial principal amount and
integral multiples thereof, except that one certificate evidencing an interest
in such trust may be issued in a denomination that is less than $1,000 initial
principal amount. Certificates may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge payable
in connection with such transfer or exchange. Unless we specify otherwise in
the prospectus supplement, the trustee will initially be designated as the
registrar for the certificates.
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Distributions of Interest and Principal
The timing and priority of distributions, seniority, allocations of loss,
pass-through rate and amount of or method of determining distributions with
respect to principal and interest, or, where applicable, for principal only or
interest only on the certificates of any series will be described in the
prospectus supplement. Distributions of interest on the certificates will be
made on the dates specified in the related prospectus supplement and, unless we
specify otherwise in the prospectus supplement, will be made prior to
distributions with respect to principal. A series may include one or more
classes of stripped certificates entitled to:
(1) distributions in respect of principal with disproportionate, nominal
or no interest distribution, or
(2) interest distributions, with disproportionate, nominal or no
distributions in respect of principal.
Each class of certificates may have a different pass-through rate, which may be
a fixed, variable or adjustable pass-through rate, and which may be zero for
certain classes of stripped certificates, or any combination of the these. The
prospectus supplement will specify the pass-through rate for each class of
certificate, or the initial pass-through rate and the method for determining
the pass-through rate. Unless we specify otherwise in the prospectus
supplement, interest on the certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless we specify otherwise in
the prospectus supplement, distributions for the certificates will be
subordinate to payments for the notes, if any, as more fully described in the
prospectus supplement. Distributions for principal of any class of certificates
will be made on a pro rata basis among all of the certificateholders of such
class.
In the case of a series of certificates which includes two or more classes of
certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as described in the prospectus supplement.
THE NOTES
General
For each series of securities, one or more classes of notes issued under the
terms of an indenture, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. Unless we specify
otherwise in the prospectus supplement, no notes will be issued as a part of
any series. The following summary is not complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the notes
and the indenture, and the following summary will be supplemented in whole or
in part by the prospectus supplement. Where particular provisions of or terms
used in the indenture are referred to, the actual provisions including
definition of terms are incorporated by reference as part of this summary.
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Unless we specify otherwise in the prospectus supplement, each class of notes
will initially be represented by a single note registered in the name of the
nominee of the depository. See "Certain Information Regarding the Securities--
Book-Entry Registration." Unless we specify otherwise in the prospectus
supplement, notes will be available for purchase in denominations of $1,000 and
integral multiples of $1,000. Notes may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge payable
for such transfer or exchange. Unless we provide otherwise in the prospectus
supplement, the indenture trustee will initially be designated as the registrar
for the notes.
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of loss, interest
rate and amount of or method of determining payments of principal and interest
on the notes will be described in the prospectus supplement. The right of
holders of any class of notes to receive payments of principal and interest may
be senior or subordinate to the rights of holders of any class or classes of
notes of such series, or any class of certificates, as described in the
prospectus supplement. A series may include one or more classes of stripped
notes entitled to:
(1) principal payments with disproportionate, nominal or no interest
payment, or
(2) interest payments with disproportionate, nominal or no principal
payments.
Each class of notes may have a different interest rate, which may be a fixed,
variable or adjustable interest rate, and which may be zero for some classes of
notes, or any combination of these. The prospectus supplement will specify the
interest rate for each class of notes, or the initial interest rate and the
method for determining the interest rate. One or more classes of notes of a
series may be redeemable under the circumstances specified in the prospectus
supplement.
Unless we specify otherwise in the prospectus supplement, payments for
interest to noteholders of all classes within a series will have the same
priority. Under some circumstances, the amount available for these payments
could be less than the amount of interest payable on the notes on any of the
dates we specify for payments in the prospectus supplement, in which case each
class of noteholders will receive their ratable share based upon the aggregate
amount of interest due to such class of noteholders of the aggregate amount
available to be distributed in respect of interest on the notes.
In the case of a series of securities which includes two or more classes of
notes, the sequential order and priority of payment for principal and interest,
and any schedule or formula or other provisions applicable to the
determination, of each class will be described in the prospectus supplement.
Unless we specify otherwise in the prospectus supplement, payments in respect
of principal and interest of any class of notes will be made on a pro rata
basis among all of the notes of the class.
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The indenture
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. Conseco Finance will provide a
copy of the applicable indenture, without exhibits, upon request to a holder of
notes issued under the indenture.
Modification of Indenture Without Noteholder Consent. Each trust and related
indenture trustee, on behalf of the trust, may, without consent of the
noteholders, enter into one or more supplemental indentures for any of the
following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the note and the indenture
obligations by a permitted successor to the trust;
(3) to add additional covenants for the benefit of the applicable
noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture;
(6) to provide for the acceptance of the appointment of a successor
indenture trustee or to add to or change any of the provisions of the
indenture or any supplemental indenture which may be inconsistent with any
other provision of the indenture as shall be necessary and permitted to
facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the indenture in
order to comply with the Trust Indenture Act of 1939; and
(8) to add any provisions to, change in any manner, or eliminate any of
the provisions of, the indenture or modify in any manner the rights of
noteholders under the indenture; provided that any action specified in this
clause (8) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any noteholder unless
noteholder consent is otherwise obtained as described below.
Modifications of Indenture With Noteholder Consent. Each trust, with the
consent of the holders representing a majority of the principal balance of the
outstanding notes, a note majority, the owner trustee and the indenture trustee
may execute a supplemental indenture to add provisions, to change in any manner
or eliminate any provisions of, the indenture, or modify in any manner the
rights of the noteholders.
Without the consent of the holder of each outstanding note affected, no
supplemental indenture may:
(1) change the due date of any installment of principal of or interest on
any note or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price or change the manner of
calculating any payment, any place of payment where, or the coin or
currency in which any note or any interest is payable;
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(2) impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
notes the consent of the holders of which is required for any the
supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with certain provisions of the indenture or of
certain defaults thereunder and their consequences as provided for in the
indenture;
(4) modify or alter the provisions of the indenture regarding the voting
of notes held by the trust, any other obligor on the notes, Conseco
Securitizations, Conseco Finance or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of the
notes the consent of the holders of which is required to direct the
indenture trustee to sell or liquidate the contracts if the proceeds of
such sale would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding notes;
(6) decrease the percentage of the aggregate principal amount of the
notes required to amend the sections of the indenture which specify the
applicable percentage of aggregate principal amount of the notes necessary
to amend the indenture or other applicable agreements; or
(7) permit the creation of any lien ranking prior to or on a parity with
the lien of the indenture for any of the collateral for the notes or,
except as otherwise permitted or contemplated in the indenture, terminate
the lien of the indenture on any of the collateral or deprive the holder of
any note of the security afforded by the lien of the indenture.
Events of Default; Rights Upon Event of Default. For each trust, unless we
specify otherwise in the prospectus supplement, events of default under the
indenture will consist of:
(1) a default for five days or more in the payment of any interest on any
note;
(2) a default in the payment of the principal of or any installment of
the principal of any note when the note becomes due and payable;
(3) a default in the observance or performance in any material way of any
covenant or agreement of the trust made in the indenture, or any
representation or warranty made by the trust in the indenture or in any
certificate delivered under the indenture or in connection with the
indenture having been incorrect as of the time made, and the continuation
of any such default or the failure to cure such breach of a representation
or warranty for a period of 30 days after notice thereof is given to the
trust by the indenture trustee or to the trust and the indenture trustee by
the holders of at least 25% in principal amount of the notes then
outstanding; or
(4) certain events of bankruptcy, insolvency, receivership or liquidation
of the Trust.
However, the amount of principal due and payable on any class of notes on any
payment date prior to the final scheduled payment date, if any, for such class
will generally be
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determined by amounts available to be deposited in the note distribution
account for such distribution date.
Therefore, unless we specify otherwise in the prospectus supplement, the
failure to pay principal on a class of notes generally will not result in the
occurrence of an event of default unless the class of notes has a final
scheduled payment date, and then not until such final scheduled payment date
for the class of notes.
Unless we specify otherwise in the prospectus supplement, if an event of
default should occur and be continuing for the notes of any series, the related
indenture trustee or a note majority may declare the principal of the notes to
be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by a note majority.
Unless we specify otherwise in the prospectus supplement, if the notes of any
series have been declared due and payable following an event of default, the
related indenture trustee may institute proceedings to collect amounts due or
foreclose on trust property, exercise remedies as a secured party, sell the
related contracts or elect to have the trust maintain possession of the
contracts and continue to apply collections on the contracts as if there had
been no declaration of acceleration. Unless we specify otherwise in the
prospectus supplement, the indenture trustee, however, will be prohibited from
selling the related contracts following an event of default, unless:
(1) the holders of all the outstanding related notes consent to such
sale;
(2) the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on such outstanding notes at the date of such
sale; or
(3) the indenture trustee determines that the proceeds of the contracts
would not be sufficient on an ongoing basis to make all payments on the
notes as such payments would have become due if such obligations had not
been declared due and payable, and the indenture trustee obtains the
consent of the holders of 66 2/3% of the aggregate outstanding amount of
the notes.
Unless otherwise specified in the related prospectus supplement, following a
declaration upon an event of default that the notes are immediately due and
payable,
(1) Note owners will be entitled to ratable repayment of principal on the
basis of their respective unpaid principal balances and
(2) repayment in full of the accrued interest on and unpaid principal
balances of the notes will be made prior to any further payment of interest
or principal on the certificates.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an event of default occurs and is continuing with respect
to a series of notes, the indenture trustee will be under no obligation to
exercise any of the rights or powers under the indenture at the request or
direction of any of the holders of such notes, if the indenture trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the
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provisions for indemnification and certain limitations contained in the
indenture, a note majority in a series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
indenture trustee, and a note majority may, in certain cases, waive any default
with respect thereto, except a default in the payment of principal or interest
or a default in respect of a covenant or provision of the indenture that cannot
be modified without the waiver or consent of all of the holders of such
outstanding notes.
No holder of a note of any series will have the right to institute any
proceeding with respect to the related indenture, unless:
. that holder previously has given to the indenture trustee written
notice of a continuing event of default,
. the holders of not less than 25% in principal amount of the
outstanding notes of such series have made written request of the
indenture trustee to institute such proceeding in its own name as
indenture trustee,
. such holder or holders have offered the indenture trustee reasonable
indemnity,
. the indenture trustee has for 60 days failed to institute such
proceeding, and
. no direction inconsistent with such written request has been given to
the indenture trustee during such 60-day period by the holders of a
majority in principal amount of the outstanding notes.
If an event of default occurs and is continuing and if it is known to the
indenture trustee, the indenture trustee will mail to each noteholder notice of
the event of default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any notes, the indenture trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the noteholders.
In addition, each indenture trustee and the related noteholders, by accepting
the related notes, will covenant that they will not at any time institute
against Conseco Securitizations, Conseco Finance or the related trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Neither the indenture trustee nor the trustee in its individual capacity, nor
any holder of a certificate including, without limitation, Conseco
Securitizations, Conseco Finance, nor any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors
or assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the notes or for any agreement or covenant
of the trust contained in the indenture.
Covenants. Each indenture will provide that the trust may not consolidate
with or merge into any other entity, unless:
(1) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States or any state,
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(2) such entity expressly assumes the trust's obligation to make due and
punctual payments upon the notes and the performance or observance of every
agreement and covenant of the trust under the indenture,
(3) no event of default shall have occurred and be continuing immediately
after the merger or consolidation,
(4) the trustee has been advised that the then current rating of the
related notes or certificates then in effect would not be reduced or
withdrawn by the rating agencies as a result of the merger or
consolidation,
(5) the trustee has received an opinion of counsel stating that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any related note owner or certificate owner.
Each trust may not:
(1) except as expressly permitted by the indenture, the trust documents
or certain related documents for such trust, collectively, the related
documents, sell, transfer, exchange or otherwise dispose of any of the
assets of the trust,
(2) claim any credit on or make any deduction from the principal and
interest payable on the notes, other than amounts withheld under the IRS
code or applicable state law or assert any claim against any present or
former holder of such notes because of the payment of taxes levied or
assessed upon the trust,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the related indenture to be
impaired or permit any person to be released from any covenants or
obligations for the related notes under the indenture except as may be
expressly permitted thereby, or
(5) except as expressly permitted by the related documents, permit any
lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden
the assets of the trust or any part thereof, or any interest therein or
proceeds thereof.
No trust may engage in any activity other than as specified under the section
of the related prospectus supplement entitled "The Trust." No trust may incur,
assume or guarantee any indebtedness other than indebtedness incurred pursuant
to the notes and the indenture or otherwise in accordance with the related
documents.
Annual Compliance Statement. Each trust will be required to file annually
with the related indenture trustee a written statement as to the fulfillment of
its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture trustee will be required to
mail each year to all related noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee under the
related indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the trust to
the indenture trustee in its individual capacity, the property and funds
physically
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held by the indenture trustee and any action taken by it that materially
affects the notes and that has not been previously reported. Note owners may
receive reports upon written request, together with a certification that they
are note owners and payment of reproduction and postage expenses associated
with the distribution of such reports, from the indenture trustee at the
address specified in the prospectus supplement.
Satisfaction and Discharge of Indenture. The indenture will be discharged
with respect to the collateral securing the related notes upon the delivery to
the related indenture trustee for cancellation of all such notes or, with
certain limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all of such notes.
The Indenture Trustee
The indenture trustee for a series of notes will be specified in the
prospectus supplement. The indenture trustee may resign at any time, and
Conseco Securitizations as the seller will be obligated to appoint a successor
trustee. We may also remove the indenture trustee if the indenture trustee
ceases to be eligible to continue under the indenture or if the indenture
trustee becomes insolvent. In such circumstances, We will be obligated to
appoint a successor trustee. Any resignation or removal of the indenture
trustee and appointment of a successor trustee will be subject to any
conditions or approvals, if any, specified in the prospectus supplement and
will not become effective until acceptance of the appointment by a successor
trustee.
INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless we provide otherwise in the prospectus supplement, the securities of
each series will be registered in the name of Cede & Co., the nominee of DTC.
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a clearing corporation within
the meaning of the New York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
accepts securities for deposit from its participating organizations and
facilitates the clearance and settlement of securities transactions between
participants in such securities through electronic book-entry changes in
accounts of participants, eliminating the need for physical movement of
certificates. participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Certificate owners and note owners who are not participants but desire to
purchase, sell or otherwise transfer ownership of securities may do so only
through participants, unless and until definitive certificates or definitive
notes, each as defined below, are issued. In addition, certificate owners and
note owners will receive all distributions of principal of, and interest on,
the securities from the trustee or the indenture trustee, as applicable,
through DTC and
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participants. Certificate owners and note owners will not receive or be
entitled to receive certificates representing their respective interests in the
securities, except under the limited circumstances described below and specific
other circumstances, if any, as may be specified in the prospectus supplement.
Unless and until definitive securities are issued, it is anticipated that the
only certificateholder of the certificates and the only noteholder of the
notes, if any, will be Cede & Co., as nominee of DTC. Certificate owners and
note owners will not be recognized by the trustee as certificateholders or by
the indenture trustee as noteholders as those terms are used in the related
trust documents or indenture. Certificate owners and note owners will be
permitted to exercise the rights of certificateholders or noteholders, as the
case may be, only indirectly through participants and DTC.
For any series of securities, while the securities are outstanding, except
under the circumstances described below, under the rules, regulations and
procedures creating and affecting DTC and its operations, DTC is required to
make book-entry transfers among participants on whose behalf it acts with
respect to the securities and is required to receive and transmit distributions
of principal of, and interest on, the securities. participants with whom
certificate owners or note owners have accounts with respect to securities are
similarly required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective certificate owners and note owners.
Accordingly, although certificate owners and note owners will not possess
securities, the rules provide a mechanism by which certificate owners and note
owners will receive distributions and will be able to transfer their interests.
For any series of securities, unless we specify otherwise in the prospectus
supplement, certificates and notes will be issued in registered form to
certificate owners and note owners or their nominees, rather than to DTC, the
certificates and notes being referred to in this prospectus as definitive
certificates and definitive notes, respectively, only if:
(1) DTC, the seller or the servicer advises the trustee or the indenture
trustee, as the case may be, in writing that DTC is no longer willing or
able to discharge properly its responsibilities as nominee and depository
with respect to the certificates or the notes, and the seller, the
servicer, the trustee or the indenture trustee, as the case may be, is
unable to locate a qualified successor,
(2) the seller or the administrator at its sole option has advised the
trustee or the indenture trustee, as the case may be, in writing that it
elects to terminate the book-entry system through DTC and
(3) after the occurrence of a servicer termination event, the holders
representing a majority of the certificate balance, a certificate majority
or a note majority advises the trustee or the indenture trustee, as the
case may be, through DTC, that continuation of a book-entry system is no
longer in their best interests.
Upon issuance of definitive certificates or definitive notes to certificate
owners or note owners, the certificates or notes will be transferable directly,
and not exclusively on a book-
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entry basis and registered holders will deal directly with the trustee or the
indenture trustee, as the case may be, for transfers, notices and
distributions.
DTC has advised the seller that, unless and until definitive certificates or
definitive notes are issued, DTC will take any action permitted to be taken by
a certificateholder or a noteholder under the related trust documents or
indenture only at the direction of one or more participants to whose DTC
accounts the certificates or notes are credited. DTC has advised us that DTC
will take the action for any fractional interest of the certificates or the
notes only at the direction of and on behalf of the participants beneficially
owning a corresponding fractional interest of the certificates or the notes.
DTC may take actions, at the direction of the related participants, for some
certificates or notes which conflict with actions taken for other certificates
or notes.
Issuance of certificates and notes in book-entry form rather than as physical
certificates or notes may adversely affect the liquidity of certificates or
notes in the secondary market and the ability of the certificate owners or note
owners to pledge them. In addition, since distributions on the certificates and
the notes will be made by the trustee or the indenture trustee to DTC and DTC
will credit such distributions to the accounts of its participants, with the
participants further crediting such distributions to the accounts of indirect
participants or certificate owners or note owners, certificate owners and note
owners may experience delays in the receipt of such distributions.
Statements to Securityholders
On or before each distribution date, the servicer will prepare and provide to
the trustee a statement to be delivered to the related certificateholders on
distribution date. On or prior to each distribution date, the servicer will
prepare and provide to the indenture trustee a statement to be delivered to the
related noteholders on the distribution date. These statements will be based on
the information in the related servicer's certificate setting forth information
required under the trust documents. Unless otherwise specified in the
prospectus supplement, each statement to be delivered to certificateholders
will include the following information for the certificates on that
distribution date or the period since the previous distribution date, as
applicable, and each statement to be delivered to noteholders will include the
following information as to the notes on the distribution date or the period
since the previous distribution date:
(1) the amount of the distribution allocable to interest on or for each
class of securities;
(2) the amount of the distribution allocable to principal on or for each
class of securities;
(3) the principal balance and the pool factor for each class of
certificates and the aggregate outstanding principal balance and the pool
factor for each class of notes, after giving effect to all payments
reported under (2) above on that date;
(4) the amount of the servicing fee paid to the servicer for the related
monthly period or periods, as the case may be;
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(5) the pass-through rate or interest rate for the next period for any
class of certificates or notes with variable or adjustable rates;
(6) the amount of advances made by the servicer for the distribution
date, and the amount paid to the servicer on that distribution date as
reimbursement of advances made on previous distribution dates;
(7) the amount, if any, distributed to certificateholders and noteholders
applicable to payments under the related form of credit enhancement, if
any; and
(8) any other information as may be specified in the prospectus
supplement.
Each amount set forth under subclauses (1), (2), (4) and (6) for certificates
or notes will be expressed as a dollar amount per $1,000 of the initial
principal balance of the certificates or notes, as applicable.
Unless and until definitive certificates or definitive notes are issued, the
reports for a series of securities will be sent on behalf of the related trust
to the trustee, the indenture trustee and Cede & Co., as registered holder of
the certificates and the notes and the nominee of DTC. Certificate owners and
note owners may receive copies of the reports upon written request, together
with a certification that they are certificate owners or note owners, as the
case may be, and payment of reproduction and postage expenses associated with
the distribution of the reports, from the trustee or the indenture trustee, as
applicable. See "Reports to Securityholders" and "--Book-Entry Registration" in
this prospectus.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year during the term of a trust, the trustee and the indenture
trustee, as applicable, will mail to each holder of a class of securities who
at any time during such calendar year has been a securityholder, and received
any payment thereon, a statement containing certain information for the
purposes of such securityholder's preparation of federal income tax returns.
DTC will convey such information to its participants, who in turn will convey
the information to their related indirect participants in accordance with
arrangements among DTC and the participants. Certificate owners and note owners
may receive the reports upon written request, together with a certification
that they are certificate owners or note owners and payment of reproduction and
postage expenses associated with the distribution of the information, from the
trustee, for certificate owners, or from the indenture trustee, for note
owners, at the addresses specified in the prospectus supplement. See "Federal
Income Tax Consequences."
Lists of Securityholders
Unless we provide otherwise in the prospectus supplement, for each series of
certificates, at that time, if any, as definitive certificates have been
issued, the trustee will, upon written request by three or more
certificateholders or one or more holders of certificates evidencing not less
than 25% of the principal balance of the certificate within five business days
after provision to the trustee of a statement of the applicants' desire to
communicate with other certificateholders about their rights under the related
trust documents or the certificates and a copy of the communication that the
applicants propose to transmit, afford
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such certificateholders access during business hours to the current list of
certificateholders for purposes of communicating with other certificateholders
with respect to their rights under the trust documents. Unless otherwise
specified in the prospectus supplement, the trust documents will not provide
for holding any annual or other meetings of certificateholders.
Unless we provide otherwise in the prospectus supplement, for each series of
notes, if any, at that time, if any, as definitive notes have been issued, the
indenture trustee will, upon written request by three or more noteholders or
one or more holders of notes evidencing not less than 25% of the aggregate
principal balance of the related notes, within five business days after
provision to the indenture trustee of a statement of the applicants' desire to
communicate with other noteholders about their rights under the related
indenture or the notes and a copy of the communication that the applicants
propose to transmit, afford such noteholders access during business hours to
the current list of noteholders for purposes of communicating with other
noteholders about their rights under the indenture. Unless otherwise specified
in the prospectus supplement, the indenture will not provide for holding any
annual or other meetings of noteholders.
DESCRIPTION OF THE TRUST DOCUMENTS
Except as we specify otherwise in the prospectus supplement, the following
summary describes certain terms of the transfer agreement between Conseco
Finance and Conseco Securitizations, and of either the pooling and servicing
agreements or the sale and servicing agreements and the trust agreements--in
either case collectively referred to as the trust documents--pursuant to which
Conseco Securitizations will sell and assign contracts to a trust and the
servicer will agree to service those contracts on behalf of the trust, and
pursuant to which such trust will be created and certificates will be issued.
Forms of the trust documents have been filed as exhibits to the registration
statement of which this prospectus forms a part. We will provide a copy of the
agreements, without exhibits upon request to a holder of securities. This
summary is not complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the trust documents. Where particular
provisions or terms used in the trust documents are referred to, the actual
provisions, including definitions of terms are incorporated by reference as
part of that summary.
Sale and Assignment of the Contracts
On the closing date, Conseco Finance will sell and assign to Conseco
Securitizations, without recourse, its entire interest in the related contracts
and the proceeds thereof, including its security interests in the related
products, and Conseco Securitizations will immediately re-transfer the
contracts and related assets to the trust. Each contract transferred by Conseco
Securitizations to the trust will be identified in a schedule appearing as an
exhibit to the trust documents. At the same time as such sale and assignment,
the trustee will execute and deliver the certificates representing the
certificates to or upon the order of the seller, and the trustee will execute
and the indenture trustee will authenticate and deliver the notes, if any, to
or upon our order.
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Except as we specify otherwise in the prospectus supplement, Conseco Finance
will make certain warranties in the trust documents with respect to each
contract as of the closing date, including that:
(a) as of the cutoff date, the most recent scheduled payment was made or
was not delinquent more than 59 days;
(b) no provision of a contract has been waived, altered or modified in
any respect, except by instruments or documents contained in the contract
file;
(c) each contract is a legal, valid and binding obligation of the obligor
and is enforceable in accordance with its terms, except as may be limited
by laws affecting creditors' rights generally;
(d) no contract is subject to any right of rescission, set-off,
counterclaim or defense;
(e) for contracts with an original balance greater than $7,500, the
related product is covered by insurance naming us as an additional insured
party;
(f) each contract has been originated by a dealer or us in the ordinary
course of such dealer's, or our business and, if originated by a dealer,
was purchased by us in the ordinary course of business;
(g) no contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer of the contract or an
interest therein to the trustee pursuant to the trust documents or pursuant
to the notes or certificates unlawful;
(h) each contract complies with all requirements of law;
(i) no contract has been satisfied, subordinated to a lower lien ranking
than its original position in whole or in part or rescinded and the product
has not been released from the lien of the contract in whole or in part;
(j) each contract creates a valid and enforceable first priority security
interest in favor of us in the product covered thereby and such security
interest has been assigned by us to the trustee;
(k) all parties to each contract had capacity to execute such contract;
(l) no contract has been sold, assigned or pledged to any other person
and prior to the transfer of the contracts by us to the trustee, We had
good and marketable title to each contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, and
was the sole owner and had full right to transfer the contract to the
trustee;
(m) as of the cutoff date, there was no default, breach, violation or
event permitting acceleration under any contract, except for payment
delinquencies permitted by clause (a) above, no event which with notice and
the expiration of any grace or cure period would constitute a default,
breach, violation or event permitting acceleration under the contract, and
we have not waived any of the these;
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(n) as of the closing date there were, to the best of our knowledge, no
liens or claims which have been filed for work, labor or materials
affecting the product securing a contract, which are or may be liens prior
or equal to the lien of the contract;
(o) each contract is a fully-amortizing loan and provides for level
payments over the term of the contract;
(p) each contract contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for
realization against the collateral of the benefits of the security;
(q) the description of each contract set forth in the schedule of
contracts delivered to the trustee is true and correct; and
(r) there is only one original of each contract, other than the copy in
the possession of the obligor.
Our warranties will be made as of the execution and delivery of the related
trust documents and will survive the sale, transfer and assignment of the
related contracts and other trust property to the trust but will speak only as
of the date made.
Conseco Finance is obligated to repurchase for the repurchase price any
contract on the first business day after the first determination date which is
more than 90 days after Conseco Finance becomes aware, or should have become
aware, or its receipt of written notice from the trustee or the servicer, of a
breach of any representation or warranty by Conseco Finance in the trust
documents that materially adversely affects the trust's interest in any
contract if the breach has not been cured. The repurchase price for any
contract will be the remaining principal amount outstanding on the contract on
the date of repurchase plus accrued and unpaid interest thereon at its contract
rate to the date of such repurchase. This repurchase obligation constitutes the
sole remedy available to the trust and the securityholders for a breach of a
representation or warranty under the trust documents with respect to the
contracts, but not for any other breach of Conseco Finance's obligations under
the trust documents.
Upon our purchase of a contract due to a breach of a representation or
warranty, the trustee will convey the contract and the related trust property
to us.
Custody of Contract Files
Unless we specify otherwise specified in the prospectus supplement, Conseco
Finance initially will be appointed to act as custodian for the contract files
of each trust. Prior to the appointment of any custodian other than Conseco
Finance, the trust and institution specified in the prospectus supplement shall
enter into a custodian agreement pursuant to which the such institution will
agree to hold the contract files on behalf of the related trust. Any such
custodian agreement may be terminated by the trust on 30 days' notice to such
institution.
To facilitate servicing and save administrative costs, the documents will not
be physically segregated from other similar documents that are in Conseco
Finance's possession. UCC financing statements will be filed in Minnesota
reflecting the sale and
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assignment of the contracts by Conseco Finance to Conseco Securitizations, and
by Conseco Securitizations to the trustee, and our accounting records and
computer systems will also reflect such sale and assignment. In addition, the
contracts that are in our possession will be stamped or otherwise marked to
indicate that the contracts have been sold to the related trust. Despite these
precautions, if, through inadvertence or otherwise, any of the contracts were
sold to another party, or a security interest therein were granted to another
party that purchased, or took such security interest in any of the contracts in
the ordinary course of its business and took possession of the contracts, the
purchaser, or secured party would acquire an interest in the contracts superior
to the interest of the related trust if the purchaser, or secured party
acquired, or took a security interest in the contracts for new value and
without actual knowledge of such trust's interest. See "Legal Aspects of the
Contracts--Rights in the Contracts."
Collections
For each trust, the servicer will establish one or more collection accounts
in the name of the trustee or, in the case of any series including one or more
classes of notes, in the name of the indenture trustee for the benefit of the
related securityholders. If we so specify in the prospectus supplement, the
trustee will establish and maintain for each series an account, in the name of
the trustee on behalf of the related certificateholders, in which amounts
released from the collection account and any pre-funding account and any
amounts received from any source of credit enhancement for distribution to the
certificateholders will be deposited and from which all distributions to such
certificateholders will be made the certificate distribution account. For any
series including one or more classes of notes, the indenture trustee will
establish and maintain for each series an account, in the name of the indenture
trustee on behalf of the related noteholders, in which amounts released from
the collection account and any pre-funding account and any amounts received
from any source of credit enhancement for payment to such noteholders will be
deposited and from which all distributions to such noteholders will be made,
the note distribution account. The collection account, the certificate
distribution account if any, and the note distribution account, are referred to
collectively as the designated accounts. Any other accounts to be established
with respect to a trust will be described in the prospectus supplement.
Each designated account will be an eligible account maintained with the
trustee, the indenture trustee and/or other depository institutions. Eligible
account means any account which is:
(1) an account maintained with an eligible institution;
(2) an account or accounts the deposits in which are fully insured by
either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC;
(3) a segregated trust account maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the trustee, which depository institution or trust company has
capital and surplus, or, if such depository institution or trust company is
a subsidiary of a bank holding company system, the capital and surplus of
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the bank holding company of not less than $50,000,000 and the securities of
such depository institution, or, if such depository institution is a
subsidiary of a bank holding company system and such depository
institution's securities are not rated, the securities of the bank holding
company has a credit rating from each rating agency rating such series of
notes and/or certificates, a rating agency in one of its generic credit
rating categories which signifies investment grade; or
(4) an account that will not cause any rating agency to downgrade or
withdraw its then-current rating assigned to the securities, as confirmed
in writing by each rating agency.
Eligible institution means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the
full extent permitted by law by the Bank Insurance Fund, currently administered
by the Federal Deposit Insurance Corporation, whose short-term deposits have
been rated in one of the two highest rating categories or such other rating
category as will not adversely affect the ratings assigned to the securities of
such series. On the closing date specified in the prospectus supplement, the
servicer will cause to be deposited in the collection account all payments on
the contracts received by the servicer after the cutoff date and on or prior to
the second business day preceding the closing date.
The servicer will deposit all payments on the contracts held by any trust
received directly by the servicer from obligors and all proceeds of contracts
collected directly by the servicer during each monthly period into the
collection account no later than one business day after receipt.
Notwithstanding the foregoing and unless otherwise provided in the prospectus
supplement, the servicer may utilize an alternative remittance schedule, if the
servicer provides to the trustee and the indenture trustee written confirmation
from each rating agency that such alternative remittance schedule will not
result in the downgrading or withdrawal by the rating agency of the rating(s)
then assigned to the securities. We will also deposit into the collection
account on or before the deposit date the purchase amount of each contract to
be purchased by it for breach of a representation or warranty.
For any series of securities, funds in the designated accounts and any other
accounts identified in the related prospectus supplement will be invested, as
provided in the related trust documents, at the direction of the servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related trust documents are called
eligible investments. Eligible investments shall mature no later than the
business day preceding the applicable distribution date for the monthly period
to which such amounts relate. Investments in eligible investments will be made
in the name of the trustee or the indenture trustee, as the case may be, and
the investments will not be sold or disposed of prior to their maturity.
Unless we specify otherwise in the prospectus supplement, collections or
recoveries on a contract other than late fees or certain other similar fees or
charges received during a monthly period and purchase amounts deposited with
the trustee before a distribution date will be applied first to any outstanding
monthly advances made by the servicer for that
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contract, and then to interest and principal on the contract in accordance with
the terms of the contract.
Servicing Procedures
The servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the servicer with respect to contracts owned
or serviced by it, to collect all payments due with respect to the contracts
held by any trust and, in a manner consistent with the trust documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the trust documents, the servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
product securing a contract, with respect to which the servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on such contract. The servicer is authorized to follow such of
its normal collection practices and procedures as it deems necessary or
advisable to realize upon any contract. The servicer may repossess and sell the
product securing such contract at judicial sale, or take any other action
permitted by applicable law. See "Legal Aspects of the Contracts." The servicer
will be entitled to recover all reasonable expenses incurred by it in
connection therewith. The proceeds of such realization, net of such expenses
will be deposited in the collection account at the time and in the manner
described above under "--Collections."
The trust documents will provide that the servicer will indemnify and defend
the trustee, the indenture trustee, the trust and the securityholders against,
among other things, any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, or in respect of any action taken or failed to be taken by the
servicer with respect to any portion of the trust property in violation of the
provisions of the trust documents. The servicer's obligations to indemnify the
trustee, the indenture trustee, the trust and the securityholders for the
servicer's actions or omissions will survive the removal of the servicer but
will not apply to any action or omission of a successor servicer.
Servicing Compensation
Unless we specify otherwise in the prospectus supplement, for each series of
securities, the servicer will be entitled to receive the servicing fee for each
monthly period in an amount equal to the product of one-twelfth of the
servicing rate and the aggregate principal balance of the certificate as of the
first day of such monthly period. The servicer also will be entitled to collect
and retain any late fees or other administrative fees or similar charges
allowed by the terms of the contracts or applicable law. Unless we provide
otherwise in the prospectus supplement, the servicing rate will equal .75% per
annum calculated on the basis of a 360-day year consisting of twelve 30-day
months. As long as we are the servicer, the servicing fee and any additional
servicing compensation will be paid out of collections on or with respect to
the contracts after the required distributions to noteholders and
certificateholders. If we are no longer the servicer, the servicing fee and any
additional
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servicing compensation will be paid out of collections on or with respect to
the contracts prior to distributions to certificateholders and noteholders.
Unless we specify otherwise in the prospectus supplement, a monthly period for
any distribution date is the calendar month immediately preceding the month in
which the distribution date occurs.
Conseco Finance, as servicer, will be required to pay all expenses incurred
by it in connection with its servicing activities, including fees, expenses and
disbursements of the trustee, the indenture trustee, the custodian and
independent accountants, taxes imposed on the servicer and expenses incurred in
connection with distributions and reports to certificateholders and
noteholders, except certain expenses incurred in connection with realizing upon
the contracts.
Distributions
For each trust, beginning on the distribution date specified in the
prospectus supplement, distributions of principal and interest, or, where
applicable, of principal or interest only on each class of securities entitled
thereto will be made by the trustee or the indenture trustee, as applicable, to
the certificateholders and the noteholders. The timing, calculation,
allocation, order, source, priorities of and requirements for all distributions
to each class of certificateholders and all payments to each class of
noteholders will be described in the prospectus supplement.
Unless we specify otherwise in the prospectus supplement, on the third
business day prior to each distribution date, the servicer will determine the
amount available and the amounts to be distributed on the notes and
certificates for such distribution date. Except as we specify otherwise in the
prospectus supplement, the amount available for any distribution date will be
equal to:
(1) the funds on deposit in the collection account at the close of
business on the last day of the related monthly period, plus
(2) any advances to be made by the servicer with respect to delinquent
payments, plus
(3) any repurchase amounts to be deposited by us for contracts to be
repurchased due to a breach of a representation or warranty, minus
(4) any amounts paid by obligors in the related monthly period, but to be
applied in respect of a regular monthly payment due in a subsequent monthly
period, minus
(5) any amounts incorrectly deposited in the collection account.
Unless we specify otherwise in the prospectus supplement, on each distribution
date, prior to making distributions in respect of the notes and certificates,
the amount available will be applied, first, if we are is no longer the
servicer, to pay the servicing fee to the successor servicer, and second, to
reimburse the servicer, including us for any advances made with respect to a
prior monthly period and subsequently recovered and for any advances previously
made that the servicer has determined are uncollectible advances.
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Enhancement
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, for each class of securities will be described in the prospectus
supplement. If and to the extent provided in the prospectus supplement,
enhancement may be in the form of a financial guaranty insurance policy, letter
of credit, we guaranty, cash reserve fund, derivative product, or other form of
enhancement, or any combination thereof, as may be described in the prospectus
supplement. If specified in the prospectus supplement, enhancement for a class
of securities of a series may cover one or more other classes of securities in
such series, and accordingly may be exhausted for the benefit of a particular
class and thereafter be unavailable to such other classes. Further information
regarding any provider of enhancement, including financial information when
material, will be included in the prospectus supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the certificateholders and the noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
certificateholders and the noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
prospectus supplement. Unless otherwise specified in the prospectus supplement,
the enhancement for a class of securities will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal and
interest thereon. If losses occur which exceed the amount covered by any
enhancement or which are not covered by any enhancement, securityholders will
bear their allocable share of deficiencies. In addition, if a form of
enhancement covers more than one class of securities of a series,
securityholders of any such class will be subject to the risk that the
enhancement will be exhausted by the claims of securityholders of other
classes.
Advances
Unless otherwise specified in the prospectus supplement, the servicer will be
obligated to make advances each month of any scheduled payments on the
contracts included in a trust that were due but not received during the prior
monthly period. The servicer will be entitled to reimbursement of an advance
from available funds in the collection account for the related trust, (1) when
the delinquent payment is recovered by the trust, or (2) when the servicer has
determined that such advance has become an uncollectible advance. The servicer
will be obligated to make an advance only to the extent that it determines that
such advance will be recoverable from subsequent funds available therefor in
the collection account for the related trust.
Evidence as to Compliance
On or before March 31 of each year the servicer will deliver to each trustee
and each indenture trustee a report of a nationally recognized accounting firm
stating that such firm has examined certain documents and records relating to
the servicing of contracts serviced by the servicer under pooling and servicing
agreements or sale and servicing agreements similar to the trust documents and
stating that, on the basis of such procedures, such
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servicing has been conducted in compliance with the applicable trust documents,
except for any exceptions described in that report. A copy of the statement may
be obtained by any certificate owner or note owner upon compliance with the
requirements described above. See "Information Regarding the Securities--
Statements to Securityholders" above.
Matters Regarding the Servicer
Unless we provide otherwise in the prospectus supplement, our appointment as
servicer under the trust documents will continue until such time as we resign
or are terminated, or until such time, if any, as a servicer termination event
shall have occurred under the trust documents. The trust documents will provide
that the servicer may not resign from its obligations and duties as servicer
thereunder, except upon a determination, as evidenced by an opinion of
independent counsel, delivered and acceptable to the trustee and the indenture
trustee, that by reason of a change in legal requirements its performance of
such duties would cause it to be in violation of the legal requirements in a
manner which would result in a material adverse effect on the servicer. No such
resignation will become effective until a successor servicer has assumed the
servicing obligations and duties under the trust documents.
Unless otherwise provided in the prospectus supplement, any corporation or
other entity into which the servicer may be merged or consolidated, resulting
from any merger or consolidation to which the servicer is a party, which
acquires by conveyance, transfer or lease substantially all of the assets of
the servicer or succeeds to all or substantially all the business of the
servicer, where the servicer is not the surviving entity, which corporation or
other entity assumes every obligation of the servicer under each trust
document, will be the successor to the servicer under the related trust
documents; provided, that:
(1) such entity is an eligible servicer, and
(2) immediately after giving effect to such transaction, no servicer
termination event and no event which, after notice or lapse of time, or
both, would become a servicer termination event shall have occurred and be
continuing.
Indemnification and Limits on Liability
Unless we specify otherwise in the prospectus supplement, the trust documents
will provide that the servicer will be liable only to the extent of the
obligations specifically undertaken by it under the trust documents and will
have no other obligations or liabilities thereunder. The trust documents will
further provide that neither the servicer nor any of its directors, officers,
employees and agents will have any liability to the trust, the
certificateholders or the noteholders, except as provided in the trust
documents, for any action taken or for refraining from taking any action
pursuant to the trust documents, other than any liability that would otherwise
be imposed by reason of the servicer's breach of the trust documents or willful
misfeasance, bad faith or negligence, including errors in judgment in the
performance of its duties, or by reason of reckless disregard of obligations
and duties under the trust documents or any violation of law.
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The servicer may, with the prior consent of the trustee and the indenture
trustee, if any, delegate duties under the related trust documents to any of
its affiliates. In addition, the servicer may at any time perform the specific
duty of repossessing products through subcontractors who are in the business of
servicing consumer receivables. The servicer may also perform other specific
duties through subcontractors; provided, however, that no such delegation of
such duties by the servicer shall relieve the servicer of its responsibility.
Servicer Termination Events
Except as we specify otherwise in the prospectus supplement, servicer
termination events under the trust documents will include:
(1) any failure by the servicer to deliver to the indenture trustee for
distribution to the noteholders or to the trustee for distribution to the
certificateholders any required payment which continues unremedied for 5
days, or such other period specified in the related prospectus supplement
after the giving of written notice;
(2) any failure by the servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the trust
documents that materially and adversely affects the interests of
securityholders, which, in either case, continues unremedied for 30 days
after the giving of written notice of such failure of breach;
(3) any assignment or delegation by the servicer of its duties or rights
under the trust documents, except as specifically permitted under the trust
documents, or any attempt to make such an assignment or delegation;
(4) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings regarding the servicer; and
(5) the servicer is no longer an eligible servicer, as defined in the
trust documents. Notice shall mean notice to the servicer by the trustee,
the indenture trustee, if any, or us, or notice to us, the servicer, the
indenture trustee, if any, and the trustee by the holders of securities
representing interests aggregating not less than 25% of the outstanding
principal balance of the securities issued by the trust.
Unless we specify otherwise in the prospectus supplement, if a servicer
termination event occurs and is continuing, the trustee, the indenture trustee,
or the holders of at least 25% in aggregate principal balance of the
outstanding securities issued by the trust, by notice then given in writing to
the servicer, and to the trustee and the indenture trustee if given by the
securityholders may terminate all of the rights and obligations of the servicer
under the trust documents. Immediately upon the giving of the notice, and, in
the case of a successor servicer other than the trustee, the acceptance by the
successor servicer of its appointment, all authority of the servicer will pass
to the trustee or other successor servicer. The trustee, the indenture trustee
and the successor servicer may set off and deduct any amounts owed by the
servicer from any amounts payable to the outgoing servicer.
On and after the time the servicer receives a notice of termination, the
trustee or other successor servicer specified in the prospectus supplement, the
backup servicer, will be the successor in all respects to the servicer and will
be subject to all the responsibilities,
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restrictions, duties and liabilities of the servicer under the trust documents;
provided, however, that the successor servicer shall have no liability any
obligation which was required to be performed by the prior servicer prior to
the date that the successor servicer becomes the servicer or any claim of a
third party, including a securityholder, based on any alleged action or
inaction of the prior servicer. Notwithstanding the termination, the servicer
shall be entitled to payment of amounts payable to it prior to the termination,
for services rendered prior to the termination. No termination will affect in
any manner Conseco Finance's obligation to repurchase contracts for breaches of
representations or warranties under the trust documents. In the event that the
trustee would be obligated to succeed the servicer but is unwilling or unable
to act, it may appoint, or petition to a court of competent jurisdiction for
the appointment of a servicer. Pending the appointment, the trustee is
obligated to act in the capacity. The trustee and the successor servicer may
agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation to the servicer under the trust documents.
Upon any termination of, or appointment of a successor to, the servicer, the
trustee and the indenture trustee, if any, will each give prompt written notice
to certificateholders and noteholders, respectively, at their respective
addresses appearing in the certificate register or the note register and to
each rating agency.
Amendment
Unless we provide otherwise in the prospectus supplement, the trust documents
may be amended by us, the servicer, the trustee and the indenture trustee, if
any, but without the consent of any of the securityholders, to cure any
ambiguity or to correct or supplement any provision, provided that the action
will not, in the opinion of counsel, which may be our internal counsel or the
servicer reasonably satisfactory to the trustee and the indenture trustee,
materially and adversely affect the interests of the securityholders. The trust
documents may also be amended by us, the servicer and the trustee and the
indenture trustee, and a certificate majority and a note majority, if
applicable, for the purpose of adding any provisions to or changing or
eliminating any of the provisions of the trust documents or of modifying the
rights of the certificateholders or the noteholders. No amendment may, (1)
increase or reduce the amount of, or accelerate or delay the timing of,
collections of payments on the related contracts or distributions that are
required to be made on any related certificate or note or the related interest
rate, or (2) reduce the percentage of the certificate balance evidenced by
certificates or of the aggregate principal amount of notes then outstanding
required to consent to any amendment, without the consent of the holders of all
certificates or all notes, as the case may be, then outstanding.
Termination
The obligations created by the trust documents will terminate upon the date
calculated as specified in the trust documents, generally upon:
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(1) the later of the final payment or other liquidation of the last
contract subject thereto and the disposition of all property acquired upon
repossession of any product; and
(2) the payment to the securityholders of all amounts held by the
servicer or the trustee and required to be paid to the securityholders
pursuant to the trust documents.
Unless we provide otherwise in the prospectus supplement, for each series of
securities, in order to avoid excessive administrative expense, we and the
servicer each will be permitted, at its option, to purchase from the trust, on
any distribution date immediately following any monthly period as of the last
day of which the pool schedule principal balance is equal to or less than 10%,
or other percentage as may be specified in the prospectus supplement of the
cutoff date principal balance, all remaining contracts in the related trust and
the other remaining trust property at a price equal to the aggregate of the
purchase amounts and the appraised value of any other remaining trust property.
The exercise of this right will effect an early retirement of the related
certificates and notes.
If a general partner is named in the prospectus supplement, unless we specify
otherwise in the prospectus supplement, the trust agreement will provide that,
in the event that the general partner becomes insolvent, withdraws or is
expelled as a general partner or is terminated or dissolved, the trust will
terminate in 90 days and effect redemption of the notes, if any, and prepayment
of the certificates following the winding-up of the affairs of the related
trust, unless within such 90 days the remaining general partner, if any, and
holders of a majority of the certificates of the series agree in writing to the
continuation of the business of the trust and to the appointment of a successor
to the former general partner, and the owner trustee is able to obtain an
opinion of counsel to the effect that the trust will not thereafter be an
association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes.
Unless we specify otherwise in the prospectus supplement, for each series of
securities, the trustee will give written notice of the final distribution for
the certificates to each certificateholder of record and the indenture trustee
will give written notice of the final payment for the notes, if any, to each
noteholder of record. The final distribution to any certificateholder and the
final payment to any noteholder will be made only upon surrender and
cancellation of the holder's certificate or note at the office or agency of the
trustee, for certificates, or of the indenture trustee, for notes, specified in
the notice of termination. Any funds remaining in the trust, after the trustee
or the indenture trustee has taken certain measures to locate a
certificateholder or noteholder, as the case may be, and the measures have
failed, will be distributed to The United Way, and the certificateholders and
noteholders, by acceptance of their certificates and notes, will waive any
rights for the funds.
The Trustee
The trustee or owner trustee, as applicable, for each trust will be specified
in the prospectus supplement. The trustee, in its individual capacity or
otherwise, and any of its affiliates may hold certificates or notes in their
own names or as pledgee. In addition, for the purpose of meeting the legal
requirements of certain jurisdictions, the trustee, with the
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consent of the servicer, shall have the power to appoint co-trustees or
separate trustees of all or any part of the trust. In the event of the
appointment, all rights, powers, duties and obligations conferred or imposed
upon the trustee by the related trust documents will be conferred or imposed
upon the trustee and the separate trustee or co-trustee jointly, or, in any
jurisdiction where the trustee is incompetent or unqualified to perform certain
acts, singly upon the separate trustee or co-trustee who shall exercise and
perform the rights, powers, duties and obligations solely at the direction of
the trustee.
The trustee of any trust may resign at any time, in which event the general
partner, if any, specified in the prospectus supplement or, if no such general
partner is specified, the servicer or its successor will be obligated to
appoint a successor trustee. The general partner, if any, specified in the
prospectus supplement, or, if no general partner is specified, the servicer,
may also remove the trustee, if the trustee ceases to be eligible to serve,
becomes legally unable to act, is adjudged insolvent or is placed in
receivership or similar proceedings. In those circumstances, the general
partner, if any, specified in the related prospectus supplement or, if no
general partner is specified, the servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the trustee and appointment of
a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
Duties of the Trustee
The trustee will make no representation as to the validity or sufficiency of
any trust document, the certificates or the notes, other than its execution of
the certificates and the notes, the contracts or any related documents, and
will not be accountable for the use or application by the servicer of any funds
paid to the servicer in respect of the certificates, the notes or the contracts
prior to deposit in the related collection account.
The trustee will be required to perform only those duties specifically
required of it under the trust documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the servicer to the trustee under the
trust documents, in which case it will only be required to examine the
certificates, reports or instruments to determine whether they conform
substantially to the requirements of the trust documents.
The trustee will be under no obligation to exercise any of the rights or
powers vested in it by the trust documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the certificateholders or noteholders, unless the
certificateholders or noteholders have offered the trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No certificateholder nor any noteholder will have any right
under the trust documents to institute any proceeding for the trust documents,
unless the holder has given the trustee written notice of default and unless
the holders of certificates evidencing not less than 25% of the certificate
balance or the holders of notes evidencing not less than 25% of the aggregate
principal balance of the notes then outstanding, as the case may be, have made
written request to the trustee to institute the proceeding in its own name as
trustee and have
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offered to the trustee reasonable indemnity, and the trustee for 30 days after
the receipt of the notice, request and offer to indemnify has neglected or
refused to institute any proceedings.
Administrator
If an administrator is specified in the prospectus supplement, the
administrator will enter into an agreement, the administration agreement,
pursuant to which such administrator will agree, to the extent provided in the
administration agreement, to provide the notices and to perform other
administrative obligations required by the related indenture and the trust
agreement.
LEGAL ASPECTS OF THE CONTRACTS
Rights in the Contracts
The contracts are chattel paper as defined in the UCC as in effect in the
State of Minnesota. Pursuant to the UCC, an ownership interest in chattel paper
may be perfected by possession or by filing a UCC-1 financing statement in the
state where the seller's principal executive office is located. Accordingly,
financing statements covering the contracts will be filed by Conseco
Securitizations in Minnesota.
The servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each trust's interest in the related
contracts and the proceeds. Conseco Finance will warrant in the trust documents
for the contracts held by the related trust and the trustee will pledge the
right to enforce the warranty to the indenture trustee as collateral for the
notes, if any, that, as of the closing date, the contracts have not been sold,
pledged or assigned by it to any other person, and that it has good and
indefeasible title and is the sole owner free of any liens and that,
immediately upon the transfer of the contracts to the trust pursuant to the
related trust document, the trust will have good and indefeasible title to and
will be the sole owner of the contracts, free of any liens. In the event of an
uncured breach of any of the warranties in the trust documents that materially
and adversely affects the related trust's, certificateholders' or noteholders'
interest in any contract, a repurchase event, we will be obligated to
repurchase the contract.
Unless we provide otherwise in the prospectus supplement, Conseco Finance
will hold the contract files on behalf of each trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in our possession. UCC financing
statements will be filed in Minnesota reflecting the sale and assignment of the
contracts to the trustee, and our accounting records and computer systems will
also reflect the sale and assignment. In addition, the contracts will be
stamped or otherwise marked to indicate that the contracts have been sold to
the related trust. Despite these precautions, if, through inadvertence or
otherwise, any of the contracts were sold to another party, or a security
interest therein were granted to another party that purchased, or took the
security interest in any of the contracts in the ordinary course of its
business and took possession of the contracts, the purchaser, or secured party
would acquire an interest in
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the contracts superior to the interest of the related trust if the purchaser,
or secured party acquired or took a security interest in the contracts for new
value and without actual knowledge of the trust's interest. See "Description of
the Trust Documents--Custody of Contract Files."
Security Interests in the Products
Security interests in some products must be perfected by notation of the
secured party's lien on the certificate of title or by actual possession of the
certificate of title, depending on the law of the state wherein the purchaser
resides. Security interests in certain other products must be perfected by the
filing of a UCC financing statement, naming the obligor as debtor and us as
secured party. Purchase money security interests in products that are consumer
goods, as defined in the UCC, are deemed perfected under some states' laws when
the contract is executed and we have advanced the purchase price of the goods.
It is our practice to take action as is required to perfect its security
interest under the laws of the state in which the product is located. In the
event of clerical errors, administrative delays or otherwise, actions may not
have been taken for a product and the security interest may be subordinate to
the interests of, among others, subsequent purchasers of the products, holders
of perfected security interests in the product, and the trustee in bankruptcy
of the obligor. Likewise, where we did not file a UCC financing statement
because its security interest was perfected as a purchase money security
interest in consumer goods;
(1) such security interest may be deemed not to be perfected if the
product were ultimately determined not to be consumer goods, and
(2) a subsequent purchaser of the product may acquire the product free of
our security interest.
The events would, however, give rise to a repurchase event and obligate us to
repurchase the affected contract if the interests of the related
certificateholders, noteholders or trust were materially and adversely
affected.
Under the related trust document, we will assign the security interests in
the products to the owner trustee on behalf of the related trust. However,
because of the administrative burden and expense that would be entailed in
doing so, none of Conseco Securitizations, Conseco Finance or the trustee will
be required, except to the extent provided below, to amend the certificates of
title or UCC financing statements to identify the trustee as the new secured
party and, accordingly, we will continue to be named as the secured party on
the certificates of title or UCC financing statements relating to the products.
The servicer will be required to note the interest of the related trust on the
certificates of title for the products or to amend the UCC financing statements
only upon a servicer termination event. In most states, an assignment such as
that under the related trust documents should be an effective transfer of a
security interest without amendment of any lien noted on the related
certificate of title or financing statement, and the assignee should succeed to
the assignor's status as the secured party. In the absence of fraud or forgery
by the obligor or administrative error by state recording officials, the
notation of the lien on the certificate of title or the UCC financing statement
should be sufficient to protect the related trust against the rights of
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subsequent purchasers of a product or subsequent lenders who take a security
interest in the related product. However, in the absence of an amendment, the
security interest of the related trust in the related products might be
defeated by, among others, the trustee in our bankruptcy or the obligor.
However, failure would give rise to a repurchase event and obligate us to
repurchase the affected contract if the interests of the related
certificateholders, noteholders or trust were materially and adversely
affected.
In most states, a perfected security interest in a product subject to
certificate of title or a financing statement continues for four months after
the product is moved to a different state and thereafter until the owner re-
registers the product in the new state, but in no event beyond the surrender of
the certificate of title. A majority of states require surrender of a
certificate of title to re-register a product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to the product.
In the case of products registered in states which provide for notation of a
lien but not possession of the certificate of title by the holder of the
security interest in the related product, the secured party should receive
notice of surrender if the security interest in the product is noted on the
certificate of title. Accordingly, the secured party should have the
opportunity to re-perfect its security interest in the product in the state of
relocation. In states that do not require a certificate of title for
registration of a product, re-registration could defeat perfection.
In the ordinary course of servicing its secured consumer contract portfolio,
it is our practice to effect the re-perfection upon receipt of notice of re-
registration or information from the obligor as to relocation. Similarly, when
an obligor sells a product subject to a certificate of title, we must surrender
possession of the certificate of title or receive notice as a result of its
lien noted thereon and accordingly should have an opportunity to require
satisfaction of the related contract before release of the lien.
Under the laws of most states, liens for repairs performed on a product and
liens for unpaid taxes take priority over even a perfected security interest in
a product. Conseco Finance will represent, in the related trust document that,
immediately prior to the sale, assignment and transfer to the related trust,
each contract held by such trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in its favor, as secured
party. However, liens for taxes, judicial liens or liens arising by operation
of law could arise at any time during the term of a contract. In addition, the
laws of certain states and federal law permit the confiscation of motor
vehicles and certain other consumer products by governmental authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
product. No notice will be given to the owner trustee, indenture trustee,
certificateholders or noteholders in the event that a lien or confiscation
arises, and if the lien arises or confiscation occurs after the date of
issuance of any series of certificates and notes, neither we nor the servicer
will be required to repurchase or purchase the related contract.
Repossession
In the event of default by an obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party
under the UCC, except where
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specifically limited by other state laws. The remedies of a secured party under
the UCC include the right to repossession by self-help means, unless the means
would constitute a breach of the peace. Self-help repossession is the method
employed by us in most cases and is accomplished simply by taking possession of
the product. In the event of default by the obligor, some jurisdictions require
that the obligor be notified of the default and be given a time period within
which the obligor may cure the default prior to repossession. In cases where
the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the product must then be repossessed in accordance
with that order. If a breach of the peace cannot be avoided, judicial action is
required. A secured party may be held responsible for damages caused by a
wrongful repossession of a product, including a wrongful repossession conducted
by an agent of the secured party. In many states, a product may be repossessed
without notice to the obligor, but only if the repossession can be accomplished
without a breach of the peace.
Notice of Sale; Redemption Rights
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
has the right to redeem the collateral prior to actual sale by paying the
secured party the entire unpaid time balance of the obligation, less any
unaccrued finance charges plus accrued default charges, reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, to the extent provided in the financing
documents, reasonable attorneys' fees, or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the related
contract. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in other states that do not
prohibit or limit such judgments, subject to satisfaction of statutory
procedural requirements by the holder of the obligation. However, any
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. In many cases, it may
not be useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount or not paid at all. We generally seeks to
recover any deficiency existing after repossession and sale of a product.
Occasionally, after resale of a repossessed products, and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the law
of most states requires the secured party to remit the surplus to any holder of
another lien for the product, if proper
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notification of demand for proceeds is received prior to distribution, or, if
no lienholder exists, to remit the surplus to the former owner of the product.
Soldiers' and Sailors' Civil Relief Act
The Relief Act imposes certain limitations upon the actions of creditors with
respect to persons serving in the Armed Forces of the United States and, to a
more limited extent, their dependents and guarantors and sureties of debt
incurred by those persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her
ability to pay interest at a higher rate. Further, a secured party may not
repossess during a person's military service a product subject to an
installment sales contract or a promissory note entered into prior to the
person's entering military service, for a loan default which occurred prior to
or during the service, without court action. The Relief Act imposes penalties
for knowingly repossessing property in contravention of its provisions.
Additionally, dependents of military personnel are entitled to the protection
of the Relief Act, upon application to a court, if the court determines the
obligation of the dependent has been materially impaired by reason of the
military service. To the extent an obligation is unenforceable against the
person in military service or a dependent, any guarantor or surety of that
obligation will not be liable for performance.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts
and promissory notes pursuant to which purchasers finance the acquisition of
consumer products. These laws place finance charge ceilings on the amount that
a creditor may charge in connection with financing the purchase of a consumer
product. These laws also impose other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who
fail to comply. In some cases, this liability could affect the ability of an
assignee, such as the related trust, to enforce consumer finance contracts such
as the contracts. The credit practices rule of the FTC imposes additional
restrictions on contract provisions and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions, and certain related lenders
and their assignees to all claims and defenses which the purchaser could assert
against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the
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event of a successful claim is limited to amounts paid by the purchaser under
the consumer credit contract. The assignee's ability to collect any balance
remaining due thereunder is subject to these claims and defenses. Accordingly,
each trust, as assignee of the related contracts, will be subject to claims or
defenses, that the purchaser of the related product may assert against the
seller of the product.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
We will warrant in the related trust document that as of the date of
origination each contract held by the related trust complied with all
requirements of applicable law in all material respects. Accordingly, if the
trust's interest in a contract were materially and adversely affected by a
violation of any law, the violation would constitute a repurchase event and
would obligate us to repurchase the contract unless the breach were cured. See
"Description of the Trust Documents--Sale and Assignment of the Contracts."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the collateral at the time of bankruptcy, as determined by the
court, leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing the
indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the
securities. The discussion is based upon the current provisions of the Internal
Revenue Code of 1986, the treasury regulations promulgated thereunder and
judicial or ruling authority, all of which are subject to change, which change
may be retroactive. The discussion does not deal with federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors are encouraged to consult their own tax
advisors for the federal, state, local, and any other tax consequences of the
purchase, ownership, and disposition of the securities.
[Counsel for Conseco Finance], our counsel, has delivered an opinion
regarding federal income tax matters discussed below. Counsel to the seller
identified in the prospectus supplement will deliver an opinion regarding tax
matters applicable to each series of
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securities. The opinion, however, is not binding on the IRS or the courts. The
opinion of counsel will specifically address only those issues specifically
identified below as being covered by the opinion; however, the opinion of
counsel also will state that the additional discussion set forth below
accurately describes counsel's advice for material tax issues. No ruling on any
of the issues discussed below will be sought from the IRS.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the securities of any series will depend upon whether the trust
created with respect to that series is structured as an owner trust, treated as
a partnership for federal income tax purposes or as a grantor trust. The
prospectus supplement for each series of securities will indicate whether the
trust created for that series will be treated as a partnership or as a grantor
trust. The following discussion deals first with series for which the trust has
been structured as an owner trust treated as a partnership, and then with
series for which the trust has been structured as a grantor trust.
Owner Trust Series
Tax Status of the Trust
For each series of securities which includes both notes and certificates,
counsel will deliver its opinion that the trust will not be an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. As a result, in the opinion of counsel, the trust itself will not be
subject to federal income tax but, each certificateholder will be required to
take into account its distributive share of items of income and deduction,
including deductions for distributions of interest to the noteholders of the
trust as though the items had been realized directly by the certificateholder.
This opinion will be based on the assumption that the terms of the trust
agreement and related documents will be complied with, and on counsel's
conclusion that the nature of the income of the trust will exempt it from the
rule that some publicly traded partnerships are taxable as corporations. There
are no cases or IRS rulings on transactions involving a trust issuing both debt
and equity interests with terms similar to those of the notes and the
certificates. As a result, the IRS may disagree with all or a part of this
discussion.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the contracts, possibly
reduced by its interest expense on the notes. Any corporate income tax could
materially reduce cash available to make payments on the notes and
distributions on the certificates.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The owner trustee, on behalf of the
trust, will agree, and the noteholders will agree by their purchase of notes,
to treat the notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
notes is correct.
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Interest Income on the Notes. Interest on the notes will be taxable as
ordinary interest income when received by noteholders utilizing the cash-basis
method of accounting and when accrued by noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the notes would be
considered issued with original issue discount if the stated redemption price
at maturity of a note, generally equal to its principal amount as of the date
of issuance plus all interest other than qualified stated interest payable
prior to or at maturity exceeds the original issue price, in this case, the
initial offering price at which a substantial amount of the notes are sold to
the public. Any OID would be considered de minimis under the OID regulations if
it does not exceed 1/4% of the stated redemption price at maturity of a note
multiplied by the number of full years until its maturity date. It is
anticipated that the notes will not be considered issued with more than de
minimis OID. Under the OID regulations, an owner of a note issued with a de
minimis amount of OID must include the OID in income, on a pro rata basis, as
principal payments are made on the note.
While it is not anticipated that the notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to be
issued with OID. This deemed OID could arise, for example, if interest payments
on the notes are not deemed to be qualified stated interest because the notes
do not provide for default remedies ordinarily available to holders of debt
instruments or do not contain terms and conditions that make the likelihood of
late payment or nonpayment a remote contingency. Based upon existing authority,
the trust will treat interest payments on the notes as qualified stated
interest under the OID regulations. If the notes are issued or are deemed to be
issued with OID, all or a portion of the taxable income to be recognized with
respect to the notes would be includible in the income of noteholders as OID.
Any amount treated as OID would not, however, be includible again when the
amount is actually received. If the yield on a class of notes were not
materially different from its coupon, this treatment would have no significant
effect on noteholders using the accrual method of accounting. However, cash
method noteholders may be required to report income for the notes in advance of
the receipt of cash attributable to that income.
A noteholder must include OID in income as interest over the term of the
notes under a constant yield method. In general, OID must be included in income
in advance of the receipt of cash representing that income. Each noteholder is
encouraged to consult its own tax advisor regarding the impact of the OID rules
if the notes are issued with OID.
Market Discount. The notes, whether or not issued with original issue
discount, will be subject to the market discount rules of Section 1276 of the
IRS code. In general, these rules provide that if a noteholder purchases the
note at a market discount, for example, a discount from its original issue
price plus any accrued original issue discount that exceeds a de minimis amount
specified in the IRS code, and thereafter recognizes gain upon a disposition,
the lesser of the gain or the accrued market discount will be taxed as ordinary
interest income. Market discount also will be recognized and taxable as
ordinary interest income as payments of principal are received on the notes to
the extent that the amount of the payments does not exceed the accrued market
discount. Generally, the accrued market
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discount will be the total market discount on the note multiplied by a
fraction, the numerator of which is the number of days the noteholder held the
note and the denominator of which is the number of days after the date the
noteholder acquired the note until and including its maturity date. The
noteholder may elect, however, to determine accrued market discount under the
constant-yield method, which election shall not be revoked without the consent
of the IRS.
Limitations imposed by the IRS code which are intended to match deductions
with the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A noteholder may elect to include market
discount in gross income as it accrues and, if the noteholder makes such an
election, is exempt from this rule. The adjusted basis of a note subject to the
election will be increased to reflect market discount included in gross income,
thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any election to include market discount in gross income as it
accrues shall apply to all debt instruments held by the noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the IRS.
Amortizable Bond Premium. In general, if a noteholder purchases a note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), the noteholder will be considered to have purchased the note with
amortizable bond premium equal to the amount of the excess. The noteholder may
elect to deduct the amortizable bond premium as it accrues under a constant-
yield method over the remaining term of the note. The noteholder's tax basis in
the note will be reduced by the amount of the amortizable bond premium
deducted. Amortizable bond premium for a note will be treated as an offset to
interest income on that note, and a noteholder's deduction for amortizable bond
premium that a note will be limited in each year to the amount of interest
income derived for that Note for that year. Any election to deduct amortizable
bond premium shall apply to all debt instruments (other than instruments the
interest on which is excludible from gross income) held by the noteholder at
the beginning of the first taxable year to which the election applies or
thereafter acquired and is irrevocable without the consent of the IRS. Bond
premium on a note held by a noteholder who does not elect to deduct the premium
will decrease the gain or increase the loss otherwise recognized on the
disposition of the note.
Disposition of Notes. If a noteholder sells a note, the noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the noteholder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder generally will equal
the noteholder's cost for the note, increased by any market discount, OID and
gain previously included by that noteholder in income for the note and
decreased by principal payments previously received by that noteholder and the
amount of bond premium previously amortized for the note. Any gain or loss will
be capital gain or loss if the note was held as a capital asset, except for
gain representing accrued interest and accrued market discount not previously
included in income, and will be short-term, mid-term or long-term capital gain
or loss depending upon whether the note was held for more or less
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than one year or for more than eighteen months. Capital losses generally may be
used only to offset capital gains.
Foreign Holders. Generally, interest paid to a noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
note in connection with a United States trade or business will be treated as
portfolio interest and will be exempt from the 30% withholding tax. The
noteholder will be entitled to receive interest payments on the notes free of
United States federal income tax provided that the noteholder periodically
provides the indenture trustee, or other person who would otherwise be required
to withhold tax with a statement certifying under penalty of perjury that the
noteholder is not a United States person and providing the name and address of
that noteholder and will not be subject to federal income tax on gain from the
disposition of a note unless the noteholder is an individual who is present in
the United States for 183 days or more during the taxable year in which the
disposition takes place and some other requirements are met.
Tax Administration and Reporting. The indenture trustee will furnish to each
noteholder with each distribution a statement showing the amount of the
distribution allocable to principal and to interest. Reports will be made
annually to the IRS and to holders of record that are not excepted from the
reporting requirements regarding the information as may be required for the
interest and original issue discount, with respect to the notes.
Backup Withholding. Under certain circumstances, a noteholder may be subject
to backup withholding at a 31% rate. Backup withholding may apply to a
noteholder who is a United States person if the holder, among other
circumstances, fails to furnish their social security number or other taxpayer
identification number to the indenture trustee. Backup withholding may apply,
under some circumstances, to a noteholder who is a foreign person if the
noteholder fails to provide the indenture trustee or the noteholder's
securities broker with the statement necessary to establish the exemption from
federal income and withholding tax on interest on the note. Backup withholding,
however, does not apply to payments on a note made to some exempt recipients,
such as corporations and tax-exempt organizations, and to certain foreign
persons. Noteholders should consult their tax advisors for additional
information concerning the potential application of backup withholding to
payments received by them for a note.
On October 6, 1997, the treasury department issued new regulations which make
some modifications to the withholding, backup withholding and information
reporting rules described above. The new regulations attempt to unify
certification requirements and modify reliance standards, and will generally be
effective for payments made after December 31, 1999, subject to some transition
rules. You are urged to consult your own tax advisors regarding the new
regulations.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
counsel, the IRS successfully asserted that the notes did not represent debt
for federal income tax purposes, the notes might be treated as equity interests
in the trust. If so treated, the trust would be treated as a publicly traded
partnership that would not be taxable as a corporation
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because it would meet some qualifying income tests. Nonetheless, treatment of
the notes as equity interests in that type of partnership could have adverse
tax consequences to some holders. For example, income to foreign holders
generally would be subject to federal tax and federal tax return filing and
withholding requirements, income to some tax-exempt entities would be unrelated
business taxable income, and individual holders might be subject to some
limitations on their ability to deduct their share of trust expenses.
Tax Consequences to Certificateholders
Treatment of the Trust as a Partnership. We, the general partner and the
owner trustee will agree, and the certificateholders will agree by their
purchase of certificates, to treat the trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the trust, the partners of the partnership being the certificateholders and
the general partner, and the notes being debt of the partnership. The proper
characterization of the arrangement involving the trust, the certificates, the
notes, the general partner, Green Tree and the servicer, however, is not
certain because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example, because
the certificates have certain features characteristic of debt, the certificates
might be considered debt of the trust. This characterization would not result
in materially adverse tax consequences to certificateholders as compared to the
consequences from treatment of the certificates as equity in a partnership as
discussed in the following paragraphs. The following discussion assumes that
the certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the trust will not be subject to
federal income tax. Each certificateholder will be required to separately take
into account the holder's allocated share of income, gains, losses, deductions
and credits of the trust. The trust's income will consist primarily of interest
and finance charges earned on the contracts, including appropriate adjustments
for market discount, OID and bond premium and any gain upon collection or
disposition of the contracts. The trust's deductions will consist primarily of
interest accruing for the notes, servicing and other fees, and losses or
deductions upon collection or disposition of the contracts.
The tax items of a partnership are allocable to the partners in accordance
with the IRS code, treasury regulations and the partnership agreement, here,
the trust agreement and related documents. The trust agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
trust for each month equal to the sum of:
(1) the interest that accrues on the certificates according to their terms
for that month, including interest accruing at the pass-through rate
for that month and interest on amounts previously due on the
certificates but not yet distributed;
(2) any trust income attributable to discount on the contracts that
corresponds to any excess of the principal amount of the certificates
over their initial issue price;
(3) prepayment premium payable to the certificateholders for that month;
and
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(4) any other amounts of income payable to the certificateholders for that
month.
Although it is not anticipated that the certificates will be issued at a price
which exceeds their principal amount, allocations of trust income to the
certificateholders will be reduced by any amortization by the trust of premium
on contracts that corresponds to any excess of the issue price of certificates
over their principal amount. All remaining taxable income of the trust will be
allocated to the general partner. Based on the economic arrangement of the
parties, this approach for allocating trust income should be permissible under
applicable treasury regulations, although no assurance can be given that the
IRS would not require a greater amount of income to be allocated to
certificateholders. Even under this method of allocation, certificateholders
may be allocated income equal to the entire pass-through rate plus the other
items described above even though the trust might not have sufficient cash to
make current cash distributions of that amount. Cash basis holders will in
effect be required to report income from the certificates on the accrual basis,
and certificateholders may become liable for taxes on trust income even if they
have not received cash from the trust to pay these taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
All of the taxable income allocated to a certificateholder that is a pension,
profit sharing or employee benefit plan or other tax-exempt entity, including
an individual retirement account will constitute unrelated business taxable
income generally taxable to the holder under the IRS code.
A certificateholder's share of expenses of the trust, including fees to the
servicer but not interest expense will be miscellaneous itemized deductions. An
individual, an estate, or a trust that holds a certificate either directly or
through a pass-through entity will be allowed to deduct the expenses under
Section 212 of the IRS code only to the extent that, in the aggregate and
combined with specific other itemized deductions, they exceed 2% of the
adjusted gross income of the certificateholder. In addition, Section 68 of the
IRS code provides that the amount of itemized deductions, including those
provided for in Section 212 of the IRS code otherwise allowable for the taxable
year for an individual whose adjusted gross income exceeds a threshold amount
determined under the IRS code ($121,000 in 1997, in the case of a joint return)
will be reduced by the lesser of:
(1) 3% of the excess of adjusted gross income over the specified
threshold amount; or
(2) 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
To the extent that a certificateholder is not permitted to deduct servicing
fees allocable to a certificate, the taxable income of the certificateholder
attributable to that certificate will exceed the net cash distributions related
to that income. Certificateholders may deduct any loss on disposition of the
contracts to the extent permitted under the IRS code.
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Discount and Premium. It is believed that the contracts were not issued with
OID, and therefore, the trust should not have OID income. The purchase price
paid by the trust for the contracts may exceed the remaining principal balance
of the contracts at the time of purchase. If the trust is deemed to acquire the
contracts at such a premium or at a market discount, the trust will elect to
offset any premium against interest income on the contracts or to include any
discount in income currently as it accrues over the life of the contracts. The
trust will make this premium or market discount calculation on an aggregate
basis but may be required to recompute it on a contract-by-contract basis. As
indicated above, a portion of this premium deduction or market discount income
may be allocated to certificateholders.
Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss for distributions from the trust. A certificateholder
will recognize gain, to the extent that any money distributed exceeds the
certificateholder's adjusted basis in its certificates as described below under
"Disposition of Certificates" immediately before the distribution. A
certificateholder will recognize loss upon termination of the trust or
termination of the certificateholder's interest in the trust if the trust only
distributes money to the certificateholder and the amount distributed is less
than the certificateholder's adjusted basis in the certificates. This gain or
loss generally will be capital gain or loss if the certificates are held as
capital assets and will be long-term gain or loss if the holding period of the
certificates is more than one year.
Section 708 Termination. Under Section 708 of the IRS code, the trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the trust are sold or exchanged within a 12-
month period. Under treasury regulations, if a termination occurs, the trust
will be considered to have contributed the assets of the trust the old
partnership to a new partnership in exchange for interests in the new
partnership. The interests would be deemed distributed to the partners of the
old partnership in liquidation, which would not constitute a sale or exchange
for United States federal income tax purposes.
Disposition of Certificates. If a certificateholder sells a certificate, the
certificateholder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized on the sale and the
seller's tax basis in the certificate. A certificateholder's tax basis in a
certificate generally will equal the certificateholder's cost increased by the
certificateholder's share of trust income and decreased by any distributions
received with respect to the certificate. In addition, both the tax basis in
the certificate and the amount realized on a sale of a certificate would
include the certificateholder's share of the notes and other liabilities of the
trust. A certificateholder acquiring certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in these
certificates, and, upon sale or other disposition of some of these
certificates, allocate a portion of the aggregate tax basis to the certificates
sold, rather than maintain a separate tax basis in each certificate for
purposes of computing gain or loss on a sale of that certificate.
Any gain on the sale of a certificate attributable to the certificateholder's
share of unrecognized accrued market discount on the contracts would generally
be treated as
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ordinary income to the certificateholder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets that
would give rise to special reporting requirements. To avoid those special
reporting requirements, the trust will elect to include market discount in
income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income, not including income attributable to disallowed itemized deductions
described in the paragraphs above over the life of the certificates that
exceeds the aggregate cash distributions, the excess generally will give rise
to a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the trust's
taxable income and losses will be determined monthly, and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the
close of the related record date. As a result, a certificateholder purchasing a
certificate may be allocated tax items, which will affect the
certificateholder's tax liability and tax basis attributable to periods before
the certificateholder actually owns the certificate. The use of this convention
may not be permitted by existing regulations. If a monthly convention is not
permitted, or only applies to transfers of less than all of the
certificateholder's interest, taxable income or losses of the trust may be
reallocated among the certificateholders. The general partner is authorized to
revise the trust's method of allocation between transferors and transferees to
conform to a method permitted by future regulations.
Section 754 Election. In the event that a certificateholder sells a
certificate at a profit or loss, the purchasing certificateholder will have a
higher or lower basis in the certificate than the selling certificateholder
had. The tax basis of the trust's assets will not be adjusted to reflect that
higher or lower basis unless the trust files an election under Section 754 of
the IRS code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the trust will not make that election. As a
result, certificateholders may be allocated a greater or lesser amount of trust
income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters. Under an administration agreement, the trustee will
monitor the performance of the following responsibilities of the trust by other
service providers. The trust is required to keep or have kept complete and
accurate books of the trust. The books will be maintained for financial
reporting and tax purposes on an accrual basis and the fiscal year of the trust
will be the calendar year. The trust will file a partnership information return
(IRS Form 1065) with the IRS for each taxable year of the trust and will report
each certificateholder's allocable share of items of trust income and expense
to certificateholders and the IRS on Schedule K-1. The trust will provide the
Schedule K-1 information to nominees that fail to provide the trust with
specific required information statements relating to identification of
beneficial owners of certificates and the nominees will be required to forward
the information to the beneficial owners. Generally, certificateholders must
file tax returns that are consistent with the information return filed by the
trust or be subject to penalties unless the certificateholder notifies the IRS
of any inconsistencies.
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We or our subsidiaries as identified in the prospectus supplement will be
designated as the tax matters partner in the trust agreement and, will be
responsible for representing the certificateholders in any dispute with the
IRS. The IRS code provides for administrative examination of a partnership as
if the partnership were a separate and distinct taxpayer. Generally, the
statute of limitations for partnership items does not expire before three years
after the date on which the partnership information return is filed. Any
adverse determination following an audit of the return of the trust by the
appropriate taxing authorities could result in an adjustment of the returns of
the certificateholders, and, under specific circumstances, a certificateholder
may be precluded from separately litigating a proposed adjustment to the items
of the trust. An adjustment could also result in an audit of a
certificateholder's returns and adjustments of items not related to the income
and losses of the trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
trust will be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes for non-U.S. persons because
there is no clear authority dealing with that issue under facts substantially
similar to those described in this prospectus. Although it is not expected that
the trust will be engaged in a trade or business in the United States for those
purposes, the trust will withhold as if it were so engaged in order to protect
the trust from possible adverse consequences of a failure to withhold. It is
expected that the trust will withhold on the portion of its taxable income that
is allocable to foreign certificateholders under Section 1446 of the IRS code,
as if the income were effectively connected to a U.S. trade or business, at a
rate of 35% for foreign holders that are taxable as corporations and 39.6% for
all other foreign certificateholders. Subsequent adoption of treasury
regulations or the issuance of other administrative pronouncements may require
the trust to change its withholding procedures. In determining a
certificateholder's nonforeign status, the trust may rely on Form W-8, Form W-9
or the certificateholder's certification of nonforeign status signed under
penalties of perjury.
Each foreign certificateholder might be required to file a U.S. individual or
corporate income tax return, including, in the case of a corporation, the
branch profits tax on its share of the trust's income. Each foreign
certificateholder must obtain a taxpayer identification number from the IRS and
submit that number to the trust on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign certificateholder generally will be
entitled to file with the IRS a claim for refund for the taxes withheld by the
trust, taking the position that no taxes are due because the trust is not
engaged in a U.S. trade or business. However, the IRS may assert that
additional taxes are due, and no assurance can be given as to the appropriate
amount of tax liability.
Backup Withholding. Under specific circumstances, a certificateholder may be
subject to backup withholding at a 31% rate. See the discussion above under
"Tax Consequences to Noteholders--Backup Withholding."
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Grantor Trust Series
Tax Status of the Trust
For the series of securities which includes only certificates, unless we
specify otherwise in the prospectus supplement, counsel will deliver its
opinion that the trust will be classified as a grantor trust for federal income
tax purposes and not as an association which is taxable as a corporation. The
trust will be classified as a trust regardless of whether we are considered to
retain an interest in the contracts, as discussed below. While a retained
interest might be viewed as a second class of beneficial interest in the trust
and Treasury Regulations Section 301.7701-4(c) generally provides that an
investment trust with more than one class of ownership interest will be
classified as an association taxable as a corporation or a partnership, that
regulation would treat the trust as a grantor trust because there will be no
power under the pooling and servicing agreement to vary the investment of the
certificateholders, the purpose of the trust will be to facilitate direct
investment in the contracts, and the existence of multiple classes of ownership
interests in the trust will be incidental to that purpose.
Tax Consequences to Certificateholders
Because the trust will be classified as a grantor trust, each
certificateholder, including any holder of a subordinated certificate will, in
the opinion of counsel, be treated for federal income tax purposes as the owner
of an undivided interest in the contracts and other trust property.
Accordingly, subject to the discussion below of certain limitations on
deductions and the stripped bond rules of the IRS code, each certificateholder
must report on its federal income tax return its pro rata share of the entire
income from the contracts and other trust property, and may deduct its pro rata
share of the fees paid by the trust, at the same time as the items would be
reported under the certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the trust and received and paid
directly the amounts received and paid by the trust. A certificateholder's
share of expenses of the trust will be miscellaneous itemized deductions
subject to certain limits on deductibility. See the discussion above under
"Owner Trust Series--Tax Consequences to Certificateholders--Partnership
Taxation."
A purchaser of a certificate will be treated as purchasing an interest in
each contract in the trust at a price determined by allocating the purchase
price paid for the certificate among all contracts in proportion to their fair
market values at the time of purchase of the certificate. To the extent that
the portion of the purchase price of a certificate allocated to a contract is
greater than or less than the portion of the principal balance of the contract
allocable to the certificate, that interest in the contract will be deemed to
have been acquired with premium or discount. See the discussions above under
"Owner Trust Series --Tax Consequences to Noteholders--Market Discount" and "--
Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. It is not anticipated that the
contracts will have original issue discount, unless they are subject to the
stripped bond rules of the IRS code described
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below. If the contracts are subject to the stripped bond rules of the IRS code,
the market discount rules discussed above may not apply.
Subordinated Certificates. If the subordinated certificateholders receive
distributions of less than their share of the trust's receipts of principal or
interest, the shortfall amount, because of the subordination of the
subordinated certificates, holders of subordinated certificates would probably
be treated for federal income tax purposes as if they had:
(1) received as distributions their full share of such receipts;
(2) paid over to the senior certificateholders an amount equal to the
shortfall amount; and
(3) retained the right to reimbursement of those amounts to the extent
available from future collections on the contracts.
Under this analysis, (a) subordinated certificateholders would be required to
accrue as current income any interest or OID income of the trust that was a
component of the shortfall amount, even though the amount was in fact paid to
the senior certificateholders, (b) a loss would only be allowed to the
subordinated certificateholders when their right to receive reimbursement of
the shortfall amount became worthless, and (c) reimbursement of the shortfall
amount prior to a claim of worthlessness would not be taxable income to
subordinated certificateholders because the amount was previously included in
income. Those results should not significantly affect the inclusion of income
for subordinated certificateholders on the accrual method of accounting, but
could accelerate inclusion of income to subordinated certificateholders on the
cash method of accounting by, in effect, placing them on the accrual method.
The character and timing of loss deductions is unclear.
Under current IRS interpretations of applicable treasury regulations, we
would be able to sell or otherwise dispose of any subordinated certificates.
Accordingly, we may offer subordinated certificates for sale to investors.
Stripped Certificates. Some classes of certificates may be subject to the
stripped bond rules of Section 1286 of the IRS code and for purposes of this
discussion will be referred to as stripped certificates. In general, a stripped
certificate will be subject to the stripped bond rules where there has been a
separation of ownership of the right to receive some or all of the principal
payments on a contract from ownership of the right to receive some or all of
the related interest payments. Certificates will constitute stripped
certificates and will be subject to these rules under various circumstances,
including the following:
(1) if any servicing compensation is deemed to exceed a reasonable
amount;
(2) if two or more classes of certificates are issued representing the
right to non-pro rata percentages of the interest or principal payments on
the contracts; or
(3) if certificates are issued which represent the right to interest only
payments or principal only payments.
Although not entirely clear, each stripped certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original
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issue discount. Original issue discount for a stripped certificate, must be
included in ordinary gross income for federal income tax purposes as it accrues
in accordance with the constant-yield method that takes into account the
compounding of interest and the accrual of income may be in advance of the
receipt of any cash attributable to the income. See "Owner Trust Series--Tax
Consequences to Noteholders--Interest Income on the Notes" above. For purposes
of applying the original issue discount provisions of the IRS code, the issue
price of a stripped certificate will be the purchase price paid by the holder
thereof and the stated redemption price at maturity may include the aggregate
amount of all payments to be made for the stripped certificate whether or not
denominated as interest. The amount of original issue discount for a stripped
certificate may be treated as zero under the original issue discount de minimis
rules described above. Under rules similar to those provided in Rev. Proc. 91-
49, applicable only to mortgages secured by real property, a certificateholder
may be required to account for any discount on a stripped certificate as market
discount rather than original issue discount if either (1) the amount of
original issue discount for the certificate was treated as zero under the
original issue discount de minimis rule when the certificate was stripped; or
(2) no more than 100 basis points, including any amount of servicing in excess
of reasonable servicing is stripped off of the contracts.
When an investor purchases more than one class of stripped certificates, it
is currently unclear whether for federal income tax purposes the classes of
stripped certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the IRS may take a contrary position for some or all of
the foregoing tax consequences. For example, a holder of a stripped certificate
may be treated as the owner of:
(1) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each contract, or
(2) a separate installment obligation for each contract representing the
stripped certificate's pro rata share of principal and/or interest payments
to be made.
In addition, if a trust issues more than one class of certificates with
different pass-through rates, a holder of the certificate may be treated as the
owner of a stripped bond with a rate equal to the lowest pass-through rate and
a stripped coupon representing the excess of the pass-through rate on that
certificate over the lowest pass-through rate. As a result of these possible
alternative characterizations, investors should consult their own tax advisors
regarding the proper treatment of stripped certificates for federal income tax
purposes.
The servicing fee to be received by the servicer and the fee for the
enhancement, provided for a series of certificates may be questioned by the IRS
for some certificates or contracts as exceeding a reasonable fee for the
services being performed in exchange therefor, and a portion of the servicing
compensation could be recharacterized as an ownership interest retained by the
servicer or other party in a portion of the interest payments to be made under
the contracts. In this event, a certificate might be treated as a
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stripped certificate subject to the stripped bond rules of Section 1286 of the
IRS code and the original issue discount provisions rather than to the market
discount and premium rules.
Disposition of Certificates. If a certificate is sold, gain or loss will be
recognized equal to the difference between the amount realized on the sale and
the certificateholder's adjusted tax basis in the certificate. See the
discussion above under "Owner Trust Series--Tax Consequences to Noteholders--
Disposition of Notes."
Foreign Holders. Generally, interest paid to a certificateholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
certificates in connection with a United States trade or business will be
treated as portfolio interest. See the discussion above under "Owner Trust
Series--Tax Consequences to Noteholders--Foreign Holders."
Tax Administration and Reporting
The trustee will furnish to each certificateholder with each distribution a
statement showing the amount of the distribution allocable to principal and to
interest. In addition, the trustee will furnish, within a reasonable time after
the end of each calendar year, to each certificateholder who was a
certificateholder at any time during that year, information regarding the
amount of servicing compensation received by the servicer and the other factual
information as we deem necessary to enable certificateholders to prepare their
tax returns. Reports will be made annually to the IRS and to holders of record
that are not excepted from the reporting requirements regarding information as
may be required for the interest and original issue discount for the
certificates.
Backup Withholding
Under some circumstances, a certificateholder may be subject to backup
withholding at a 31% rate. See the discussion above under "Owner Trust Series--
Tax Consequences to Noteholders--Backup Withholding."
STATE INCOME TAX CONSEQUENCES
The activities to be undertaken by the servicer in servicing and collecting
the contracts will take place in Minnesota. The State of Minnesota imposes an
income tax on individuals, trusts and estates and a franchise tax measured by
net income on corporations. This discussion of Minnesota taxation is based upon
current statutory provisions and the regulations promulgated, and applicable
judicial or ruling authority, all of which are subject to change, which may be
retroactive. No ruling on any of the issues discussed below will be sought from
the Minnesota Department of Revenue.
Owner Trust Series
If the notes are treated as debt for federal income tax purposes, in the
opinion of counsel this treatment will also apply for Minnesota tax purposes.
Noteholders not otherwise subject to Minnesota income or franchise taxation
would not become subject to this tax
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solely because of their ownership of the notes. Noteholders already subject to
income or franchise taxation in Minnesota could, however, be required to pay
that tax on all or a portion of the income generated from ownership of the
notes.
If the trust is treated as a partnership, not taxable as a corporation for
federal income tax purposes, in the opinion of counsel the trust would also be
treated as a partnership for Minnesota income tax purposes. The partnership
would not be subject to Minnesota taxation. Certificateholders that are not
otherwise subject to Minnesota income or franchise taxation would not become
subject to this tax solely because of their interests in the partnership.
Certificateholders already subject to income or franchise taxation in Minnesota
could, however, be required to pay this tax on all or a portion of the income
from the partnership.
If the certificates are treated as ownership interests in an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes, in the opinion of counsel this treatment would also apply for
Minnesota income and franchise tax purposes. Under this treatment, the trust
would be subject to the Minnesota franchise tax measured by net income, which
could result in reduced distributions to certificateholders. Certificateholders
that are not otherwise subject to Minnesota income or franchise taxation would
not become subject to this tax solely because of their interests in the
constructive corporation. Certificateholders already subject to income or
franchise taxation in Minnesota could, however, be required to pay this tax on
all or a portion of the income from the constructive corporation.
Grantor Trust Series
If the trust is treated as a grantor trust for federal income tax purposes,
in the opinion of counsel the trust would also be treated as a grantor trust
for Minnesota income tax purposes. The trust therefore would not be subject to
Minnesota taxation. Certificateholders that are not otherwise subject to
Minnesota income or franchise taxation would not become subject to the tax
solely because of their interests in the trust. Certificateholders already
subject to income or franchise taxation in Minnesota could, however, be
required to pay that tax on all or a portion of the income from the trust.
Because state tax laws vary, it is not possible to describe the tax
consequences to the noteholders and certificateholders in all of the states.
Noteholders and certificateholders are therefore urged to consult their own tax
advisors for the state tax treatment of the notes and certificates and income
derived therefrom.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, and
Section 4975 of the IRS code prohibit a pension, profit sharing or other
employee benefit plan, the benefit plan from engaging in some transactions
involving plan assets with persons that are parties in interest under ERISA or
disqualified persons under the IRS code for the benefit plan. ERISA also
imposes some duties and some prohibitions on persons who are fiduciaries of
plans subject to ERISA. Under ERISA, generally any person who exercises any
authority
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or control for the management or disposition of the assets of a benefit plan is
considered to be a fiduciary of the plan. A violation of these prohibited
transaction rules may generate excise tax and other liabilities under ERISA and
the IRS code for those persons.
Some transactions involving the related trust might be deemed to constitute
prohibited transactions under ERISA and the IRS code for a benefit plan that
purchased securities if assets of the related trust were deemed to be assets of
the benefit plan. Under a regulation issued by the United States Department of
Labor, the plan assets regulation, the assets of a trust would be treated as
plan assets of a benefit plan for the purposes of ERISA and the IRS code only
if the benefit plan acquired an equity interest in the trust and none of the
exceptions contained in the plan assets regulation was applicable. An equity
interest is defined under the plan assets regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. The likely treatment of notes and
certificates will be discussed in the related prospectus supplement.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA are
not subject to ERISA requirements.
A benefit plan fiduciary considering the purchase of securities should
consult its tax and/or legal advisors regarding whether the assets of the trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions described in an underwriting agreement for each
trust, we will agree to sell to each of the underwriters named and in the
prospectus supplement, and each of the underwriters will severally agree to
purchase from the seller, the principal amount of each class of securities of
the related series described and in the prospectus supplement.
In each underwriting agreement, the several underwriters will agree, subject
to the terms and conditions set forth, to purchase all the securities described
which are offered and by the prospectus supplement of the securities are
purchased. In the event of a default by any underwriter, each underwriting
agreement will provide that, in some circumstances, purchase commitments of the
nondefaulting underwriters may be increased, or the underwriting agreement may
be terminated.
Each prospectus supplement will either:
(1) set forth the price at which each class of securities being offered
will be offered to the public and any concessions that may be offered to
some dealers participating in the offering of the securities; or
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(2) specify that the related securities are to be resold by the
underwriters in negotiated transactions at varying prices to be determined
at the time of the sale.
After the initial public offering of any securities, the public offering price
and the concessions may be changed.
Each underwriting agreement will provide that we will indemnify the
underwriters against some liabilities, including liabilities under the
Securities Act.
The indenture trustee may, from time to time, invest the funds in the
designated accounts in eligible investments acquired from the underwriters.
Under each underwriting agreement, the closing of the sale of any class of
securities will be conditioned on the closing of the sale of all other classes.
The place and time of delivery for the securities for which this prospectus
is delivered will be described in the related prospectus supplement.
LEGAL MATTERS
Some matters relating to validity of the certificates and the notes will be
passed upon by our counsel as identified in the prospectus supplement. The
validity of the certificates and the notes will be passed upon for the
underwriters named in the prospectus supplement by the counsel for the
underwriters identified in the prospectus supplement.
EXPERTS
The consolidated financial statements of Conseco Finance as of December 31,
1998 and for the year ended December 31, 1998 are incorporated by reference in
this prospectus in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of Conseco Finance, formerly known as
Green Tree Financial Corporation, as of December 31, 1997 and for each of the
years in the two-year period ended December 31, 1997 incorporated by reference
in this prospectus and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference in this prospectus, and upon the authority of KPMG LLP as experts in
accounting and auditing.
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GLOSSARY
For the purposes of this prospectus and the prospectus supplement, the
following terms will have the following meanings:
"Amount available" with respect to any distribution date, means generally the
sum of payments on the contracts due and received during the preceding month,
prepayments and other unscheduled collections received during the preceding
month, any amounts deposited in respect of purchased contracts, any interest
rate cap payment, any guaranty payment, and all earnings from the investment of
funds in the collection account.
"Certificateholders' distributable amount" means, for any distribution date,
the sum of the certificateholders' interest distributable amount and the
certificateholders' principal distributable amount.
"Certificateholders' interest carryover shortfall" means, for any
distribution date, the excess of the certificateholders' monthly interest
distributable amount for the preceding distribution date and any outstanding
certificateholders' interest carryover shortfall on the preceding distribution
date, over the amount in respect of interest at the pass-through rate that is
actually deposited in the certificate distribution account on such preceding
distribution date, plus interest on such excess, to the extent permitted by
law, at the pass-through rate from such preceding distribution date to but
excluding the current distribution date.
"Certificateholders' interest distributable amount" means, for any
distribution date, the sum of the certificateholders' monthly interest
distributable amount for such distribution date and the certificateholders'
interest carryover shortfall for such distribution date.
"Certificateholders' monthly interest distributable amount" means, for any
distribution date, interest accrued at the pass-through rate on:
(1) the certificate principal balance and
(2) the aggregate unreimbursed certificate principal liquidation losses on
each prior distribution date, in each case after giving effect to all
payments of principal to the certificateholders on the immediately
preceding distribution date.
"Certificateholders' monthly principal distributable amount" means, for any
distribution date prior to the distribution date on which the notes are paid in
full, zero; and with respect to any distribution date commencing on the
distribution date on which the notes are paid in full, the formula principal
distribution amount, less, on the distribution date on which the notes are paid
in full, the portion thereof payable on the notes.
"Certificate principal balance" equals, initially, approximately $ and,
after that, equals the original certificate principal balance, reduced by all
amounts allocable to principal previously distributed to certificateholders
minus any unreimbursed certificate principal liquidation losses.
"Certificateholders' principal distributable amount" means, for any
distribution date, the sum of the certificateholders' monthly principal
distributable amount for such distribution
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date and the certificateholders' unpaid principal shortfall as of the close of
the preceding distribution date; provided, however, that the
certificateholders' principal distributable amount shall not exceed the
certificate principal balance plus any unreimbursed certificate principal
liquidation losses. In addition, on the final scheduled distribution date, the
principal required to be deposited into the certificate distribution account
shall not be less than the amount that is necessary, after giving effect to the
other amounts to be deposited in the certificate distribution account on such
distribution date and allocable to principal, to reduce to zero the certificate
principal balance plus the unreimbursed certificate principal liquidation
losses.
"Certificate principal liquidation loss" means, for any distribution date,
the amount by which the aggregate principal balance of the notes and the
certificate principal balance exceeds the pool scheduled principal balance,
after giving effect to all distributions of principal on such distribution
date.
"Certificateholders' unpaid principal shortfall" means, as of the close of
any distribution date, the excess of the certificateholders' monthly principal
distributable amount and any outstanding certificateholders' unpaid principal
shortfall from the preceding distribution date, over the amount in respect of
principal that is actually deposited in the certificate distribution account.
The "formula principal distribution amount" for any distribution date (but
subject to the last sentence of this definition) will generally be equal to the
sum of the following amounts with respect to the monthly period, in each case
computed in accordance with the method specified in each contract:
(1) all scheduled payments of principal due on each outstanding contract
during the related monthly period, after adjustments for previous partial
principal prepayments and after any adjustments to a contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related obligor,
(2) the scheduled principal balance of each contract which, during the
related monthly period, was purchased by us pursuant to the sale and
servicing agreement on account of a breach of a representation or warranty,
(3) all partial principal prepayments applied and all principal
prepayments in full received on contracts during the related monthly
period,
(4) the scheduled principal balance of each contract that became a
liquidated contract during the related monthly period, plus the amount of
any reduction in the outstanding principal balance of a contract during
such monthly period ordered as a result of a bankruptcy or similar
proceeding involving the related obligor,
(5) without duplication of the foregoing, all collections in respect of
principal on the contracts received during the current month up to and
including the third business day prior to such distribution date, but in no
event later than the 10th day of the month in which such distribution date
occurs, minus
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(6) the amount, if any, included in the formula principal distribution
amount for the preceding distribution date by virtue of clause (5) above.
The formula principal distribution amount for the distribution date in
2029, will be the sum of the note principal balance and the certificate
principal balance.
"Liquidated contract" means any defaulted contract as to which the servicer
has determined that all amounts which it expects to recover from or on account
of such contract through the date of disposition of the real property have been
recovered; provided that any defaulted contract in respect of which the real
property has been realized upon and disposed of and proceeds of such
disposition have been received shall be deemed to be a liquidated contract.
"Noteholders' distributable amount" means, for any distribution date, the sum
of the noteholders' interest distributable amount and the noteholders'
principal distributable amount.
"Noteholders' interest carryover shortfall" means, for any distribution date,
the excess of the noteholders' monthly interest distributable amount for the
preceding distribution date and any outstanding noteholders' interest carryover
shortfall on such preceding distribution date, over the amount in respect of
interest that is actually deposited in the note distribution account on the
preceding distribution date, plus interest on the amount of interest due but
not paid to noteholders on the preceding distribution date, to the extent
permitted by law, at the respective interest rate for each class of notes for
the applicable monthly interest period.
"Noteholders' interest distributable amount" means, for any distribution
date, the sum of the noteholders' monthly interest distributable amount for
such distribution date and the noteholders' interest carryover shortfall for
the distribution date.
"Noteholders' monthly interest distributable amount" means, for any
distribution date, interest accrued for the monthly interest period on each
class of notes at the respective interest rate for such class on:
(1) the outstanding principal balance of the notes of such class and
(2) the aggregate unreimbursed principal liquidation losses of the class
on each prior distribution date, in each case after giving effect to
all payments of principal to the noteholders of the class on the
immediately preceding distribution date.
"Noteholders' monthly principal distributable amount" means, for any
distribution date, the noteholders' percentage of the formula principal
distribution amount plus the aggregate unreimbursed principal liquidation
losses of each class of notes.
"Noteholders' percentage" means, 100% until and including the distribution
date on which the aggregate principal balance of the notes are paid in full and
0% thereafter.
"Noteholder's principal distributable amount" means, for any distribution
date, the sum of the noteholders' monthly principal distributable amount for
the distribution date and the noteholders' unpaid principal shortfall as of the
close of the preceding distribution date;
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provided, however, that the noteholders' principal distributable amount shall
not exceed the outstanding principal balance of the notes, and provided
further, that the noteholders' principal distributable amount on the final
scheduled distribution date shall not be less than the amount that is
necessary, after giving effect to other amounts to be deposited in the note
distribution account on such distribution date and allocable to principal, to
reduce the outstanding principal balances, including all unreimbursed principal
liquidation losses, of all classes of notes to zero.
"Noteholders' unpaid principal shortfall" means, as of the close of any
distribution date, the excess of the noteholders' monthly principal
distributable amount and any outstanding noteholders' unpaid principal
shortfall from the preceding distribution date over the amount in respect of
principal that is actually deposited in the note distribution account on such
distribution date.
"Principal balance" means, with respect to any determination date and any
class of notes, the original principal balance of a class minus all amounts
previously distributed in respect of principal of the class and minus any
unreimbursed principal liquidation losses of such class.
"Purchased contract" means a contract that:
. we have become obligated to repurchase (or, under specified
circumstances, has elected to repurchase) as a result of an uncured
breach by us of a representation or warranty made by us for that
contract or
. the servicer has become obligated to repurchase, or, under specific
circumstances, has elected to repurchase, as a result of an uncured
breach of the covenants made by it with respect to such contract.
"Principal liquidation loss" means, for any distribution date and any class
of notes, the amount by which the aggregate principal balance of the class and
each junior class and the certificate principal balance, after giving effect to
any principal liquidation losses imposed on such junior classes and
certificates, exceeds the pool scheduled principal balance, after giving effect
to all distributions of principal on such distribution date.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained in this prospectus is not complete and may be changed. +
+We may not sell these securities until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[Conseco Logo]
PROSPECTUS (BASE PROSPECTUS--TRUCKS ONLY)
Conseco Finance Corp.
Servicer
Conseco Finance Securitizations Corp.
Seller
Conseco Finance Recreational Enthusiast Consumer Trusts
Asset-Backed Certificates
Asset-Backed Notes
------------
We are offering asset-backed certificates and asset-backed notes under this
prospectus and a prospectus supplement. A prospectus supplement will be
prepared separately for each series of securities offered. A prospectus
supplement may offer asset-backed certificates, or asset-backed notes, or both.
Conseco Finance Securitizations Corp. will form a trust for each series and
deposit a pool of contracts in the trust, and the trust will issue the
securities of that series. Payments of principal and interest on the securities
of any series will depend primarily on payments made on the related pool of
contracts. The securities of any series may comprise several different classes.
A trust may also issue one or more other classes of certificates or notes that
will not be offered under this prospectus.
The right of each class of securities within a series to receive payments may
be senior or subordinate to the rights of one or more of the other classes of
securities. In addition, a series of securities may include one or more classes
which on the one hand are subordinated to one or more classes of securities,
while on the other hand are senior to one or more classes of securities. The
rate of principal and interest payment on the securities of any class will
depend on the priority of payment of that class and the rate and timing of
payments on the contracts owned by that trust.
------------
The securities will represent interests in, or obligations of, the related
trust and will not represent any interest in or obligation of Conseco Finance
Corp., Conseco Finance Securitizations Corp. or any of their affiliates, except
as specified in the prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
------------
This prospectus may not be used to consummate sales of any securities unless
accompanied by a prospectus supplement for that series.
Prospectus date is , 1999.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate documents that progressively
provide more detail: (1) this prospectus, which provides general information,
some of which may not apply to a particular series of securities, including
your series; and (2) the prospectus supplement for the particular terms of your
series of securities.
If the terms of your series of securities described in the prospectus
supplement varies from this prospectus, you should rely on the information in
your prospectus supplement.
You should rely only on the information contained in this document or
information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities.
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To understand all of the terms of the certificates, read this entire
prospectus and the accompanying prospectus supplement. We have also defined
terms in the "Glossary" section at the back of this prospectus.
THE TRUSTS
For each series of securities, Conseco Securitizations will establish a trust
under either (1) a pooling and servicing agreement among Conseco Finance as
servicer, Conseco Securitizations, as seller, and a trustee specified in the
prospectus supplement, the trustee, or (2) a trust agreement between Conseco
Finance, as depositor, and a trustee specified in the related prospectus
supplement, the owner trustee, and a related sale and servicing agreement among
Conseco Securitizations, as seller, Conseco Finance, as servicer, and the
trust. For any trust, the related pooling and servicing agreement, or the
related trust agreement and sale and servicing agreement, as applicable, are
referred to herein as the related trust documents. Before the sale and
assignment of the related contracts under the related trust documents, the
trust will have no assets or obligations. The trust will not engage in any
business activity other than acquiring and holding the trust property issuing
the certificates and the notes, if any, of such series and distributing
payments thereon.
Each certificate will represent a fractional undivided interest in, and each
note, if any, will represent an obligation of, the related trust. The property
of each trust will include:
(1) a contract pool, as described in "The Contracts";
(2) all monies paid or payable thereon on or after the cutoff date;
(3) such amounts as from time to time may be held in the collection
account, including all investments in the collection account and all
income from the investment of funds and all proceeds and certain
other accounts, as described in "Description of the Trust Documents--
Collections";
(4) an assignment of our security interests in the products securing the
related contracts, as described in "The Contracts";
(5) an assignment of the right to receive proceeds from claims on some
insurance policies covering the products or obligors; and
(6) specific other rights under the related trust documents.
The trust property will also include, if so specified in the prospectus
supplement, monies on deposit in a pre-funding account to be established with
the indenture trustee or the trustee, which will be used to purchase subsequent
contracts from Conseco Securitizations from time to time, and as frequently as
daily, during the pre-funding period specified in the related prospectus
supplement. Any subsequent contracts so purchased will be included in the
related contract pool forming part of the trust property, subject to the prior
rights of the related indenture trustee and the noteholders therein. In
addition, to the extent specified in the prospectus supplement, a form of
credit enhancement may be issued to or held by the trustee or the indenture
trustee for the benefit of holders of one or more classes of securities.
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<PAGE>
The servicer will service the contracts held by each trust and will receive
fees for such services. See "Description of the Trust Documents--Servicing
Compensation." Unless we specify otherwise in the prospectus supplement,
Conseco Finance, on behalf of each trust, will hold the original installment
sales contract or promissory note as well as copies of documents and
instruments relating to each contract and evidencing the security interest in
the product securing each contract. In order to protect the trust's ownership
interest in the contracts, we will file a UCC-1 financing statement in
Minnesota and Delaware to give notice of such trust's ownership of the related
contracts and the related trust property.
The Trustee
The trustee or owner trustee, as applicable, for each trust will be specified
in the prospectus supplement. The trustee's liability in connection with the
issuance and sale of the securities of such series will be limited solely to
the express obligations of such trustee set forth in the related trust
documents. A trustee may resign at any time, in which event the general
partner, if the related trust is structured as an owner trust or the servicer
or its successor, if the related trust is structured as a grantor trust will be
obligated to appoint a successor trustee. The general partner, if the related
trust is structured as an owner trust or the servicer, if the related trust is
structured as a grantor trust may also remove the trustee if the trustee ceases
to be eligible to continue as trustee under the related trust documents or if
the trustee becomes insolvent. In such circumstances, the general partner, if
the related trust is structured as an owner trust or the servicer, if the
related trust is structured as a grantor trust will be obligated to appoint a
successor trustee. Any resignation or removal of a trustee and appointment of a
successor trustee will be subject to any conditions or approvals specified in
the prospectus supplement and will not become effective until acceptance of the
appointment by the successor trustee.
THE CONTRACTS
Each pool of contracts in a trust will consist of retail installment sales
contracts and promissory notes to finance the purchase of products to the types
described in the next paragraph. The contracts will be originated or purchased
by us on an individual basis in the ordinary course of business. Except as we
specify otherwise in the prospectus supplement, the contracts will be fully
amortizing and will bear interest at a fixed or variable rate.
The products financed by the contracts included in a contract pool will
include only trucks. Any trust whose securities are offered under this
prospectus will include only contracts secured by trucks. The types of products
securing a contract pool and the relative concentrations of each such type will
be specified in the prospectus supplement. Because we have less extensive
experience in underwriting and servicing retail installment sales contracts for
items such as the products, we have no basis upon which to distinguish the
expected delinquency, default or prepayment experience of contracts secured by
different types of products.
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CONSECO FINANCE CORP.
General
Conseco Finance Corp. was formerly known as Green Tree Financial Corporation.
It is a Delaware corporation that, as of December 31, 1998, had stockholders'
equity of approximately $2.2 billion. Through its various divisions, it
purchases, pools, sells and services retail conditional sales contracts for
manufactured housing and retail installment sales contracts for home
improvements, a variety of consumer products and equipment finance, and home
equity loans. Conseco Finance is the largest servicer of government-insured
manufactured housing contracts and conventional manufactured housing contracts
in the United States. Servicing functions are performed through Conseco Finance
Servicing Corp., its wholly owned subsidiary. Through its principal offices in
St. Paul, Minnesota, and service centers throughout the United States, it
serves all 50 states. It began financing FHA-insured home improvement loans in
April 1989 and conventional home improvement loans in September 1992. It also
purchases, pools and services installment sales contracts for various consumer
products. Its principal executive offices are located at 1100 Landmark Towers,
St. Paul, Minnesota 55102-1639 (telephone (651) 293-3400). Its annual report on
Form 10-K for the year ended December 31, 1998 and, when available, subsequent
quarterly and annual reports are available upon written request.
The SEC allows Conseco Finance to incorporate by reference some of the
information it files with it, which means that it can disclose important
information to you by referring you to those documents. The information that it
incorporates by reference is considered to be part of this prospectus, and
later information filed with the SEC will automatically update and supersede
this information. Conseco Finance is incorporating by reference the following
documents into this prospectus and the prospectus supplement:
. Conseco Finance Corp.'s annual report on Form 10-K for the year ended
December 31, 1998.
. Conseco Finance Corp.'s quarterly report on Form 10Q for the quarter
ended June 30, 1999.
Conseco Finance will provide you, upon your written or oral request, a copy
of any or all of the documents incorporated by reference in this prospectus,
exhibits to those documents. Please direct your requests for copies to John
Dolphin, Director of Investor Relations, 11825 Pennsylvania Street, Carmel,
Indiana 46032, telephone number (317) 817-6100.
All documents filed by the servicer, on behalf of any trust, under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after the
date of this prospectus and before the termination of the offering of the
securities issued by that trust, will be incorporated by reference into this
prospectus.
Federal securities law requires the filing of information with the Securities
and Exchange Commission, including annual, quarterly and special reports and
other
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information. You can read and copy these documents at the public reference
facility maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. You can also read and copy such reports,
proxy statements and other information at the following regional offices of
the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite
New York, NY 10048 1400
Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
Purchase of Contracts
Conseco Finance arranges to purchase qualifying contracts originated by
dealers located throughout the United States. Conseco Finance's personnel
contact dealers and explain Conseco Finance's available financing plans,
terms, prevailing rates and credit and financing policies. If the dealer
wishes to utilize Conseco Finance's available customer financing, the dealer
must make an application for dealer approval.
Currently, Conseco Finance's consumer finance division finances the purchase
of motorcycles; marine products, including boats, boat trailers and outboard
motors; pianos and organs; horse trailers; sport vehicles, including
snowmobiles, personal watercraft and all-terrain vehicles; and recreational
vehicles. The products financed by contracts included in any trust whose
securities are offered pursuant to this prospectus will include only the
products listed above.
All contracts that Conseco Finance purchases are written on forms provided
or approved by Conseco Finance and are purchased on an individually approved
basis in accordance with Conseco Finance's guidelines. The dealer submits the
customer's credit application and purchase order to Conseco Finance's office
where an analysis of the creditworthiness of the proposed buyer is made. The
analysis includes a review of the applicant's paying habits, length and
likelihood of continued employment and certain other procedures. Conseco
Finance's underwriting guidelines for consumer products focus primarily on the
obligor's ability to repay the loan rather than the collateral value of the
product financed. The maximum loan amount for an obligor will depend on a
variety of factors, including the type of product, whether the product is new
or used, the obligor's debt-to-income ratio, and the manufacturer's invoice
price of the product, plus certain dealer-installed accessories, sales taxes,
title fees, registration fees, and other items. Generally, the maximum
permissible debt-to-income ratio, based on the monthly loan payments, is
between 55% and 65%, the maximum loan-to-invoice ratio, for new products,
ranges from 100% to 125%, and the maximum loan-to-sales-price ratio, for used
products is typically 90% subject to further limitation based on a standard
assumed value for such a used product. Management may revise these guidelines
from time to time,
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and the underwriting guidelines may be exceeded in some cases with the approval
of Conseco Finance's management. Accordingly, some of the contracts included in
a trust may not conform in all respects to the criteria described above.
Conseco Finance will generally finance premiums for the term of the contract on
optional credit life, accident and health and extended warranty insurance, up
to 20% of the sales price of the product, and may finance premiums for required
physical damage insurance on the product. If the application meets our
guidelines and the credit is approved, we purchase the contract when the
customer accepts delivery of the product.
Loss and Delinquency Information
Each prospectus supplement will include loss and delinquency experience for
our entire servicing portfolio of consumer product contracts. However, there
can be no assurance that the experience will be indicative of the performance
of the contracts included in a particular contract pool.
CONSECO FINANCE SECURITIZATIONS CORP.
Conseco Securitizations is a wholly owned subsidiary of Conseco Finance. It
was formed on September 10, 1999. Conseco Securitizations may only engage in
the business of acquiring pools of loans from Conseco Finance and transferring
those loans to trusts such as the trusts described in this prospectus, and
activities incidental or related thereto. The principal executive offices of
Conseco Securitizations are located at 300 Landmark Towers, St. Paul, Minnesota
55102-1639 and its telephone number is (651) 293-3400.
Conseco Securitizations has taken and will take steps in conducting its
business that are intended to make it unlikely that a bankruptcy of Conseco
Finance would result in the consolidation of the assets and liabilities of
Conseco Finance and Conseco Securitizations. These steps include the creation
of Conseco Securitizations as a separate, limited-purpose corporation pursuant
to a certification of incorporation containing restrictions on the permissible
business activities of Conseco Securitizations, requiring that Conseco
Securitizations have on its board of directors at least two directors who are
independent of Conseco Finance, and requiring that all business transactions or
corporate actions outside of the ordinary course of business be approved by the
independent directors.
YIELD AND PREPAYMENT CONSIDERATIONS
The remittance rates and the weighted average contract rate of the contracts
for each series of certificates are listed in the prospectus supplement.
Unless Conseco Finance specifies otherwise in the prospectus supplement, many
of the contracts will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an obligor pays an
installment before its due date, the portion of the payment
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<PAGE>
allocable to interest for the period will be less than if the payment had been
made on the due date, the portion of the payment applied to reduce the
principal balance will be correspondingly greater, and the principal balance
will be amortized more rapidly than scheduled. Conversely, if an obligor pays
an installment after its due date, the portion of the payment allocable to
interest will be greater than if the payment had been made on the due date, the
portion of the payment applied to reduce the principal balance will be
correspondingly less, and the principal balance will be amortized slower than
scheduled, in which case a larger portion of the principal balance may be due
on the final scheduled payment date. Any interest shortfalls resulting from
early payment or prepayment of a contract will be funded by collections on
other contracts or, to the extent collections are insufficient, by payments
under the applicable form of credit enhancement, if any, described in the
prospectus supplement.
The contracts will be prepayable, without premium or penalty, by obligors at
any time. Prepayments, or, for this purpose, equivalent payments to a trust,
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by us due to breach of a representation or
warranty, or as a result of our or the servicer exercising its option to
purchase the contract pool. See "Description of the Trust Documents." The rate
of prepayments on the contracts may be influenced by a variety of economic,
social and other factors. No assurance can be given that prepayments on the
contracts will conform to any estimated or actual historical experience, and no
prediction can be made as to the actual prepayment rates which will be
experienced on the contracts. certificateholders and noteholders will bear all
reinvestment risk resulting from the timing of payments of principal on the
certificates or the notes, as the case may be.
POOL FACTOR
The pool factor for each class of certificates will be an eight-digit decimal
which the servicer will compute indicating the principal balance for the
certificates as of each distribution date, after giving effect to all
distributions of principal made on each distribution date, as a fraction of the
original principal balance of for the certificates. The pool factor for each
class of notes, if any, will be an eight-digit decimal which the servicer will
compute indicating the remaining outstanding principal balance for the notes as
of each distribution date, after giving effect to all distributions of
principal on such distribution date as a fraction of the initial outstanding
principal balance of the class of notes. Each pool factor will initially be
1.00000000; after that, the pool factor will decline to reflect reductions in
the outstanding principal balance of the applicable class of certificates or
notes, as the case may be. The amount of a certificateholder's pro rata share
of the principal balance for the related class of certificates can be
determined by multiplying the original denomination of the certificateholder's
certificate by the then applicable pool factor. The amount of a noteholder's
pro rata share of the aggregate outstanding principal balance of the applicable
class of notes can be determined by multiplying the original denomination of
such noteholder's note by the then applicable pool factor.
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For each trust, on each distribution date, the related certificateholders and
noteholders will receive periodic reports from the trustee stating the pool
factor and containing various other items of information. Unless and until
definitive certificates or definitive notes are issued, the reports will be
sent on behalf of the trust to the trustee and the indenture trustee, if any,
and Cede & Co., as registered holder of the certificates and the notes and the
nominee of DTC. Certificate owners and note owners may receive such reports,
upon written request, together with a certification that they are certificate
owners or note owners and payment of any expenses associated with the
distribution of such reports, from the trustee and the indenture trustee, if
any, at the addresses specified in the prospectus supplement. See "Information
Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless we specify otherwise in the prospectus supplement, the net proceeds to
be received by the trust from the sale of each series of securities will be
used to pay to us the purchase price for the contracts and to make the deposit
of the pre-funded amount into the pre-funding account, if any, to repay
warehouse lenders and/or to provide for other forms of credit enhancement
specified in the prospectus supplement. The net proceeds to be received by us
will be used to pay our warehouse loans, and any additional proceeds will be
added to our general funds and used for general corporate purposes.
THE CERTIFICATES
General
For each trust, one or more classes of certificates of a given series will be
issued under the trust documents to be entered into among Conseco
Securitizations, as seller, Conseco Finance, as servicer, and the trustee,
forms of which have been filed as exhibits to the registration statement of
which this prospectus forms a part. Where particular provisions of or terms
used in the trust documents are referred to, the actual provisions are
incorporated by reference as part of this summary.
Unless we specify otherwise in the prospectus supplement, each class of
certificates will initially be represented by a single certificate registered
in the name of the nominee of DTC, together with any successor depository
selected by Conseco Securitizations, the depository. See "Information Regarding
the Securities--Book-Entry Registration." Unless we specify otherwise in the
prospectus supplement, the certificates evidencing interests in a trust will be
available for purchase in denominations of $1,000 initial principal amount and
integral multiples thereof, except that one certificate evidencing an interest
in such trust may be issued in a denomination that is less than $1,000 initial
principal amount. Certificates may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge payable
in connection with such transfer or exchange. Unless we specify otherwise in
the prospectus supplement, the trustee will initially be designated as the
registrar for the certificates.
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Distributions of Interest and Principal
The timing and priority of distributions, seniority, allocations of loss,
pass-through rate and amount of or method of determining distributions with
respect to principal and interest, or, where applicable, for principal only or
interest only on the certificates of any series will be described in the
prospectus supplement. Distributions of interest on the certificates will be
made on the dates specified in the related prospectus supplement and, unless we
specify otherwise in the prospectus supplement, will be made prior to
distributions with respect to principal. A series may include one or more
classes of stripped certificates entitled to:
(1) distributions in respect of principal with disproportionate, nominal
or no interest distribution, or
(2) interest distributions, with disproportionate, nominal or no
distributions in respect of principal.
Each class of certificates may have a different pass-through rate, which may be
a fixed, variable or adjustable pass-through rate, and which may be zero for
certain classes of stripped certificates, or any combination of the these. The
prospectus supplement will specify the pass-through rate for each class of
certificate, or the initial pass-through rate and the method for determining
the pass-through rate. Unless we specify otherwise in the prospectus
supplement, interest on the certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless we specify otherwise in
the prospectus supplement, distributions for the certificates will be
subordinate to payments for the notes, if any, as more fully described in the
prospectus supplement. Distributions for principal of any class of certificates
will be made on a pro rata basis among all of the certificateholders of such
class.
In the case of a series of certificates which includes two or more classes of
certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as described in the prospectus supplement.
THE NOTES
General
For each series of securities, one or more classes of notes issued under the
terms of an indenture, a form of which has been filed as an exhibit to the
registration statement of which this prospectus forms a part. Unless we specify
otherwise in the prospectus supplement, no notes will be issued as a part of
any series. The following summary is not complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the notes
and the indenture, and the following summary will be supplemented in whole or
in part by the prospectus supplement. Where particular provisions of or terms
used in the indenture are referred to, the actual provisions including
definition of terms are incorporated by reference as part of this summary.
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Unless we specify otherwise in the prospectus supplement, each class of notes
will initially be represented by a single note registered in the name of the
nominee of the depository. See "Certain Information Regarding the Securities--
Book-Entry Registration." Unless we specify otherwise in the prospectus
supplement, notes will be available for purchase in denominations of $1,000 and
integral multiples of $1,000. Notes may be transferred or exchanged without the
payment of any service charge other than any tax or governmental charge payable
for such transfer or exchange. Unless we provide otherwise in the prospectus
supplement, the indenture trustee will initially be designated as the registrar
for the notes.
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of loss, interest
rate and amount of or method of determining payments of principal and interest
on the notes will be described in the prospectus supplement. The right of
holders of any class of notes to receive payments of principal and interest may
be senior or subordinate to the rights of holders of any class or classes of
notes of such series, or any class of certificates, as described in the
prospectus supplement. A series may include one or more classes of stripped
notes entitled to:
(1) principal payments with disproportionate, nominal or no interest
payment, or
(2) interest payments with disproportionate, nominal or no principal
payments.
Each class of notes may have a different interest rate, which may be a fixed,
variable or adjustable interest rate, and which may be zero for some classes of
notes, or any combination of these. The prospectus supplement will specify the
interest rate for each class of notes, or the initial interest rate and the
method for determining the interest rate. One or more classes of notes of a
series may be redeemable under the circumstances specified in the prospectus
supplement.
Unless we specify otherwise in the prospectus supplement, payments for
interest to noteholders of all classes within a series will have the same
priority. Under some circumstances, the amount available for these payments
could be less than the amount of interest payable on the notes on any of the
dates we specify for payments in the prospectus supplement, in which case each
class of noteholders will receive their ratable share based upon the aggregate
amount of interest due to such class of noteholders of the aggregate amount
available to be distributed in respect of interest on the notes.
In the case of a series of securities which includes two or more classes of
notes, the sequential order and priority of payment for principal and interest,
and any schedule or formula or other provisions applicable to the
determination, of each class will be described in the prospectus supplement.
Unless we specify otherwise in the prospectus supplement, payments in respect
of principal and interest of any class of notes will be made on a pro rata
basis among all of the notes of the class.
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The indenture
A form of indenture has been filed as an exhibit to the registration
statement of which this prospectus forms a part. Conseco Finance will provide a
copy of the applicable indenture, without exhibits, upon request to a holder of
notes issued under the indenture.
Modification of Indenture Without Noteholder Consent. Each trust and related
indenture trustee, on behalf of the trust, may, without consent of the
noteholders, enter into one or more supplemental indentures for any of the
following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the note and the indenture
obligations by a permitted successor to the trust;
(3) to add additional covenants for the benefit of the applicable
noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture;
(6) to provide for the acceptance of the appointment of a successor
indenture trustee or to add to or change any of the provisions of the
indenture or any supplemental indenture which may be inconsistent with any
other provision of the indenture as shall be necessary and permitted to
facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the indenture in
order to comply with the Trust Indenture Act of 1939; and
(8) to add any provisions to, change in any manner, or eliminate any of
the provisions of, the indenture or modify in any manner the rights of
noteholders under the indenture; provided that any action specified in this
clause (8) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any noteholder unless
noteholder consent is otherwise obtained as described below.
Modifications of Indenture With Noteholder Consent. Each trust, with the
consent of the holders representing a majority of the principal balance of the
outstanding notes, a note majority, the owner trustee and the indenture trustee
may execute a supplemental indenture to add provisions, to change in any manner
or eliminate any provisions of, the indenture, or modify in any manner the
rights of the noteholders.
Without the consent of the holder of each outstanding note affected, no
supplemental indenture may:
(1) change the due date of any installment of principal of or interest on
any note or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price or change the manner of
calculating any payment, any place of payment where, or the coin or
currency in which any note or any interest is payable;
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(2) impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
notes the consent of the holders of which is required for any the
supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with certain provisions of the indenture or of
certain defaults thereunder and their consequences as provided for in the
indenture;
(4) modify or alter the provisions of the indenture regarding the voting
of notes held by the trust, any other obligor on the notes, Conseco
Securitizations, Conseco Finance or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of the
notes the consent of the holders of which is required to direct the
indenture trustee to sell or liquidate the contracts if the proceeds of
such sale would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding notes;
(6) decrease the percentage of the aggregate principal amount of the
notes required to amend the sections of the indenture which specify the
applicable percentage of aggregate principal amount of the notes necessary
to amend the indenture or other applicable agreements; or
(7) permit the creation of any lien ranking prior to or on a parity with
the lien of the indenture for any of the collateral for the notes or,
except as otherwise permitted or contemplated in the indenture, terminate
the lien of the indenture on any of the collateral or deprive the holder of
any note of the security afforded by the lien of the indenture.
Events of Default; Rights Upon Event of Default. For each trust, unless we
specify otherwise in the prospectus supplement, events of default under the
indenture will consist of:
(1) a default for five days or more in the payment of any interest on any
note;
(2) a default in the payment of the principal of or any installment of
the principal of any note when the note becomes due and payable;
(3) a default in the observance or performance in any material way of any
covenant or agreement of the trust made in the indenture, or any
representation or warranty made by the trust in the indenture or in any
certificate delivered under the indenture or in connection with the
indenture having been incorrect as of the time made, and the continuation
of any such default or the failure to cure such breach of a representation
or warranty for a period of 30 days after notice thereof is given to the
trust by the indenture trustee or to the trust and the indenture trustee by
the holders of at least 25% in principal amount of the notes then
outstanding; or
(4) certain events of bankruptcy, insolvency, receivership or liquidation
of the Trust.
However, the amount of principal due and payable on any class of notes on any
payment date prior to the final scheduled payment date, if any, for such class
will generally be
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determined by amounts available to be deposited in the note distribution
account for such distribution date.
Therefore, unless we specify otherwise in the prospectus supplement, the
failure to pay principal on a class of notes generally will not result in the
occurrence of an event of default unless the class of notes has a final
scheduled payment date, and then not until such final scheduled payment date
for the class of notes.
Unless we specify otherwise in the prospectus supplement, if an event of
default should occur and be continuing for the notes of any series, the related
indenture trustee or a note majority may declare the principal of the notes to
be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by a note majority.
Unless we specify otherwise in the prospectus supplement, if the notes of any
series have been declared due and payable following an event of default, the
related indenture trustee may institute proceedings to collect amounts due or
foreclose on trust property, exercise remedies as a secured party, sell the
related contracts or elect to have the trust maintain possession of the
contracts and continue to apply collections on the contracts as if there had
been no declaration of acceleration. Unless we specify otherwise in the
prospectus supplement, the indenture trustee, however, will be prohibited from
selling the related contracts following an event of default, unless:
(1) the holders of all the outstanding related notes consent to such
sale;
(2) the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on such outstanding notes at the date of such
sale; or
(3) the indenture trustee determines that the proceeds of the contracts
would not be sufficient on an ongoing basis to make all payments on the
notes as such payments would have become due if such obligations had not
been declared due and payable, and the indenture trustee obtains the
consent of the holders of 66 2/3% of the aggregate outstanding amount of
the notes.
Unless otherwise specified in the related prospectus supplement, following a
declaration upon an event of default that the notes are immediately due and
payable,
(1) Note owners will be entitled to ratable repayment of principal on the
basis of their respective unpaid principal balances and
(2) repayment in full of the accrued interest on and unpaid principal
balances of the notes will be made prior to any further payment of interest
or principal on the certificates.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an event of default occurs and is continuing with respect
to a series of notes, the indenture trustee will be under no obligation to
exercise any of the rights or powers under the indenture at the request or
direction of any of the holders of such notes, if the indenture trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the
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provisions for indemnification and certain limitations contained in the
indenture, a note majority in a series will have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
indenture trustee, and a note majority may, in certain cases, waive any default
with respect thereto, except a default in the payment of principal or interest
or a default in respect of a covenant or provision of the indenture that cannot
be modified without the waiver or consent of all of the holders of such
outstanding notes.
No holder of a note of any series will have the right to institute any
proceeding with respect to the related indenture, unless:
. that holder previously has given to the indenture trustee written
notice of a continuing event of default,
. the holders of not less than 25% in principal amount of the
outstanding notes of such series have made written request of the
indenture trustee to institute such proceeding in its own name as
indenture trustee,
. such holder or holders have offered the indenture trustee reasonable
indemnity,
. the indenture trustee has for 60 days failed to institute such
proceeding, and
. no direction inconsistent with such written request has been given to
the indenture trustee during such 60-day period by the holders of a
majority in principal amount of the outstanding notes.
If an event of default occurs and is continuing and if it is known to the
indenture trustee, the indenture trustee will mail to each noteholder notice of
the event of default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any notes, the indenture trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the noteholders.
In addition, each indenture trustee and the related noteholders, by accepting
the related notes, will covenant that they will not at any time institute
against Conseco Securitizations, Conseco Finance or the related trust any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
Neither the indenture trustee nor the trustee in its individual capacity, nor
any holder of a certificate including, without limitation, Conseco
Securitizations, Conseco Finance, nor any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors
or assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the notes or for any agreement or covenant
of the trust contained in the indenture.
Covenants. Each indenture will provide that the trust may not consolidate
with or merge into any other entity, unless:
(1) the entity formed by or surviving such consolidation or merger is
organized under the laws of the United States or any state,
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(2) such entity expressly assumes the trust's obligation to make due and
punctual payments upon the notes and the performance or observance of every
agreement and covenant of the trust under the indenture,
(3) no event of default shall have occurred and be continuing immediately
after the merger or consolidation,
(4) the trustee has been advised that the then current rating of the
related notes or certificates then in effect would not be reduced or
withdrawn by the rating agencies as a result of the merger or
consolidation,
(5) the trustee has received an opinion of counsel stating that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any related note owner or certificate owner.
Each trust may not:
(1) except as expressly permitted by the indenture, the trust documents
or certain related documents for such trust, collectively, the related
documents, sell, transfer, exchange or otherwise dispose of any of the
assets of the trust,
(2) claim any credit on or make any deduction from the principal and
interest payable on the notes, other than amounts withheld under the IRS
code or applicable state law or assert any claim against any present or
former holder of such notes because of the payment of taxes levied or
assessed upon the trust,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the related indenture to be
impaired or permit any person to be released from any covenants or
obligations for the related notes under the indenture except as may be
expressly permitted thereby, or
(5) except as expressly permitted by the related documents, permit any
lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden
the assets of the trust or any part thereof, or any interest therein or
proceeds thereof.
No trust may engage in any activity other than as specified under the section
of the related prospectus supplement entitled "The Trust." No trust may incur,
assume or guarantee any indebtedness other than indebtedness incurred pursuant
to the notes and the indenture or otherwise in accordance with the related
documents.
Annual Compliance Statement. Each trust will be required to file annually
with the related indenture trustee a written statement as to the fulfillment of
its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture trustee will be required to
mail each year to all related noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee under the
related indenture, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the trust to
the indenture trustee in its individual capacity, the property and funds
physically
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held by the indenture trustee and any action taken by it that materially
affects the notes and that has not been previously reported. Note owners may
receive reports upon written request, together with a certification that they
are note owners and payment of reproduction and postage expenses associated
with the distribution of such reports, from the indenture trustee at the
address specified in the prospectus supplement.
Satisfaction and Discharge of Indenture. The indenture will be discharged
with respect to the collateral securing the related notes upon the delivery to
the related indenture trustee for cancellation of all such notes or, with
certain limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all of such notes.
The Indenture Trustee
The indenture trustee for a series of notes will be specified in the
prospectus supplement. The indenture trustee may resign at any time, and
Conseco Securitizations as the seller will be obligated to appoint a successor
trustee. We may also remove the indenture trustee if the indenture trustee
ceases to be eligible to continue under the indenture or if the indenture
trustee becomes insolvent. In such circumstances, We will be obligated to
appoint a successor trustee. Any resignation or removal of the indenture
trustee and appointment of a successor trustee will be subject to any
conditions or approvals, if any, specified in the prospectus supplement and
will not become effective until acceptance of the appointment by a successor
trustee.
INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless we provide otherwise in the prospectus supplement, the securities of
each series will be registered in the name of Cede & Co., the nominee of DTC.
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a clearing corporation within
the meaning of the New York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
accepts securities for deposit from its participating organizations and
facilitates the clearance and settlement of securities transactions between
participants in such securities through electronic book-entry changes in
accounts of participants, eliminating the need for physical movement of
certificates. participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Certificate owners and note owners who are not participants but desire to
purchase, sell or otherwise transfer ownership of securities may do so only
through participants, unless and until definitive certificates or definitive
notes, each as defined below, are issued. In addition, certificate owners and
note owners will receive all distributions of principal of, and interest on,
the securities from the trustee or the indenture trustee, as applicable,
through DTC and
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participants. Certificate owners and note owners will not receive or be
entitled to receive certificates representing their respective interests in the
securities, except under the limited circumstances described below and specific
other circumstances, if any, as may be specified in the prospectus supplement.
Unless and until definitive securities are issued, it is anticipated that the
only certificateholder of the certificates and the only noteholder of the
notes, if any, will be Cede & Co., as nominee of DTC. Certificate owners and
note owners will not be recognized by the trustee as certificateholders or by
the indenture trustee as noteholders as those terms are used in the related
trust documents or indenture. Certificate owners and note owners will be
permitted to exercise the rights of certificateholders or noteholders, as the
case may be, only indirectly through participants and DTC.
For any series of securities, while the securities are outstanding, except
under the circumstances described below, under the rules, regulations and
procedures creating and affecting DTC and its operations, DTC is required to
make book-entry transfers among participants on whose behalf it acts with
respect to the securities and is required to receive and transmit distributions
of principal of, and interest on, the securities. participants with whom
certificate owners or note owners have accounts with respect to securities are
similarly required to make book-entry transfers and receive and transmit such
distributions on behalf of their respective certificate owners and note owners.
Accordingly, although certificate owners and note owners will not possess
securities, the rules provide a mechanism by which certificate owners and note
owners will receive distributions and will be able to transfer their interests.
For any series of securities, unless we specify otherwise in the prospectus
supplement, certificates and notes will be issued in registered form to
certificate owners and note owners or their nominees, rather than to DTC, the
certificates and notes being referred to in this prospectus as definitive
certificates and definitive notes, respectively, only if:
(1) DTC, the seller or the servicer advises the trustee or the indenture
trustee, as the case may be, in writing that DTC is no longer willing or
able to discharge properly its responsibilities as nominee and depository
with respect to the certificates or the notes, and the seller, the
servicer, the trustee or the indenture trustee, as the case may be, is
unable to locate a qualified successor,
(2) the seller or the administrator at its sole option has advised the
trustee or the indenture trustee, as the case may be, in writing that it
elects to terminate the book-entry system through DTC and
(3) after the occurrence of a servicer termination event, the holders
representing a majority of the certificate balance, a certificate majority
or a note majority advises the trustee or the indenture trustee, as the
case may be, through DTC, that continuation of a book-entry system is no
longer in their best interests.
Upon issuance of definitive certificates or definitive notes to certificate
owners or note owners, the certificates or notes will be transferable directly,
and not exclusively on a book-
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entry basis and registered holders will deal directly with the trustee or the
indenture trustee, as the case may be, for transfers, notices and
distributions.
DTC has advised the seller that, unless and until definitive certificates or
definitive notes are issued, DTC will take any action permitted to be taken by
a certificateholder or a noteholder under the related trust documents or
indenture only at the direction of one or more participants to whose DTC
accounts the certificates or notes are credited. DTC has advised us that DTC
will take the action for any fractional interest of the certificates or the
notes only at the direction of and on behalf of the participants beneficially
owning a corresponding fractional interest of the certificates or the notes.
DTC may take actions, at the direction of the related participants, for some
certificates or notes which conflict with actions taken for other certificates
or notes.
Issuance of certificates and notes in book-entry form rather than as physical
certificates or notes may adversely affect the liquidity of certificates or
notes in the secondary market and the ability of the certificate owners or note
owners to pledge them. In addition, since distributions on the certificates and
the notes will be made by the trustee or the indenture trustee to DTC and DTC
will credit such distributions to the accounts of its participants, with the
participants further crediting such distributions to the accounts of indirect
participants or certificate owners or note owners, certificate owners and note
owners may experience delays in the receipt of such distributions.
Statements to Securityholders
On or before each distribution date, the servicer will prepare and provide to
the trustee a statement to be delivered to the related certificateholders on
distribution date. On or prior to each distribution date, the servicer will
prepare and provide to the indenture trustee a statement to be delivered to the
related noteholders on the distribution date. These statements will be based on
the information in the related servicer's certificate setting forth information
required under the trust documents. Unless otherwise specified in the
prospectus supplement, each statement to be delivered to certificateholders
will include the following information for the certificates on that
distribution date or the period since the previous distribution date, as
applicable, and each statement to be delivered to noteholders will include the
following information as to the notes on the distribution date or the period
since the previous distribution date:
(1) the amount of the distribution allocable to interest on or for each
class of securities;
(2) the amount of the distribution allocable to principal on or for each
class of securities;
(3) the principal balance and the pool factor for each class of
certificates and the aggregate outstanding principal balance and the pool
factor for each class of notes, after giving effect to all payments
reported under (2) above on that date;
(4) the amount of the servicing fee paid to the servicer for the related
monthly period or periods, as the case may be;
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(5) the pass-through rate or interest rate for the next period for any
class of certificates or notes with variable or adjustable rates;
(6) the amount of advances made by the servicer for the distribution
date, and the amount paid to the servicer on that distribution date as
reimbursement of advances made on previous distribution dates;
(7) the amount, if any, distributed to certificateholders and noteholders
applicable to payments under the related form of credit enhancement, if
any; and
(8) any other information as may be specified in the prospectus
supplement.
Each amount set forth under subclauses (1), (2), (4) and (6) for certificates
or notes will be expressed as a dollar amount per $1,000 of the initial
principal balance of the certificates or notes, as applicable.
Unless and until definitive certificates or definitive notes are issued, the
reports for a series of securities will be sent on behalf of the related trust
to the trustee, the indenture trustee and Cede & Co., as registered holder of
the certificates and the notes and the nominee of DTC. Certificate owners and
note owners may receive copies of the reports upon written request, together
with a certification that they are certificate owners or note owners, as the
case may be, and payment of reproduction and postage expenses associated with
the distribution of the reports, from the trustee or the indenture trustee, as
applicable. See "Reports to Securityholders" and "--Book-Entry Registration" in
this prospectus.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year during the term of a trust, the trustee and the indenture
trustee, as applicable, will mail to each holder of a class of securities who
at any time during such calendar year has been a securityholder, and received
any payment thereon, a statement containing certain information for the
purposes of such securityholder's preparation of federal income tax returns.
DTC will convey such information to its participants, who in turn will convey
the information to their related indirect participants in accordance with
arrangements among DTC and the participants. Certificate owners and note owners
may receive the reports upon written request, together with a certification
that they are certificate owners or note owners and payment of reproduction and
postage expenses associated with the distribution of the information, from the
trustee, for certificate owners, or from the indenture trustee, for note
owners, at the addresses specified in the prospectus supplement. See "Federal
Income Tax Consequences."
Lists of Securityholders
Unless we provide otherwise in the prospectus supplement, for each series of
certificates, at that time, if any, as definitive certificates have been
issued, the trustee will, upon written request by three or more
certificateholders or one or more holders of certificates evidencing not less
than 25% of the principal balance of the certificate within five business days
after provision to the trustee of a statement of the applicants' desire to
communicate with other certificateholders about their rights under the related
trust documents or the certificates and a copy of the communication that the
applicants propose to transmit, afford
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such certificateholders access during business hours to the current list of
certificateholders for purposes of communicating with other certificateholders
with respect to their rights under the trust documents. Unless otherwise
specified in the prospectus supplement, the trust documents will not provide
for holding any annual or other meetings of certificateholders.
Unless we provide otherwise in the prospectus supplement, for each series of
notes, if any, at that time, if any, as definitive notes have been issued, the
indenture trustee will, upon written request by three or more noteholders or
one or more holders of notes evidencing not less than 25% of the aggregate
principal balance of the related notes, within five business days after
provision to the indenture trustee of a statement of the applicants' desire to
communicate with other noteholders about their rights under the related
indenture or the notes and a copy of the communication that the applicants
propose to transmit, afford such noteholders access during business hours to
the current list of noteholders for purposes of communicating with other
noteholders about their rights under the indenture. Unless otherwise specified
in the prospectus supplement, the indenture will not provide for holding any
annual or other meetings of noteholders.
DESCRIPTION OF THE TRUST DOCUMENTS
Except as we specify otherwise in the prospectus supplement, the following
summary describes certain terms of the transfer agreement between Conseco
Finance and Conseco Securitizations, and of either the pooling and servicing
agreements or the sale and servicing agreements and the trust agreements--in
either case collectively referred to as the trust documents--pursuant to which
Conseco Securitizations will sell and assign contracts to a trust and the
servicer will agree to service those contracts on behalf of the trust, and
pursuant to which such trust will be created and certificates will be issued.
Forms of the trust documents have been filed as exhibits to the registration
statement of which this prospectus forms a part. We will provide a copy of the
agreements, without exhibits upon request to a holder of securities. This
summary is not complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the trust documents. Where particular
provisions or terms used in the trust documents are referred to, the actual
provisions, including definitions of terms are incorporated by reference as
part of that summary.
Sale and Assignment of the Contracts
On the closing date, Conseco Finance will sell and assign to Conseco
Securitizations, without recourse, its entire interest in the related contracts
and the proceeds thereof, including its security interests in the related
products, and Conseco Securitizations will immediately re-transfer the
contracts and related assets to the trust. Each contract transferred by Conseco
Securitizations to the trust will be identified in a schedule appearing as an
exhibit to the trust documents. At the same time as such sale and assignment,
the trustee will execute and deliver the certificates representing the
certificates to or upon the order of the seller, and the trustee will execute
and the indenture trustee will authenticate and deliver the notes, if any, to
or upon our order.
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Except as we specify otherwise in the prospectus supplement, Conseco Finance
will make certain warranties in the trust documents with respect to each
contract as of the closing date, including that:
(a) as of the cutoff date, the most recent scheduled payment was made or
was not delinquent more than 59 days;
(b) no provision of a contract has been waived, altered or modified in
any respect, except by instruments or documents contained in the contract
file;
(c) each contract is a legal, valid and binding obligation of the obligor
and is enforceable in accordance with its terms, except as may be limited
by laws affecting creditors' rights generally;
(d) no contract is subject to any right of rescission, set-off,
counterclaim or defense;
(e) for contracts with an original balance greater than $7,500, the
related product is covered by insurance naming us as an additional insured
party;
(f) each contract has been originated by a dealer or us in the ordinary
course of such dealer's, or our business and, if originated by a dealer,
was purchased by us in the ordinary course of business;
(g) no contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer of the contract or an
interest therein to the trustee pursuant to the trust documents or pursuant
to the notes or certificates unlawful;
(h) each contract complies with all requirements of law;
(i) no contract has been satisfied, subordinated to a lower lien ranking
than its original position in whole or in part or rescinded and the product
has not been released from the lien of the contract in whole or in part;
(j) each contract creates a valid and enforceable first priority security
interest in favor of us in the product covered thereby and such security
interest has been assigned by us to the trustee;
(k) all parties to each contract had capacity to execute such contract;
(l) no contract has been sold, assigned or pledged to any other person
and prior to the transfer of the contracts by us to the trustee, We had
good and marketable title to each contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, and
was the sole owner and had full right to transfer the contract to the
trustee;
(m) as of the cutoff date, there was no default, breach, violation or
event permitting acceleration under any contract, except for payment
delinquencies permitted by clause (a) above, no event which with notice and
the expiration of any grace or cure period would constitute a default,
breach, violation or event permitting acceleration under the contract, and
we have not waived any of the these;
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(n) as of the closing date there were, to the best of our knowledge, no
liens or claims which have been filed for work, labor or materials
affecting the product securing a contract, which are or may be liens prior
or equal to the lien of the contract;
(o) each contract is a fully-amortizing loan and provides for level
payments over the term of the contract;
(p) each contract contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for
realization against the collateral of the benefits of the security;
(q) the description of each contract set forth in the schedule of
contracts delivered to the trustee is true and correct; and
(r) there is only one original of each contract, other than the copy in
the possession of the obligor.
Our warranties will be made as of the execution and delivery of the related
trust documents and will survive the sale, transfer and assignment of the
related contracts and other trust property to the trust but will speak only as
of the date made.
Conseco Finance is obligated to repurchase for the repurchase price any
contract on the first business day after the first determination date which is
more than 90 days after Conseco Finance becomes aware, or should have become
aware, or its receipt of written notice from the trustee or the servicer, of a
breach of any representation or warranty by Conseco Finance in the trust
documents that materially adversely affects the trust's interest in any
contract if the breach has not been cured. The repurchase price for any
contract will be the remaining principal amount outstanding on the contract on
the date of repurchase plus accrued and unpaid interest thereon at its contract
rate to the date of such repurchase. This repurchase obligation constitutes the
sole remedy available to the trust and the securityholders for a breach of a
representation or warranty under the trust documents with respect to the
contracts, but not for any other breach of Conseco Finance's obligations under
the trust documents.
Upon our purchase of a contract due to a breach of a representation or
warranty, the trustee will convey the contract and the related trust property
to us.
Custody of Contract Files
Unless we specify otherwise specified in the prospectus supplement, Conseco
Finance initially will be appointed to act as custodian for the contract files
of each trust. Prior to the appointment of any custodian other than Conseco
Finance, the trust and institution specified in the prospectus supplement shall
enter into a custodian agreement pursuant to which the such institution will
agree to hold the contract files on behalf of the related trust. Any such
custodian agreement may be terminated by the trust on 30 days' notice to such
institution.
To facilitate servicing and save administrative costs, the documents will not
be physically segregated from other similar documents that are in Conseco
Finance's possession. UCC financing statements will be filed in Minnesota
reflecting the sale and
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assignment of the contracts by Conseco Finance to Conseco Securitizations, and
by Conseco Securitizations to the trustee, and our accounting records and
computer systems will also reflect such sale and assignment. In addition, the
contracts that are in our possession will be stamped or otherwise marked to
indicate that the contracts have been sold to the related trust. Despite these
precautions, if, through inadvertence or otherwise, any of the contracts were
sold to another party, or a security interest therein were granted to another
party that purchased, or took such security interest in any of the contracts in
the ordinary course of its business and took possession of the contracts, the
purchaser, or secured party would acquire an interest in the contracts superior
to the interest of the related trust if the purchaser, or secured party
acquired, or took a security interest in the contracts for new value and
without actual knowledge of such trust's interest. See "Legal Aspects of the
Contracts--Rights in the Contracts."
Collections
For each trust, the servicer will establish one or more collection accounts
in the name of the trustee or, in the case of any series including one or more
classes of notes, in the name of the indenture trustee for the benefit of the
related securityholders. If we so specify in the prospectus supplement, the
trustee will establish and maintain for each series an account, in the name of
the trustee on behalf of the related certificateholders, in which amounts
released from the collection account and any pre-funding account and any
amounts received from any source of credit enhancement for distribution to the
certificateholders will be deposited and from which all distributions to such
certificateholders will be made the certificate distribution account. For any
series including one or more classes of notes, the indenture trustee will
establish and maintain for each series an account, in the name of the indenture
trustee on behalf of the related noteholders, in which amounts released from
the collection account and any pre-funding account and any amounts received
from any source of credit enhancement for payment to such noteholders will be
deposited and from which all distributions to such noteholders will be made,
the note distribution account. The collection account, the certificate
distribution account if any, and the note distribution account, are referred to
collectively as the designated accounts. Any other accounts to be established
with respect to a trust will be described in the prospectus supplement.
Each designated account will be an eligible account maintained with the
trustee, the indenture trustee and/or other depository institutions. Eligible
account means any account which is:
(1) an account maintained with an eligible institution;
(2) an account or accounts the deposits in which are fully insured by
either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC;
(3) a segregated trust account maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the trustee, which depository institution or trust company has
capital and surplus, or, if such depository institution or trust company is
a subsidiary of a bank holding company system, the capital and surplus of
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the bank holding company of not less than $50,000,000 and the securities of
such depository institution, or, if such depository institution is a
subsidiary of a bank holding company system and such depository
institution's securities are not rated, the securities of the bank holding
company has a credit rating from each rating agency rating such series of
notes and/or certificates, a rating agency in one of its generic credit
rating categories which signifies investment grade; or
(4) an account that will not cause any rating agency to downgrade or
withdraw its then-current rating assigned to the securities, as confirmed
in writing by each rating agency.
Eligible institution means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the
full extent permitted by law by the Bank Insurance Fund, currently administered
by the Federal Deposit Insurance Corporation, whose short-term deposits have
been rated in one of the two highest rating categories or such other rating
category as will not adversely affect the ratings assigned to the securities of
such series. On the closing date specified in the prospectus supplement, the
servicer will cause to be deposited in the collection account all payments on
the contracts received by the servicer after the cutoff date and on or prior to
the second business day preceding the closing date.
The servicer will deposit all payments on the contracts held by any trust
received directly by the servicer from obligors and all proceeds of contracts
collected directly by the servicer during each monthly period into the
collection account no later than one business day after receipt.
Notwithstanding the foregoing and unless otherwise provided in the prospectus
supplement, the servicer may utilize an alternative remittance schedule, if the
servicer provides to the trustee and the indenture trustee written confirmation
from each rating agency that such alternative remittance schedule will not
result in the downgrading or withdrawal by the rating agency of the rating(s)
then assigned to the securities. We will also deposit into the collection
account on or before the deposit date the purchase amount of each contract to
be purchased by it for breach of a representation or warranty.
For any series of securities, funds in the designated accounts and any other
accounts identified in the related prospectus supplement will be invested, as
provided in the related trust documents, at the direction of the servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related trust documents are called
eligible investments. Eligible investments shall mature no later than the
business day preceding the applicable distribution date for the monthly period
to which such amounts relate. Investments in eligible investments will be made
in the name of the trustee or the indenture trustee, as the case may be, and
the investments will not be sold or disposed of prior to their maturity.
Unless we specify otherwise in the prospectus supplement, collections or
recoveries on a contract other than late fees or certain other similar fees or
charges received during a monthly period and purchase amounts deposited with
the trustee before a distribution date will be applied first to any outstanding
monthly advances made by the servicer for that
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contract, and then to interest and principal on the contract in accordance with
the terms of the contract.
Servicing Procedures
The servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the servicer with respect to contracts owned
or serviced by it, to collect all payments due with respect to the contracts
held by any trust and, in a manner consistent with the trust documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the trust documents, the servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
product securing a contract, with respect to which the servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on such contract. The servicer is authorized to follow such of
its normal collection practices and procedures as it deems necessary or
advisable to realize upon any contract. The servicer may repossess and sell the
product securing such contract at judicial sale, or take any other action
permitted by applicable law. See "Legal Aspects of the Contracts." The servicer
will be entitled to recover all reasonable expenses incurred by it in
connection therewith. The proceeds of such realization, net of such expenses
will be deposited in the collection account at the time and in the manner
described above under "--Collections."
The trust documents will provide that the servicer will indemnify and defend
the trustee, the indenture trustee, the trust and the securityholders against,
among other things, any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation, or in respect of any action taken or failed to be taken by the
servicer with respect to any portion of the trust property in violation of the
provisions of the trust documents. The servicer's obligations to indemnify the
trustee, the indenture trustee, the trust and the securityholders for the
servicer's actions or omissions will survive the removal of the servicer but
will not apply to any action or omission of a successor servicer.
Servicing Compensation
Unless we specify otherwise in the prospectus supplement, for each series of
securities, the servicer will be entitled to receive the servicing fee for each
monthly period in an amount equal to the product of one-twelfth of the
servicing rate and the aggregate principal balance of the certificate as of the
first day of such monthly period. The servicer also will be entitled to collect
and retain any late fees or other administrative fees or similar charges
allowed by the terms of the contracts or applicable law. Unless we provide
otherwise in the prospectus supplement, the servicing rate will equal .75% per
annum calculated on the basis of a 360-day year consisting of twelve 30-day
months. As long as we are the servicer, the servicing fee and any additional
servicing compensation will be paid out of collections on or with respect to
the contracts after the required distributions to noteholders and
certificateholders. If we are no longer the servicer, the servicing fee and any
additional
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servicing compensation will be paid out of collections on or with respect to
the contracts prior to distributions to certificateholders and noteholders.
Unless we specify otherwise in the prospectus supplement, a monthly period for
any distribution date is the calendar month immediately preceding the month in
which the distribution date occurs.
Conseco Finance, as servicer, will be required to pay all expenses incurred
by it in connection with its servicing activities, including fees, expenses and
disbursements of the trustee, the indenture trustee, the custodian and
independent accountants, taxes imposed on the servicer and expenses incurred in
connection with distributions and reports to certificateholders and
noteholders, except certain expenses incurred in connection with realizing upon
the contracts.
Distributions
For each trust, beginning on the distribution date specified in the
prospectus supplement, distributions of principal and interest, or, where
applicable, of principal or interest only on each class of securities entitled
thereto will be made by the trustee or the indenture trustee, as applicable, to
the certificateholders and the noteholders. The timing, calculation,
allocation, order, source, priorities of and requirements for all distributions
to each class of certificateholders and all payments to each class of
noteholders will be described in the prospectus supplement.
Unless we specify otherwise in the prospectus supplement, on the third
business day prior to each distribution date, the servicer will determine the
amount available and the amounts to be distributed on the notes and
certificates for such distribution date. Except as we specify otherwise in the
prospectus supplement, the amount available for any distribution date will be
equal to:
(1) the funds on deposit in the collection account at the close of
business on the last day of the related monthly period, plus
(2) any advances to be made by the servicer with respect to delinquent
payments, plus
(3) any repurchase amounts to be deposited by us for contracts to be
repurchased due to a breach of a representation or warranty, minus
(4) any amounts paid by obligors in the related monthly period, but to be
applied in respect of a regular monthly payment due in a subsequent monthly
period, minus
(5) any amounts incorrectly deposited in the collection account.
Unless we specify otherwise in the prospectus supplement, on each distribution
date, prior to making distributions in respect of the notes and certificates,
the amount available will be applied, first, if we are is no longer the
servicer, to pay the servicing fee to the successor servicer, and second, to
reimburse the servicer, including us for any advances made with respect to a
prior monthly period and subsequently recovered and for any advances previously
made that the servicer has determined are uncollectible advances.
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Enhancement
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, for each class of securities will be described in the prospectus
supplement. If and to the extent provided in the prospectus supplement,
enhancement may be in the form of a financial guaranty insurance policy, letter
of credit, we guaranty, cash reserve fund, derivative product, or other form of
enhancement, or any combination thereof, as may be described in the prospectus
supplement. If specified in the prospectus supplement, enhancement for a class
of securities of a series may cover one or more other classes of securities in
such series, and accordingly may be exhausted for the benefit of a particular
class and thereafter be unavailable to such other classes. Further information
regarding any provider of enhancement, including financial information when
material, will be included in the prospectus supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the certificateholders and the noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
certificateholders and the noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
prospectus supplement. Unless otherwise specified in the prospectus supplement,
the enhancement for a class of securities will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal and
interest thereon. If losses occur which exceed the amount covered by any
enhancement or which are not covered by any enhancement, securityholders will
bear their allocable share of deficiencies. In addition, if a form of
enhancement covers more than one class of securities of a series,
securityholders of any such class will be subject to the risk that the
enhancement will be exhausted by the claims of securityholders of other
classes.
Advances
Unless otherwise specified in the prospectus supplement, the servicer will be
obligated to make advances each month of any scheduled payments on the
contracts included in a trust that were due but not received during the prior
monthly period. The servicer will be entitled to reimbursement of an advance
from available funds in the collection account for the related trust, (1) when
the delinquent payment is recovered by the trust, or (2) when the servicer has
determined that such advance has become an uncollectible advance. The servicer
will be obligated to make an advance only to the extent that it determines that
such advance will be recoverable from subsequent funds available therefor in
the collection account for the related trust.
Evidence as to Compliance
On or before March 31 of each year the servicer will deliver to each trustee
and each indenture trustee a report of a nationally recognized accounting firm
stating that such firm has examined certain documents and records relating to
the servicing of contracts serviced by the servicer under pooling and servicing
agreements or sale and servicing agreements similar to the trust documents and
stating that, on the basis of such procedures, such
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servicing has been conducted in compliance with the applicable trust documents,
except for any exceptions described in that report. A copy of the statement may
be obtained by any certificate owner or note owner upon compliance with the
requirements described above. See "Information Regarding the Securities--
Statements to Securityholders" above.
Matters Regarding the Servicer
Unless we provide otherwise in the prospectus supplement, our appointment as
servicer under the trust documents will continue until such time as we resign
or are terminated, or until such time, if any, as a servicer termination event
shall have occurred under the trust documents. The trust documents will provide
that the servicer may not resign from its obligations and duties as servicer
thereunder, except upon a determination, as evidenced by an opinion of
independent counsel, delivered and acceptable to the trustee and the indenture
trustee, that by reason of a change in legal requirements its performance of
such duties would cause it to be in violation of the legal requirements in a
manner which would result in a material adverse effect on the servicer. No such
resignation will become effective until a successor servicer has assumed the
servicing obligations and duties under the trust documents.
Unless otherwise provided in the prospectus supplement, any corporation or
other entity into which the servicer may be merged or consolidated, resulting
from any merger or consolidation to which the servicer is a party, which
acquires by conveyance, transfer or lease substantially all of the assets of
the servicer or succeeds to all or substantially all the business of the
servicer, where the servicer is not the surviving entity, which corporation or
other entity assumes every obligation of the servicer under each trust
document, will be the successor to the servicer under the related trust
documents; provided, that:
(1) such entity is an eligible servicer, and
(2) immediately after giving effect to such transaction, no servicer
termination event and no event which, after notice or lapse of time, or
both, would become a servicer termination event shall have occurred and be
continuing.
Indemnification and Limits on Liability
Unless we specify otherwise in the prospectus supplement, the trust documents
will provide that the servicer will be liable only to the extent of the
obligations specifically undertaken by it under the trust documents and will
have no other obligations or liabilities thereunder. The trust documents will
further provide that neither the servicer nor any of its directors, officers,
employees and agents will have any liability to the trust, the
certificateholders or the noteholders, except as provided in the trust
documents, for any action taken or for refraining from taking any action
pursuant to the trust documents, other than any liability that would otherwise
be imposed by reason of the servicer's breach of the trust documents or willful
misfeasance, bad faith or negligence, including errors in judgment in the
performance of its duties, or by reason of reckless disregard of obligations
and duties under the trust documents or any violation of law.
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The servicer may, with the prior consent of the trustee and the indenture
trustee, if any, delegate duties under the related trust documents to any of
its affiliates. In addition, the servicer may at any time perform the specific
duty of repossessing products through subcontractors who are in the business of
servicing consumer receivables. The servicer may also perform other specific
duties through subcontractors; provided, however, that no such delegation of
such duties by the servicer shall relieve the servicer of its responsibility.
Servicer Termination Events
Except as we specify otherwise in the prospectus supplement, servicer
termination events under the trust documents will include:
(1) any failure by the servicer to deliver to the indenture trustee for
distribution to the noteholders or to the trustee for distribution to the
certificateholders any required payment which continues unremedied for 5
days, or such other period specified in the related prospectus supplement
after the giving of written notice;
(2) any failure by the servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the trust
documents that materially and adversely affects the interests of
securityholders, which, in either case, continues unremedied for 30 days
after the giving of written notice of such failure of breach;
(3) any assignment or delegation by the servicer of its duties or rights
under the trust documents, except as specifically permitted under the trust
documents, or any attempt to make such an assignment or delegation;
(4) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings regarding the servicer; and
(5) the servicer is no longer an eligible servicer, as defined in the
trust documents. Notice shall mean notice to the servicer by the trustee,
the indenture trustee, if any, or us, or notice to us, the servicer, the
indenture trustee, if any, and the trustee by the holders of securities
representing interests aggregating not less than 25% of the outstanding
principal balance of the securities issued by the trust.
Unless we specify otherwise in the prospectus supplement, if a servicer
termination event occurs and is continuing, the trustee, the indenture trustee,
or the holders of at least 25% in aggregate principal balance of the
outstanding securities issued by the trust, by notice then given in writing to
the servicer, and to the trustee and the indenture trustee if given by the
securityholders may terminate all of the rights and obligations of the servicer
under the trust documents. Immediately upon the giving of the notice, and, in
the case of a successor servicer other than the trustee, the acceptance by the
successor servicer of its appointment, all authority of the servicer will pass
to the trustee or other successor servicer. The trustee, the indenture trustee
and the successor servicer may set off and deduct any amounts owed by the
servicer from any amounts payable to the outgoing servicer.
On and after the time the servicer receives a notice of termination, the
trustee or other successor servicer specified in the prospectus supplement, the
backup servicer, will be the successor in all respects to the servicer and will
be subject to all the responsibilities,
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restrictions, duties and liabilities of the servicer under the trust documents;
provided, however, that the successor servicer shall have no liability any
obligation which was required to be performed by the prior servicer prior to
the date that the successor servicer becomes the servicer or any claim of a
third party, including a securityholder, based on any alleged action or
inaction of the prior servicer. Notwithstanding the termination, the servicer
shall be entitled to payment of amounts payable to it prior to the termination,
for services rendered prior to the termination. No termination will affect in
any manner Conseco Finance's obligation to repurchase contracts for breaches of
representations or warranties under the trust documents. In the event that the
trustee would be obligated to succeed the servicer but is unwilling or unable
to act, it may appoint, or petition to a court of competent jurisdiction for
the appointment of a servicer. Pending the appointment, the trustee is
obligated to act in the capacity. The trustee and the successor servicer may
agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation to the servicer under the trust documents.
Upon any termination of, or appointment of a successor to, the servicer, the
trustee and the indenture trustee, if any, will each give prompt written notice
to certificateholders and noteholders, respectively, at their respective
addresses appearing in the certificate register or the note register and to
each rating agency.
Amendment
Unless we provide otherwise in the prospectus supplement, the trust documents
may be amended by us, the servicer, the trustee and the indenture trustee, if
any, but without the consent of any of the securityholders, to cure any
ambiguity or to correct or supplement any provision, provided that the action
will not, in the opinion of counsel, which may be our internal counsel or the
servicer reasonably satisfactory to the trustee and the indenture trustee,
materially and adversely affect the interests of the securityholders. The trust
documents may also be amended by us, the servicer and the trustee and the
indenture trustee, and a certificate majority and a note majority, if
applicable, for the purpose of adding any provisions to or changing or
eliminating any of the provisions of the trust documents or of modifying the
rights of the certificateholders or the noteholders. No amendment may, (1)
increase or reduce the amount of, or accelerate or delay the timing of,
collections of payments on the related contracts or distributions that are
required to be made on any related certificate or note or the related interest
rate, or (2) reduce the percentage of the certificate balance evidenced by
certificates or of the aggregate principal amount of notes then outstanding
required to consent to any amendment, without the consent of the holders of all
certificates or all notes, as the case may be, then outstanding.
Termination
The obligations created by the trust documents will terminate upon the date
calculated as specified in the trust documents, generally upon:
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(1) the later of the final payment or other liquidation of the last
contract subject thereto and the disposition of all property acquired upon
repossession of any product; and
(2) the payment to the securityholders of all amounts held by the
servicer or the trustee and required to be paid to the securityholders
pursuant to the trust documents.
Unless we provide otherwise in the prospectus supplement, for each series of
securities, in order to avoid excessive administrative expense, we and the
servicer each will be permitted, at its option, to purchase from the trust, on
any distribution date immediately following any monthly period as of the last
day of which the pool schedule principal balance is equal to or less than 10%,
or other percentage as may be specified in the prospectus supplement of the
cutoff date principal balance, all remaining contracts in the related trust and
the other remaining trust property at a price equal to the aggregate of the
purchase amounts and the appraised value of any other remaining trust property.
The exercise of this right will effect an early retirement of the related
certificates and notes.
If a general partner is named in the prospectus supplement, unless we specify
otherwise in the prospectus supplement, the trust agreement will provide that,
in the event that the general partner becomes insolvent, withdraws or is
expelled as a general partner or is terminated or dissolved, the trust will
terminate in 90 days and effect redemption of the notes, if any, and prepayment
of the certificates following the winding-up of the affairs of the related
trust, unless within such 90 days the remaining general partner, if any, and
holders of a majority of the certificates of the series agree in writing to the
continuation of the business of the trust and to the appointment of a successor
to the former general partner, and the owner trustee is able to obtain an
opinion of counsel to the effect that the trust will not thereafter be an
association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes.
Unless we specify otherwise in the prospectus supplement, for each series of
securities, the trustee will give written notice of the final distribution for
the certificates to each certificateholder of record and the indenture trustee
will give written notice of the final payment for the notes, if any, to each
noteholder of record. The final distribution to any certificateholder and the
final payment to any noteholder will be made only upon surrender and
cancellation of the holder's certificate or note at the office or agency of the
trustee, for certificates, or of the indenture trustee, for notes, specified in
the notice of termination. Any funds remaining in the trust, after the trustee
or the indenture trustee has taken certain measures to locate a
certificateholder or noteholder, as the case may be, and the measures have
failed, will be distributed to The United Way, and the certificateholders and
noteholders, by acceptance of their certificates and notes, will waive any
rights for the funds.
The Trustee
The trustee or owner trustee, as applicable, for each trust will be specified
in the prospectus supplement. The trustee, in its individual capacity or
otherwise, and any of its affiliates may hold certificates or notes in their
own names or as pledgee. In addition, for the purpose of meeting the legal
requirements of certain jurisdictions, the trustee, with the
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consent of the servicer, shall have the power to appoint co-trustees or
separate trustees of all or any part of the trust. In the event of the
appointment, all rights, powers, duties and obligations conferred or imposed
upon the trustee by the related trust documents will be conferred or imposed
upon the trustee and the separate trustee or co-trustee jointly, or, in any
jurisdiction where the trustee is incompetent or unqualified to perform certain
acts, singly upon the separate trustee or co-trustee who shall exercise and
perform the rights, powers, duties and obligations solely at the direction of
the trustee.
The trustee of any trust may resign at any time, in which event the general
partner, if any, specified in the prospectus supplement or, if no such general
partner is specified, the servicer or its successor will be obligated to
appoint a successor trustee. The general partner, if any, specified in the
prospectus supplement, or, if no general partner is specified, the servicer,
may also remove the trustee, if the trustee ceases to be eligible to serve,
becomes legally unable to act, is adjudged insolvent or is placed in
receivership or similar proceedings. In those circumstances, the general
partner, if any, specified in the related prospectus supplement or, if no
general partner is specified, the servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the trustee and appointment of
a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
Duties of the Trustee
The trustee will make no representation as to the validity or sufficiency of
any trust document, the certificates or the notes, other than its execution of
the certificates and the notes, the contracts or any related documents, and
will not be accountable for the use or application by the servicer of any funds
paid to the servicer in respect of the certificates, the notes or the contracts
prior to deposit in the related collection account.
The trustee will be required to perform only those duties specifically
required of it under the trust documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the servicer to the trustee under the
trust documents, in which case it will only be required to examine the
certificates, reports or instruments to determine whether they conform
substantially to the requirements of the trust documents.
The trustee will be under no obligation to exercise any of the rights or
powers vested in it by the trust documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the certificateholders or noteholders, unless the
certificateholders or noteholders have offered the trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No certificateholder nor any noteholder will have any right
under the trust documents to institute any proceeding for the trust documents,
unless the holder has given the trustee written notice of default and unless
the holders of certificates evidencing not less than 25% of the certificate
balance or the holders of notes evidencing not less than 25% of the aggregate
principal balance of the notes then outstanding, as the case may be, have made
written request to the trustee to institute the proceeding in its own name as
trustee and have
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offered to the trustee reasonable indemnity, and the trustee for 30 days after
the receipt of the notice, request and offer to indemnify has neglected or
refused to institute any proceedings.
Administrator
If an administrator is specified in the prospectus supplement, the
administrator will enter into an agreement, the administration agreement,
pursuant to which such administrator will agree, to the extent provided in the
administration agreement, to provide the notices and to perform other
administrative obligations required by the related indenture and the trust
agreement.
LEGAL ASPECTS OF THE CONTRACTS
Rights in the Contracts
The contracts are chattel paper as defined in the UCC as in effect in the
State of Minnesota. Pursuant to the UCC, an ownership interest in chattel paper
may be perfected by possession or by filing a UCC-1 financing statement in the
state where the seller's principal executive office is located. Accordingly,
financing statements covering the contracts will be filed by Conseco
Securitizations in Minnesota.
The servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each trust's interest in the related
contracts and the proceeds. Conseco Finance will warrant in the trust documents
for the contracts held by the related trust and the trustee will pledge the
right to enforce the warranty to the indenture trustee as collateral for the
notes, if any, that, as of the closing date, the contracts have not been sold,
pledged or assigned by it to any other person, and that it has good and
indefeasible title and is the sole owner free of any liens and that,
immediately upon the transfer of the contracts to the trust pursuant to the
related trust document, the trust will have good and indefeasible title to and
will be the sole owner of the contracts, free of any liens. In the event of an
uncured breach of any of the warranties in the trust documents that materially
and adversely affects the related trust's, certificateholders' or noteholders'
interest in any contract, a repurchase event, we will be obligated to
repurchase the contract.
Unless we provide otherwise in the prospectus supplement, Conseco Finance
will hold the contract files on behalf of each trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in our possession. UCC financing
statements will be filed in Minnesota reflecting the sale and assignment of the
contracts to the trustee, and our accounting records and computer systems will
also reflect the sale and assignment. In addition, the contracts will be
stamped or otherwise marked to indicate that the contracts have been sold to
the related trust. Despite these precautions, if, through inadvertence or
otherwise, any of the contracts were sold to another party, or a security
interest therein were granted to another party that purchased, or took the
security interest in any of the contracts in the ordinary course of its
business and took possession of the contracts, the purchaser, or secured party
would acquire an interest in
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the contracts superior to the interest of the related trust if the purchaser,
or secured party acquired or took a security interest in the contracts for new
value and without actual knowledge of the trust's interest. See "Description of
the Trust Documents--Custody of Contract Files."
Security Interests in the Products
Security interests in some products must be perfected by notation of the
secured party's lien on the certificate of title or by actual possession of the
certificate of title, depending on the law of the state wherein the purchaser
resides. Security interests in certain other products must be perfected by the
filing of a UCC financing statement, naming the obligor as debtor and us as
secured party. Purchase money security interests in products that are consumer
goods, as defined in the UCC, are deemed perfected under some states' laws when
the contract is executed and we have advanced the purchase price of the goods.
It is our practice to take action as is required to perfect its security
interest under the laws of the state in which the product is located. In the
event of clerical errors, administrative delays or otherwise, actions may not
have been taken for a product and the security interest may be subordinate to
the interests of, among others, subsequent purchasers of the products, holders
of perfected security interests in the product, and the trustee in bankruptcy
of the obligor. Likewise, where we did not file a UCC financing statement
because its security interest was perfected as a purchase money security
interest in consumer goods;
(1) such security interest may be deemed not to be perfected if the
product were ultimately determined not to be consumer goods, and
(2) a subsequent purchaser of the product may acquire the product free of
our security interest.
The events would, however, give rise to a repurchase event and obligate us to
repurchase the affected contract if the interests of the related
certificateholders, noteholders or trust were materially and adversely
affected.
Under the related trust document, we will assign the security interests in
the products to the owner trustee on behalf of the related trust. However,
because of the administrative burden and expense that would be entailed in
doing so, none of Conseco Securitizations, Conseco Finance or the trustee will
be required, except to the extent provided below, to amend the certificates of
title or UCC financing statements to identify the trustee as the new secured
party and, accordingly, we will continue to be named as the secured party on
the certificates of title or UCC financing statements relating to the products.
The servicer will be required to note the interest of the related trust on the
certificates of title for the products or to amend the UCC financing statements
only upon a servicer termination event. In most states, an assignment such as
that under the related trust documents should be an effective transfer of a
security interest without amendment of any lien noted on the related
certificate of title or financing statement, and the assignee should succeed to
the assignor's status as the secured party. In the absence of fraud or forgery
by the obligor or administrative error by state recording officials, the
notation of the lien on the certificate of title or the UCC financing statement
should be sufficient to protect the related trust against the rights of
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subsequent purchasers of a product or subsequent lenders who take a security
interest in the related product. However, in the absence of an amendment, the
security interest of the related trust in the related products might be
defeated by, among others, the trustee in our bankruptcy or the obligor.
However, failure would give rise to a repurchase event and obligate us to
repurchase the affected contract if the interests of the related
certificateholders, noteholders or trust were materially and adversely
affected.
In most states, a perfected security interest in a product subject to
certificate of title or a financing statement continues for four months after
the product is moved to a different state and thereafter until the owner re-
registers the product in the new state, but in no event beyond the surrender of
the certificate of title. A majority of states require surrender of a
certificate of title to re-register a product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to the product.
In the case of products registered in states which provide for notation of a
lien but not possession of the certificate of title by the holder of the
security interest in the related product, the secured party should receive
notice of surrender if the security interest in the product is noted on the
certificate of title. Accordingly, the secured party should have the
opportunity to re-perfect its security interest in the product in the state of
relocation. In states that do not require a certificate of title for
registration of a product, re-registration could defeat perfection.
In the ordinary course of servicing its secured consumer contract portfolio,
it is our practice to effect the re-perfection upon receipt of notice of re-
registration or information from the obligor as to relocation. Similarly, when
an obligor sells a product subject to a certificate of title, we must surrender
possession of the certificate of title or receive notice as a result of its
lien noted thereon and accordingly should have an opportunity to require
satisfaction of the related contract before release of the lien.
Under the laws of most states, liens for repairs performed on a product and
liens for unpaid taxes take priority over even a perfected security interest in
a product. Conseco Finance will represent, in the related trust document that,
immediately prior to the sale, assignment and transfer to the related trust,
each contract held by such trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in its favor, as secured
party. However, liens for taxes, judicial liens or liens arising by operation
of law could arise at any time during the term of a contract. In addition, the
laws of certain states and federal law permit the confiscation of motor
vehicles and certain other consumer products by governmental authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
product. No notice will be given to the owner trustee, indenture trustee,
certificateholders or noteholders in the event that a lien or confiscation
arises, and if the lien arises or confiscation occurs after the date of
issuance of any series of certificates and notes, neither we nor the servicer
will be required to repurchase or purchase the related contract.
Repossession
In the event of default by an obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party
under the UCC, except where
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specifically limited by other state laws. The remedies of a secured party under
the UCC include the right to repossession by self-help means, unless the means
would constitute a breach of the peace. Self-help repossession is the method
employed by us in most cases and is accomplished simply by taking possession of
the product. In the event of default by the obligor, some jurisdictions require
that the obligor be notified of the default and be given a time period within
which the obligor may cure the default prior to repossession. In cases where
the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the product must then be repossessed in accordance
with that order. If a breach of the peace cannot be avoided, judicial action is
required. A secured party may be held responsible for damages caused by a
wrongful repossession of a product, including a wrongful repossession conducted
by an agent of the secured party. In many states, a product may be repossessed
without notice to the obligor, but only if the repossession can be accomplished
without a breach of the peace.
Notice of Sale; Redemption Rights
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
has the right to redeem the collateral prior to actual sale by paying the
secured party the entire unpaid time balance of the obligation, less any
unaccrued finance charges plus accrued default charges, reasonable expenses for
repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, to the extent provided in the financing
documents, reasonable attorneys' fees, or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the related
contract. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in other states that do not
prohibit or limit such judgments, subject to satisfaction of statutory
procedural requirements by the holder of the obligation. However, any
deficiency judgment would be a personal judgment against the obligor for the
shortfall, and a defaulting obligor can be expected to have very little capital
or sources of income available following repossession. In many cases, it may
not be useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount or not paid at all. We generally seeks to
recover any deficiency existing after repossession and sale of a product.
Occasionally, after resale of a repossessed products, and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the law
of most states requires the secured party to remit the surplus to any holder of
another lien for the product, if proper
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notification of demand for proceeds is received prior to distribution, or, if
no lienholder exists, to remit the surplus to the former owner of the product.
Soldiers' and Sailors' Civil Relief Act
The Relief Act imposes certain limitations upon the actions of creditors with
respect to persons serving in the Armed Forces of the United States and, to a
more limited extent, their dependents and guarantors and sureties of debt
incurred by those persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her
ability to pay interest at a higher rate. Further, a secured party may not
repossess during a person's military service a product subject to an
installment sales contract or a promissory note entered into prior to the
person's entering military service, for a loan default which occurred prior to
or during the service, without court action. The Relief Act imposes penalties
for knowingly repossessing property in contravention of its provisions.
Additionally, dependents of military personnel are entitled to the protection
of the Relief Act, upon application to a court, if the court determines the
obligation of the dependent has been materially impaired by reason of the
military service. To the extent an obligation is unenforceable against the
person in military service or a dependent, any guarantor or surety of that
obligation will not be liable for performance.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts
and promissory notes pursuant to which purchasers finance the acquisition of
consumer products. These laws place finance charge ceilings on the amount that
a creditor may charge in connection with financing the purchase of a consumer
product. These laws also impose other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who
fail to comply. In some cases, this liability could affect the ability of an
assignee, such as the related trust, to enforce consumer finance contracts such
as the contracts. The credit practices rule of the FTC imposes additional
restrictions on contract provisions and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions, and certain related lenders
and their assignees to all claims and defenses which the purchaser could assert
against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the
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event of a successful claim is limited to amounts paid by the purchaser under
the consumer credit contract. The assignee's ability to collect any balance
remaining due thereunder is subject to these claims and defenses. Accordingly,
each trust, as assignee of the related contracts, will be subject to claims or
defenses, that the purchaser of the related product may assert against the
seller of the product.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
We will warrant in the related trust document that as of the date of
origination each contract held by the related trust complied with all
requirements of applicable law in all material respects. Accordingly, if the
trust's interest in a contract were materially and adversely affected by a
violation of any law, the violation would constitute a repurchase event and
would obligate us to repurchase the contract unless the breach were cured. See
"Description of the Trust Documents--Sale and Assignment of the Contracts."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the collateral at the time of bankruptcy, as determined by the
court, leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing the
indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the
securities. The discussion is based upon the current provisions of the Internal
Revenue Code of 1986, the treasury regulations promulgated thereunder and
judicial or ruling authority, all of which are subject to change, which change
may be retroactive. The discussion does not deal with federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors are encouraged to consult their own tax
advisors for the federal, state, local, and any other tax consequences of the
purchase, ownership, and disposition of the securities.
[Counsel for Conseco Finance], our counsel, has delivered an opinion
regarding federal income tax matters discussed below. Counsel to the seller
identified in the prospectus supplement will deliver an opinion regarding tax
matters applicable to each series of
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securities. The opinion, however, is not binding on the IRS or the courts. The
opinion of counsel will specifically address only those issues specifically
identified below as being covered by the opinion; however, the opinion of
counsel also will state that the additional discussion set forth below
accurately describes counsel's advice for material tax issues. No ruling on any
of the issues discussed below will be sought from the IRS.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the securities of any series will depend upon whether the trust
created with respect to that series is structured as an owner trust, treated as
a partnership for federal income tax purposes or as a grantor trust. The
prospectus supplement for each series of securities will indicate whether the
trust created for that series will be treated as a partnership or as a grantor
trust. The following discussion deals first with series for which the trust has
been structured as an owner trust treated as a partnership, and then with
series for which the trust has been structured as a grantor trust.
Owner Trust Series
Tax Status of the Trust
For each series of securities which includes both notes and certificates,
counsel will deliver its opinion that the trust will not be an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. As a result, in the opinion of counsel, the trust itself will not be
subject to federal income tax but, each certificateholder will be required to
take into account its distributive share of items of income and deduction,
including deductions for distributions of interest to the noteholders of the
trust as though the items had been realized directly by the certificateholder.
This opinion will be based on the assumption that the terms of the trust
agreement and related documents will be complied with, and on counsel's
conclusion that the nature of the income of the trust will exempt it from the
rule that some publicly traded partnerships are taxable as corporations. There
are no cases or IRS rulings on transactions involving a trust issuing both debt
and equity interests with terms similar to those of the notes and the
certificates. As a result, the IRS may disagree with all or a part of this
discussion.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the contracts, possibly
reduced by its interest expense on the notes. Any corporate income tax could
materially reduce cash available to make payments on the notes and
distributions on the certificates.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The owner trustee, on behalf of the
trust, will agree, and the noteholders will agree by their purchase of notes,
to treat the notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
notes is correct.
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Interest Income on the Notes. Interest on the notes will be taxable as
ordinary interest income when received by noteholders utilizing the cash-basis
method of accounting and when accrued by noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the notes would be
considered issued with original issue discount if the stated redemption price
at maturity of a note, generally equal to its principal amount as of the date
of issuance plus all interest other than qualified stated interest payable
prior to or at maturity exceeds the original issue price, in this case, the
initial offering price at which a substantial amount of the notes are sold to
the public. Any OID would be considered de minimis under the OID regulations if
it does not exceed 1/4% of the stated redemption price at maturity of a note
multiplied by the number of full years until its maturity date. It is
anticipated that the notes will not be considered issued with more than de
minimis OID. Under the OID regulations, an owner of a note issued with a de
minimis amount of OID must include the OID in income, on a pro rata basis, as
principal payments are made on the note.
While it is not anticipated that the notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to be
issued with OID. This deemed OID could arise, for example, if interest payments
on the notes are not deemed to be qualified stated interest because the notes
do not provide for default remedies ordinarily available to holders of debt
instruments or do not contain terms and conditions that make the likelihood of
late payment or nonpayment a remote contingency. Based upon existing authority,
the trust will treat interest payments on the notes as qualified stated
interest under the OID regulations. If the notes are issued or are deemed to be
issued with OID, all or a portion of the taxable income to be recognized with
respect to the notes would be includible in the income of noteholders as OID.
Any amount treated as OID would not, however, be includible again when the
amount is actually received. If the yield on a class of notes were not
materially different from its coupon, this treatment would have no significant
effect on noteholders using the accrual method of accounting. However, cash
method noteholders may be required to report income for the notes in advance of
the receipt of cash attributable to that income.
A noteholder must include OID in income as interest over the term of the
notes under a constant yield method. In general, OID must be included in income
in advance of the receipt of cash representing that income. Each noteholder is
encouraged to consult its own tax advisor regarding the impact of the OID rules
if the notes are issued with OID.
Market Discount. The notes, whether or not issued with original issue
discount, will be subject to the market discount rules of Section 1276 of the
IRS code. In general, these rules provide that if a noteholder purchases the
note at a market discount, for example, a discount from its original issue
price plus any accrued original issue discount that exceeds a de minimis amount
specified in the IRS code, and thereafter recognizes gain upon a disposition,
the lesser of the gain or the accrued market discount will be taxed as ordinary
interest income. Market discount also will be recognized and taxable as
ordinary interest income as payments of principal are received on the notes to
the extent that the amount of the payments does not exceed the accrued market
discount. Generally, the accrued market
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discount will be the total market discount on the note multiplied by a
fraction, the numerator of which is the number of days the noteholder held the
note and the denominator of which is the number of days after the date the
noteholder acquired the note until and including its maturity date. The
noteholder may elect, however, to determine accrued market discount under the
constant-yield method, which election shall not be revoked without the consent
of the IRS.
Limitations imposed by the IRS code which are intended to match deductions
with the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A noteholder may elect to include market
discount in gross income as it accrues and, if the noteholder makes such an
election, is exempt from this rule. The adjusted basis of a note subject to the
election will be increased to reflect market discount included in gross income,
thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any election to include market discount in gross income as it
accrues shall apply to all debt instruments held by the noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the IRS.
Amortizable Bond Premium. In general, if a noteholder purchases a note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), the noteholder will be considered to have purchased the note with
amortizable bond premium equal to the amount of the excess. The noteholder may
elect to deduct the amortizable bond premium as it accrues under a constant-
yield method over the remaining term of the note. The noteholder's tax basis in
the note will be reduced by the amount of the amortizable bond premium
deducted. Amortizable bond premium for a note will be treated as an offset to
interest income on that note, and a noteholder's deduction for amortizable bond
premium that a note will be limited in each year to the amount of interest
income derived for that Note for that year. Any election to deduct amortizable
bond premium shall apply to all debt instruments (other than instruments the
interest on which is excludible from gross income) held by the noteholder at
the beginning of the first taxable year to which the election applies or
thereafter acquired and is irrevocable without the consent of the IRS. Bond
premium on a note held by a noteholder who does not elect to deduct the premium
will decrease the gain or increase the loss otherwise recognized on the
disposition of the note.
Disposition of Notes. If a noteholder sells a note, the noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the noteholder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder generally will equal
the noteholder's cost for the note, increased by any market discount, OID and
gain previously included by that noteholder in income for the note and
decreased by principal payments previously received by that noteholder and the
amount of bond premium previously amortized for the note. Any gain or loss will
be capital gain or loss if the note was held as a capital asset, except for
gain representing accrued interest and accrued market discount not previously
included in income, and will be short-term, mid-term or long-term capital gain
or loss depending upon whether the note was held for more or less
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than one year or for more than eighteen months. Capital losses generally may be
used only to offset capital gains.
Foreign Holders. Generally, interest paid to a noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
note in connection with a United States trade or business will be treated as
portfolio interest and will be exempt from the 30% withholding tax. The
noteholder will be entitled to receive interest payments on the notes free of
United States federal income tax provided that the noteholder periodically
provides the indenture trustee, or other person who would otherwise be required
to withhold tax with a statement certifying under penalty of perjury that the
noteholder is not a United States person and providing the name and address of
that noteholder and will not be subject to federal income tax on gain from the
disposition of a note unless the noteholder is an individual who is present in
the United States for 183 days or more during the taxable year in which the
disposition takes place and some other requirements are met.
Tax Administration and Reporting. The indenture trustee will furnish to each
noteholder with each distribution a statement showing the amount of the
distribution allocable to principal and to interest. Reports will be made
annually to the IRS and to holders of record that are not excepted from the
reporting requirements regarding the information as may be required for the
interest and original issue discount, with respect to the notes.
Backup Withholding. Under certain circumstances, a noteholder may be subject
to backup withholding at a 31% rate. Backup withholding may apply to a
noteholder who is a United States person if the holder, among other
circumstances, fails to furnish their social security number or other taxpayer
identification number to the indenture trustee. Backup withholding may apply,
under some circumstances, to a noteholder who is a foreign person if the
noteholder fails to provide the indenture trustee or the noteholder's
securities broker with the statement necessary to establish the exemption from
federal income and withholding tax on interest on the note. Backup withholding,
however, does not apply to payments on a note made to some exempt recipients,
such as corporations and tax-exempt organizations, and to certain foreign
persons. Noteholders should consult their tax advisors for additional
information concerning the potential application of backup withholding to
payments received by them for a note.
On October 6, 1997, the treasury department issued new regulations which make
some modifications to the withholding, backup withholding and information
reporting rules described above. The new regulations attempt to unify
certification requirements and modify reliance standards, and will generally be
effective for payments made after December 31, 1999, subject to some transition
rules. You are urged to consult your own tax advisors regarding the new
regulations.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
counsel, the IRS successfully asserted that the notes did not represent debt
for federal income tax purposes, the notes might be treated as equity interests
in the trust. If so treated, the trust would be treated as a publicly traded
partnership that would not be taxable as a corporation
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because it would meet some qualifying income tests. Nonetheless, treatment of
the notes as equity interests in that type of partnership could have adverse
tax consequences to some holders. For example, income to foreign holders
generally would be subject to federal tax and federal tax return filing and
withholding requirements, income to some tax-exempt entities would be unrelated
business taxable income, and individual holders might be subject to some
limitations on their ability to deduct their share of trust expenses.
Tax Consequences to Certificateholders
Treatment of the Trust as a Partnership. We, the general partner and the
owner trustee will agree, and the certificateholders will agree by their
purchase of certificates, to treat the trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the trust, the partners of the partnership being the certificateholders and
the general partner, and the notes being debt of the partnership. The proper
characterization of the arrangement involving the trust, the certificates, the
notes, the general partner, Green Tree and the servicer, however, is not
certain because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example, because
the certificates have certain features characteristic of debt, the certificates
might be considered debt of the trust. This characterization would not result
in materially adverse tax consequences to certificateholders as compared to the
consequences from treatment of the certificates as equity in a partnership as
discussed in the following paragraphs. The following discussion assumes that
the certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the trust will not be subject to
federal income tax. Each certificateholder will be required to separately take
into account the holder's allocated share of income, gains, losses, deductions
and credits of the trust. The trust's income will consist primarily of interest
and finance charges earned on the contracts, including appropriate adjustments
for market discount, OID and bond premium and any gain upon collection or
disposition of the contracts. The trust's deductions will consist primarily of
interest accruing for the notes, servicing and other fees, and losses or
deductions upon collection or disposition of the contracts.
The tax items of a partnership are allocable to the partners in accordance
with the IRS code, treasury regulations and the partnership agreement, here,
the trust agreement and related documents. The trust agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
trust for each month equal to the sum of:
(1) the interest that accrues on the certificates according to their terms
for that month, including interest accruing at the pass-through rate
for that month and interest on amounts previously due on the
certificates but not yet distributed;
(2) any trust income attributable to discount on the contracts that
corresponds to any excess of the principal amount of the certificates
over their initial issue price;
(3) prepayment premium payable to the certificateholders for that month;
and
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(4) any other amounts of income payable to the certificateholders for that
month.
Although it is not anticipated that the certificates will be issued at a price
which exceeds their principal amount, allocations of trust income to the
certificateholders will be reduced by any amortization by the trust of premium
on contracts that corresponds to any excess of the issue price of certificates
over their principal amount. All remaining taxable income of the trust will be
allocated to the general partner. Based on the economic arrangement of the
parties, this approach for allocating trust income should be permissible under
applicable treasury regulations, although no assurance can be given that the
IRS would not require a greater amount of income to be allocated to
certificateholders. Even under this method of allocation, certificateholders
may be allocated income equal to the entire pass-through rate plus the other
items described above even though the trust might not have sufficient cash to
make current cash distributions of that amount. Cash basis holders will in
effect be required to report income from the certificates on the accrual basis,
and certificateholders may become liable for taxes on trust income even if they
have not received cash from the trust to pay these taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
All of the taxable income allocated to a certificateholder that is a pension,
profit sharing or employee benefit plan or other tax-exempt entity, including
an individual retirement account will constitute unrelated business taxable
income generally taxable to the holder under the IRS code.
A certificateholder's share of expenses of the trust, including fees to the
servicer but not interest expense will be miscellaneous itemized deductions. An
individual, an estate, or a trust that holds a certificate either directly or
through a pass-through entity will be allowed to deduct the expenses under
Section 212 of the IRS code only to the extent that, in the aggregate and
combined with specific other itemized deductions, they exceed 2% of the
adjusted gross income of the certificateholder. In addition, Section 68 of the
IRS code provides that the amount of itemized deductions, including those
provided for in Section 212 of the IRS code otherwise allowable for the taxable
year for an individual whose adjusted gross income exceeds a threshold amount
determined under the IRS code ($121,000 in 1997, in the case of a joint return)
will be reduced by the lesser of:
(1) 3% of the excess of adjusted gross income over the specified
threshold amount; or
(2) 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
To the extent that a certificateholder is not permitted to deduct servicing
fees allocable to a certificate, the taxable income of the certificateholder
attributable to that certificate will exceed the net cash distributions related
to that income. Certificateholders may deduct any loss on disposition of the
contracts to the extent permitted under the IRS code.
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Discount and Premium. It is believed that the contracts were not issued with
OID, and therefore, the trust should not have OID income. The purchase price
paid by the trust for the contracts may exceed the remaining principal balance
of the contracts at the time of purchase. If the trust is deemed to acquire the
contracts at such a premium or at a market discount, the trust will elect to
offset any premium against interest income on the contracts or to include any
discount in income currently as it accrues over the life of the contracts. The
trust will make this premium or market discount calculation on an aggregate
basis but may be required to recompute it on a contract-by-contract basis. As
indicated above, a portion of this premium deduction or market discount income
may be allocated to certificateholders.
Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss for distributions from the trust. A certificateholder
will recognize gain, to the extent that any money distributed exceeds the
certificateholder's adjusted basis in its certificates as described below under
"Disposition of Certificates" immediately before the distribution. A
certificateholder will recognize loss upon termination of the trust or
termination of the certificateholder's interest in the trust if the trust only
distributes money to the certificateholder and the amount distributed is less
than the certificateholder's adjusted basis in the certificates. This gain or
loss generally will be capital gain or loss if the certificates are held as
capital assets and will be long-term gain or loss if the holding period of the
certificates is more than one year.
Section 708 Termination. Under Section 708 of the IRS code, the trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the trust are sold or exchanged within a 12-
month period. Under treasury regulations, if a termination occurs, the trust
will be considered to have contributed the assets of the trust the old
partnership to a new partnership in exchange for interests in the new
partnership. The interests would be deemed distributed to the partners of the
old partnership in liquidation, which would not constitute a sale or exchange
for United States federal income tax purposes.
Disposition of Certificates. If a certificateholder sells a certificate, the
certificateholder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized on the sale and the
seller's tax basis in the certificate. A certificateholder's tax basis in a
certificate generally will equal the certificateholder's cost increased by the
certificateholder's share of trust income and decreased by any distributions
received with respect to the certificate. In addition, both the tax basis in
the certificate and the amount realized on a sale of a certificate would
include the certificateholder's share of the notes and other liabilities of the
trust. A certificateholder acquiring certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in these
certificates, and, upon sale or other disposition of some of these
certificates, allocate a portion of the aggregate tax basis to the certificates
sold, rather than maintain a separate tax basis in each certificate for
purposes of computing gain or loss on a sale of that certificate.
Any gain on the sale of a certificate attributable to the certificateholder's
share of unrecognized accrued market discount on the contracts would generally
be treated as
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ordinary income to the certificateholder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets that
would give rise to special reporting requirements. To avoid those special
reporting requirements, the trust will elect to include market discount in
income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income, not including income attributable to disallowed itemized deductions
described in the paragraphs above over the life of the certificates that
exceeds the aggregate cash distributions, the excess generally will give rise
to a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the trust's
taxable income and losses will be determined monthly, and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the
close of the related record date. As a result, a certificateholder purchasing a
certificate may be allocated tax items, which will affect the
certificateholder's tax liability and tax basis attributable to periods before
the certificateholder actually owns the certificate. The use of this convention
may not be permitted by existing regulations. If a monthly convention is not
permitted, or only applies to transfers of less than all of the
certificateholder's interest, taxable income or losses of the trust may be
reallocated among the certificateholders. The general partner is authorized to
revise the trust's method of allocation between transferors and transferees to
conform to a method permitted by future regulations.
Section 754 Election. In the event that a certificateholder sells a
certificate at a profit or loss, the purchasing certificateholder will have a
higher or lower basis in the certificate than the selling certificateholder
had. The tax basis of the trust's assets will not be adjusted to reflect that
higher or lower basis unless the trust files an election under Section 754 of
the IRS code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the trust will not make that election. As a
result, certificateholders may be allocated a greater or lesser amount of trust
income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters. Under an administration agreement, the trustee will
monitor the performance of the following responsibilities of the trust by other
service providers. The trust is required to keep or have kept complete and
accurate books of the trust. The books will be maintained for financial
reporting and tax purposes on an accrual basis and the fiscal year of the trust
will be the calendar year. The trust will file a partnership information return
(IRS Form 1065) with the IRS for each taxable year of the trust and will report
each certificateholder's allocable share of items of trust income and expense
to certificateholders and the IRS on Schedule K-1. The trust will provide the
Schedule K-1 information to nominees that fail to provide the trust with
specific required information statements relating to identification of
beneficial owners of certificates and the nominees will be required to forward
the information to the beneficial owners. Generally, certificateholders must
file tax returns that are consistent with the information return filed by the
trust or be subject to penalties unless the certificateholder notifies the IRS
of any inconsistencies.
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We or our subsidiaries as identified in the prospectus supplement will be
designated as the tax matters partner in the trust agreement and, will be
responsible for representing the certificateholders in any dispute with the
IRS. The IRS code provides for administrative examination of a partnership as
if the partnership were a separate and distinct taxpayer. Generally, the
statute of limitations for partnership items does not expire before three years
after the date on which the partnership information return is filed. Any
adverse determination following an audit of the return of the trust by the
appropriate taxing authorities could result in an adjustment of the returns of
the certificateholders, and, under specific circumstances, a certificateholder
may be precluded from separately litigating a proposed adjustment to the items
of the trust. An adjustment could also result in an audit of a
certificateholder's returns and adjustments of items not related to the income
and losses of the trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
trust will be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes for non-U.S. persons because
there is no clear authority dealing with that issue under facts substantially
similar to those described in this prospectus. Although it is not expected that
the trust will be engaged in a trade or business in the United States for those
purposes, the trust will withhold as if it were so engaged in order to protect
the trust from possible adverse consequences of a failure to withhold. It is
expected that the trust will withhold on the portion of its taxable income that
is allocable to foreign certificateholders under Section 1446 of the IRS code,
as if the income were effectively connected to a U.S. trade or business, at a
rate of 35% for foreign holders that are taxable as corporations and 39.6% for
all other foreign certificateholders. Subsequent adoption of treasury
regulations or the issuance of other administrative pronouncements may require
the trust to change its withholding procedures. In determining a
certificateholder's nonforeign status, the trust may rely on Form W-8, Form W-9
or the certificateholder's certification of nonforeign status signed under
penalties of perjury.
Each foreign certificateholder might be required to file a U.S. individual or
corporate income tax return, including, in the case of a corporation, the
branch profits tax on its share of the trust's income. Each foreign
certificateholder must obtain a taxpayer identification number from the IRS and
submit that number to the trust on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign certificateholder generally will be
entitled to file with the IRS a claim for refund for the taxes withheld by the
trust, taking the position that no taxes are due because the trust is not
engaged in a U.S. trade or business. However, the IRS may assert that
additional taxes are due, and no assurance can be given as to the appropriate
amount of tax liability.
Backup Withholding. Under specific circumstances, a certificateholder may be
subject to backup withholding at a 31% rate. See the discussion above under
"Tax Consequences to Noteholders--Backup Withholding."
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Grantor Trust Series
Tax Status of the Trust
For the series of securities which includes only certificates, unless we
specify otherwise in the prospectus supplement, counsel will deliver its
opinion that the trust will be classified as a grantor trust for federal income
tax purposes and not as an association which is taxable as a corporation. The
trust will be classified as a trust regardless of whether we are considered to
retain an interest in the contracts, as discussed below. While a retained
interest might be viewed as a second class of beneficial interest in the trust
and Treasury Regulations Section 301.7701-4(c) generally provides that an
investment trust with more than one class of ownership interest will be
classified as an association taxable as a corporation or a partnership, that
regulation would treat the trust as a grantor trust because there will be no
power under the pooling and servicing agreement to vary the investment of the
certificateholders, the purpose of the trust will be to facilitate direct
investment in the contracts, and the existence of multiple classes of ownership
interests in the trust will be incidental to that purpose.
Tax Consequences to Certificateholders
Because the trust will be classified as a grantor trust, each
certificateholder, including any holder of a subordinated certificate will, in
the opinion of counsel, be treated for federal income tax purposes as the owner
of an undivided interest in the contracts and other trust property.
Accordingly, subject to the discussion below of certain limitations on
deductions and the stripped bond rules of the IRS code, each certificateholder
must report on its federal income tax return its pro rata share of the entire
income from the contracts and other trust property, and may deduct its pro rata
share of the fees paid by the trust, at the same time as the items would be
reported under the certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the trust and received and paid
directly the amounts received and paid by the trust. A certificateholder's
share of expenses of the trust will be miscellaneous itemized deductions
subject to certain limits on deductibility. See the discussion above under
"Owner Trust Series--Tax Consequences to Certificateholders--Partnership
Taxation."
A purchaser of a certificate will be treated as purchasing an interest in
each contract in the trust at a price determined by allocating the purchase
price paid for the certificate among all contracts in proportion to their fair
market values at the time of purchase of the certificate. To the extent that
the portion of the purchase price of a certificate allocated to a contract is
greater than or less than the portion of the principal balance of the contract
allocable to the certificate, that interest in the contract will be deemed to
have been acquired with premium or discount. See the discussions above under
"Owner Trust Series --Tax Consequences to Noteholders--Market Discount" and "--
Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. It is not anticipated that the
contracts will have original issue discount, unless they are subject to the
stripped bond rules of the IRS code described
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below. If the contracts are subject to the stripped bond rules of the IRS code,
the market discount rules discussed above may not apply.
Subordinated Certificates. If the subordinated certificateholders receive
distributions of less than their share of the trust's receipts of principal or
interest, the shortfall amount, because of the subordination of the
subordinated certificates, holders of subordinated certificates would probably
be treated for federal income tax purposes as if they had:
(1) received as distributions their full share of such receipts;
(2) paid over to the senior certificateholders an amount equal to the
shortfall amount; and
(3) retained the right to reimbursement of those amounts to the extent
available from future collections on the contracts.
Under this analysis, (a) subordinated certificateholders would be required to
accrue as current income any interest or OID income of the trust that was a
component of the shortfall amount, even though the amount was in fact paid to
the senior certificateholders, (b) a loss would only be allowed to the
subordinated certificateholders when their right to receive reimbursement of
the shortfall amount became worthless, and (c) reimbursement of the shortfall
amount prior to a claim of worthlessness would not be taxable income to
subordinated certificateholders because the amount was previously included in
income. Those results should not significantly affect the inclusion of income
for subordinated certificateholders on the accrual method of accounting, but
could accelerate inclusion of income to subordinated certificateholders on the
cash method of accounting by, in effect, placing them on the accrual method.
The character and timing of loss deductions is unclear.
Under current IRS interpretations of applicable treasury regulations, we
would be able to sell or otherwise dispose of any subordinated certificates.
Accordingly, we may offer subordinated certificates for sale to investors.
Stripped Certificates. Some classes of certificates may be subject to the
stripped bond rules of Section 1286 of the IRS code and for purposes of this
discussion will be referred to as stripped certificates. In general, a stripped
certificate will be subject to the stripped bond rules where there has been a
separation of ownership of the right to receive some or all of the principal
payments on a contract from ownership of the right to receive some or all of
the related interest payments. Certificates will constitute stripped
certificates and will be subject to these rules under various circumstances,
including the following:
(1) if any servicing compensation is deemed to exceed a reasonable
amount;
(2) if two or more classes of certificates are issued representing the
right to non-pro rata percentages of the interest or principal payments on
the contracts; or
(3) if certificates are issued which represent the right to interest only
payments or principal only payments.
Although not entirely clear, each stripped certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original
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issue discount. Original issue discount for a stripped certificate, must be
included in ordinary gross income for federal income tax purposes as it accrues
in accordance with the constant-yield method that takes into account the
compounding of interest and the accrual of income may be in advance of the
receipt of any cash attributable to the income. See "Owner Trust Series--Tax
Consequences to Noteholders--Interest Income on the Notes" above. For purposes
of applying the original issue discount provisions of the IRS code, the issue
price of a stripped certificate will be the purchase price paid by the holder
thereof and the stated redemption price at maturity may include the aggregate
amount of all payments to be made for the stripped certificate whether or not
denominated as interest. The amount of original issue discount for a stripped
certificate may be treated as zero under the original issue discount de minimis
rules described above. Under rules similar to those provided in Rev. Proc. 91-
49, applicable only to mortgages secured by real property, a certificateholder
may be required to account for any discount on a stripped certificate as market
discount rather than original issue discount if either (1) the amount of
original issue discount for the certificate was treated as zero under the
original issue discount de minimis rule when the certificate was stripped; or
(2) no more than 100 basis points, including any amount of servicing in excess
of reasonable servicing is stripped off of the contracts.
When an investor purchases more than one class of stripped certificates, it
is currently unclear whether for federal income tax purposes the classes of
stripped certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the IRS may take a contrary position for some or all of
the foregoing tax consequences. For example, a holder of a stripped certificate
may be treated as the owner of:
(1) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each contract, or
(2) a separate installment obligation for each contract representing the
stripped certificate's pro rata share of principal and/or interest payments
to be made.
In addition, if a trust issues more than one class of certificates with
different pass-through rates, a holder of the certificate may be treated as the
owner of a stripped bond with a rate equal to the lowest pass-through rate and
a stripped coupon representing the excess of the pass-through rate on that
certificate over the lowest pass-through rate. As a result of these possible
alternative characterizations, investors should consult their own tax advisors
regarding the proper treatment of stripped certificates for federal income tax
purposes.
The servicing fee to be received by the servicer and the fee for the
enhancement, provided for a series of certificates may be questioned by the IRS
for some certificates or contracts as exceeding a reasonable fee for the
services being performed in exchange therefor, and a portion of the servicing
compensation could be recharacterized as an ownership interest retained by the
servicer or other party in a portion of the interest payments to be made under
the contracts. In this event, a certificate might be treated as a
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stripped certificate subject to the stripped bond rules of Section 1286 of the
IRS code and the original issue discount provisions rather than to the market
discount and premium rules.
Disposition of Certificates. If a certificate is sold, gain or loss will be
recognized equal to the difference between the amount realized on the sale and
the certificateholder's adjusted tax basis in the certificate. See the
discussion above under "Owner Trust Series--Tax Consequences to Noteholders--
Disposition of Notes."
Foreign Holders. Generally, interest paid to a certificateholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
certificates in connection with a United States trade or business will be
treated as portfolio interest. See the discussion above under "Owner Trust
Series--Tax Consequences to Noteholders--Foreign Holders."
Tax Administration and Reporting
The trustee will furnish to each certificateholder with each distribution a
statement showing the amount of the distribution allocable to principal and to
interest. In addition, the trustee will furnish, within a reasonable time after
the end of each calendar year, to each certificateholder who was a
certificateholder at any time during that year, information regarding the
amount of servicing compensation received by the servicer and the other factual
information as we deem necessary to enable certificateholders to prepare their
tax returns. Reports will be made annually to the IRS and to holders of record
that are not excepted from the reporting requirements regarding information as
may be required for the interest and original issue discount for the
certificates.
Backup Withholding
Under some circumstances, a certificateholder may be subject to backup
withholding at a 31% rate. See the discussion above under "Owner Trust Series--
Tax Consequences to Noteholders--Backup Withholding."
STATE INCOME TAX CONSEQUENCES
The activities to be undertaken by the servicer in servicing and collecting
the contracts will take place in Minnesota. The State of Minnesota imposes an
income tax on individuals, trusts and estates and a franchise tax measured by
net income on corporations. This discussion of Minnesota taxation is based upon
current statutory provisions and the regulations promulgated, and applicable
judicial or ruling authority, all of which are subject to change, which may be
retroactive. No ruling on any of the issues discussed below will be sought from
the Minnesota Department of Revenue.
Owner Trust Series
If the notes are treated as debt for federal income tax purposes, in the
opinion of counsel this treatment will also apply for Minnesota tax purposes.
Noteholders not otherwise subject to Minnesota income or franchise taxation
would not become subject to this tax
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solely because of their ownership of the notes. Noteholders already subject to
income or franchise taxation in Minnesota could, however, be required to pay
that tax on all or a portion of the income generated from ownership of the
notes.
If the trust is treated as a partnership, not taxable as a corporation for
federal income tax purposes, in the opinion of counsel the trust would also be
treated as a partnership for Minnesota income tax purposes. The partnership
would not be subject to Minnesota taxation. Certificateholders that are not
otherwise subject to Minnesota income or franchise taxation would not become
subject to this tax solely because of their interests in the partnership.
Certificateholders already subject to income or franchise taxation in Minnesota
could, however, be required to pay this tax on all or a portion of the income
from the partnership.
If the certificates are treated as ownership interests in an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes, in the opinion of counsel this treatment would also apply for
Minnesota income and franchise tax purposes. Under this treatment, the trust
would be subject to the Minnesota franchise tax measured by net income, which
could result in reduced distributions to certificateholders. Certificateholders
that are not otherwise subject to Minnesota income or franchise taxation would
not become subject to this tax solely because of their interests in the
constructive corporation. Certificateholders already subject to income or
franchise taxation in Minnesota could, however, be required to pay this tax on
all or a portion of the income from the constructive corporation.
Grantor Trust Series
If the trust is treated as a grantor trust for federal income tax purposes,
in the opinion of counsel the trust would also be treated as a grantor trust
for Minnesota income tax purposes. The trust therefore would not be subject to
Minnesota taxation. Certificateholders that are not otherwise subject to
Minnesota income or franchise taxation would not become subject to the tax
solely because of their interests in the trust. Certificateholders already
subject to income or franchise taxation in Minnesota could, however, be
required to pay that tax on all or a portion of the income from the trust.
Because state tax laws vary, it is not possible to describe the tax
consequences to the noteholders and certificateholders in all of the states.
Noteholders and certificateholders are therefore urged to consult their own tax
advisors for the state tax treatment of the notes and certificates and income
derived therefrom.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, and
Section 4975 of the IRS code prohibit a pension, profit sharing or other
employee benefit plan, the benefit plan from engaging in some transactions
involving plan assets with persons that are parties in interest under ERISA or
disqualified persons under the IRS code for the benefit plan. ERISA also
imposes some duties and some prohibitions on persons who are fiduciaries of
plans subject to ERISA. Under ERISA, generally any person who exercises any
authority
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or control for the management or disposition of the assets of a benefit plan is
considered to be a fiduciary of the plan. A violation of these prohibited
transaction rules may generate excise tax and other liabilities under ERISA and
the IRS code for those persons.
Some transactions involving the related trust might be deemed to constitute
prohibited transactions under ERISA and the IRS code for a benefit plan that
purchased securities if assets of the related trust were deemed to be assets of
the benefit plan. Under a regulation issued by the United States Department of
Labor, the plan assets regulation, the assets of a trust would be treated as
plan assets of a benefit plan for the purposes of ERISA and the IRS code only
if the benefit plan acquired an equity interest in the trust and none of the
exceptions contained in the plan assets regulation was applicable. An equity
interest is defined under the plan assets regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. The likely treatment of notes and
certificates will be discussed in the related prospectus supplement.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA and some church plans, as defined in Section 3(33) of ERISA are
not subject to ERISA requirements.
A benefit plan fiduciary considering the purchase of securities should
consult its tax and/or legal advisors regarding whether the assets of the trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions described in an underwriting agreement for each
trust, we will agree to sell to each of the underwriters named and in the
prospectus supplement, and each of the underwriters will severally agree to
purchase from the seller, the principal amount of each class of securities of
the related series described and in the prospectus supplement.
In each underwriting agreement, the several underwriters will agree, subject
to the terms and conditions set forth, to purchase all the securities described
which are offered and by the prospectus supplement of the securities are
purchased. In the event of a default by any underwriter, each underwriting
agreement will provide that, in some circumstances, purchase commitments of the
nondefaulting underwriters may be increased, or the underwriting agreement may
be terminated.
Each prospectus supplement will either:
(1) set forth the price at which each class of securities being offered
will be offered to the public and any concessions that may be offered to
some dealers participating in the offering of the securities; or
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(2) specify that the related securities are to be resold by the
underwriters in negotiated transactions at varying prices to be determined
at the time of the sale.
After the initial public offering of any securities, the public offering price
and the concessions may be changed.
Each underwriting agreement will provide that we will indemnify the
underwriters against some liabilities, including liabilities under the
Securities Act.
The indenture trustee may, from time to time, invest the funds in the
designated accounts in eligible investments acquired from the underwriters.
Under each underwriting agreement, the closing of the sale of any class of
securities will be conditioned on the closing of the sale of all other classes.
The place and time of delivery for the securities for which this prospectus
is delivered will be described in the related prospectus supplement.
LEGAL MATTERS
Some matters relating to validity of the certificates and the notes will be
passed upon by our counsel as identified in the prospectus supplement. The
validity of the certificates and the notes will be passed upon for the
underwriters named in the prospectus supplement by the counsel for the
underwriters identified in the prospectus supplement.
EXPERTS
The consolidated financial statements of Conseco Finance as of December 31,
1998 and for the year ended December 31, 1998 are incorporated by reference in
this prospectus in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of Conseco Finance, formerly known as
Green Tree Financial Corporation, as of December 31, 1997 and for each of the
years in the two-year period ended December 31, 1997 incorporated by reference
in this prospectus and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference in this prospectus, and upon the authority of KPMG LLP as experts in
accounting and auditing.
55
<PAGE>
GLOSSARY
For the purposes of this prospectus and the prospectus supplement, the
following terms will have the following meanings:
"Amount available" with respect to any distribution date, means generally the
sum of payments on the contracts due and received during the preceding month,
prepayments and other unscheduled collections received during the preceding
month, any amounts deposited in respect of purchased contracts, any interest
rate cap payment, any guaranty payment, and all earnings from the investment of
funds in the collection account.
"Certificateholders' distributable amount" means, for any distribution date,
the sum of the certificateholders' interest distributable amount and the
certificateholders' principal distributable amount.
"Certificateholders' interest carryover shortfall" means, for any
distribution date, the excess of the certificateholders' monthly interest
distributable amount for the preceding distribution date and any outstanding
certificateholders' interest carryover shortfall on the preceding distribution
date, over the amount in respect of interest at the pass-through rate that is
actually deposited in the certificate distribution account on such preceding
distribution date, plus interest on such excess, to the extent permitted by
law, at the pass-through rate from such preceding distribution date to but
excluding the current distribution date.
"Certificateholders' interest distributable amount" means, for any
distribution date, the sum of the certificateholders' monthly interest
distributable amount for such distribution date and the certificateholders'
interest carryover shortfall for such distribution date.
"Certificateholders' monthly interest distributable amount" means, for any
distribution date, interest accrued at the pass-through rate on:
(1) the certificate principal balance and
(2) the aggregate unreimbursed certificate principal liquidation losses on
each prior distribution date, in each case after giving effect to all
payments of principal to the certificateholders on the immediately
preceding distribution date.
"Certificateholders' monthly principal distributable amount" means, for any
distribution date prior to the distribution date on which the notes are paid in
full, zero; and with respect to any distribution date commencing on the
distribution date on which the notes are paid in full, the formula principal
distribution amount, less, on the distribution date on which the notes are paid
in full, the portion thereof payable on the notes.
"Certificate principal balance" equals, initially, approximately $ and,
after that, equals the original certificate principal balance, reduced by all
amounts allocable to principal previously distributed to certificateholders
minus any unreimbursed certificate principal liquidation losses.
"Certificateholders' principal distributable amount" means, for any
distribution date, the sum of the certificateholders' monthly principal
distributable amount for such distribution
56
<PAGE>
date and the certificateholders' unpaid principal shortfall as of the close of
the preceding distribution date; provided, however, that the
certificateholders' principal distributable amount shall not exceed the
certificate principal balance plus any unreimbursed certificate principal
liquidation losses. In addition, on the final scheduled distribution date, the
principal required to be deposited into the certificate distribution account
shall not be less than the amount that is necessary, after giving effect to the
other amounts to be deposited in the certificate distribution account on such
distribution date and allocable to principal, to reduce to zero the certificate
principal balance plus the unreimbursed certificate principal liquidation
losses.
"Certificate principal liquidation loss" means, for any distribution date,
the amount by which the aggregate principal balance of the notes and the
certificate principal balance exceeds the pool scheduled principal balance,
after giving effect to all distributions of principal on such distribution
date.
"Certificateholders' unpaid principal shortfall" means, as of the close of
any distribution date, the excess of the certificateholders' monthly principal
distributable amount and any outstanding certificateholders' unpaid principal
shortfall from the preceding distribution date, over the amount in respect of
principal that is actually deposited in the certificate distribution account.
The "formula principal distribution amount" for any distribution date (but
subject to the last sentence of this definition) will generally be equal to the
sum of the following amounts with respect to the monthly period, in each case
computed in accordance with the method specified in each contract:
(1) all scheduled payments of principal due on each outstanding contract
during the related monthly period, after adjustments for previous partial
principal prepayments and after any adjustments to a contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related obligor,
(2) the scheduled principal balance of each contract which, during the
related monthly period, was purchased by us pursuant to the sale and
servicing agreement on account of a breach of a representation or warranty,
(3) all partial principal prepayments applied and all principal
prepayments in full received on contracts during the related monthly
period,
(4) the scheduled principal balance of each contract that became a
liquidated contract during the related monthly period, plus the amount of
any reduction in the outstanding principal balance of a contract during
such monthly period ordered as a result of a bankruptcy or similar
proceeding involving the related obligor,
(5) without duplication of the foregoing, all collections in respect of
principal on the contracts received during the current month up to and
including the third business day prior to such distribution date, but in no
event later than the 10th day of the month in which such distribution date
occurs, minus
57
<PAGE>
(6) the amount, if any, included in the formula principal distribution
amount for the preceding distribution date by virtue of clause (5) above.
The formula principal distribution amount for the distribution date in
2029, will be the sum of the note principal balance and the certificate
principal balance.
"Liquidated contract" means any defaulted contract as to which the servicer
has determined that all amounts which it expects to recover from or on account
of such contract through the date of disposition of the real property have been
recovered; provided that any defaulted contract in respect of which the real
property has been realized upon and disposed of and proceeds of such
disposition have been received shall be deemed to be a liquidated contract.
"Noteholders' distributable amount" means, for any distribution date, the sum
of the noteholders' interest distributable amount and the noteholders'
principal distributable amount.
"Noteholders' interest carryover shortfall" means, for any distribution date,
the excess of the noteholders' monthly interest distributable amount for the
preceding distribution date and any outstanding noteholders' interest carryover
shortfall on such preceding distribution date, over the amount in respect of
interest that is actually deposited in the note distribution account on the
preceding distribution date, plus interest on the amount of interest due but
not paid to noteholders on the preceding distribution date, to the extent
permitted by law, at the respective interest rate for each class of notes for
the applicable monthly interest period.
"Noteholders' interest distributable amount" means, for any distribution
date, the sum of the noteholders' monthly interest distributable amount for
such distribution date and the noteholders' interest carryover shortfall for
the distribution date.
"Noteholders' monthly interest distributable amount" means, for any
distribution date, interest accrued for the monthly interest period on each
class of notes at the respective interest rate for such class on:
(1) the outstanding principal balance of the notes of such class and
(2) the aggregate unreimbursed principal liquidation losses of the class
on each prior distribution date, in each case after giving effect to
all payments of principal to the noteholders of the class on the
immediately preceding distribution date.
"Noteholders' monthly principal distributable amount" means, for any
distribution date, the noteholders' percentage of the formula principal
distribution amount plus the aggregate unreimbursed principal liquidation
losses of each class of notes.
"Noteholders' percentage" means, 100% until and including the distribution
date on which the aggregate principal balance of the notes are paid in full and
0% thereafter.
"Noteholder's principal distributable amount" means, for any distribution
date, the sum of the noteholders' monthly principal distributable amount for
the distribution date and the noteholders' unpaid principal shortfall as of the
close of the preceding distribution date;
58
<PAGE>
provided, however, that the noteholders' principal distributable amount shall
not exceed the outstanding principal balance of the notes, and provided
further, that the noteholders' principal distributable amount on the final
scheduled distribution date shall not be less than the amount that is
necessary, after giving effect to other amounts to be deposited in the note
distribution account on such distribution date and allocable to principal, to
reduce the outstanding principal balances, including all unreimbursed principal
liquidation losses, of all classes of notes to zero.
"Noteholders' unpaid principal shortfall" means, as of the close of any
distribution date, the excess of the noteholders' monthly principal
distributable amount and any outstanding noteholders' unpaid principal
shortfall from the preceding distribution date over the amount in respect of
principal that is actually deposited in the note distribution account on such
distribution date.
"Principal balance" means, with respect to any determination date and any
class of notes, the original principal balance of a class minus all amounts
previously distributed in respect of principal of the class and minus any
unreimbursed principal liquidation losses of such class.
"Purchased contract" means a contract that:
. we have become obligated to repurchase (or, under specified
circumstances, has elected to repurchase) as a result of an uncured
breach by us of a representation or warranty made by us for that
contract or
. the servicer has become obligated to repurchase, or, under specific
circumstances, has elected to repurchase, as a result of an uncured
breach of the covenants made by it with respect to such contract.
"Principal liquidation loss" means, for any distribution date and any class
of notes, the amount by which the aggregate principal balance of the class and
each junior class and the certificate principal balance, after giving effect to
any principal liquidation losses imposed on such junior classes and
certificates, exceeds the pool scheduled principal balance, after giving effect
to all distributions of principal on such distribution date.
59
<PAGE>
[CONSECO LEGO]
[$ ]
(Approximate)
Conseco Finance Recreational Enthusiast Consumer Trust 1999-
Conseco Finance Securitizations Corp. Seller
Conseco Finance Corp. Servicer
-------------------------
Prospectus Supplement
-------------------------
[Underwriters]
[Date]
For 90 days after the date of this prospectus supplement, all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a copy of this prospectus supplement and the
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses to be incurred in connection
with the offering of the asset-backed certificates and the asset-backed notes,
other than underwriting discounts and commissions, described in this
registration statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 27,800.00
Printing and Engraving.......................................... 200,000.00
Legal Fees and Expenses......................................... 150,000.00
Blue Sky Filing and Counsel Fees................................ 15,000.00
Accounting Fees and Expenses.................................... 60,000.00
Trustee Fees and Expenses....................................... 66,000.00
Rating Agencies' Fees........................................... 225,000.00
Miscellaneous Expenses.......................................... 4,200.00
-----------
Total....................................................... $748,000.00
===========
</TABLE>
- --------
* All fees and expenses, other than the Securities and Exchange Commission
Registration Fee, are estimated.
Item 15. Indemnification of Directors and Officers.
Conseco Finance Corp. is incorporated under the laws of Delaware. Section
145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation,
by reason of the fact that such person was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, officer, employee or
agent of another corporation or enterprise). The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where and officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director actually and
reasonably incurred.
The Certificate of Incorporation and Bylaws of Conseco Finance Corp.
provide, in effect, that, subject to certain limited exceptions, such
corporation will indemnify its officers and directors to the extent permitted
by the Delaware General Corporation Law.
Conseco Finance maintains a directors' and officers' insurance policy.
Pursuant to the form of Underwriting Agreement, the Underwriters will agree,
subject to certain conditions, to indemnify the Company, its directors, certain
of their officers and any persons who control the Company, within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"), against
certain liabilities.
Conseco Finance Securitizations Corp. is incorporated under the laws of
Minnesota. Section 302A.521 of the Minnesota Statutes provides that a
corporation shall indemnify any person made or threatened to be made a
II-1
<PAGE>
party to a proceeding by reason of the former or present official capacity of
such person against judgments, penalties, fines (including, without limitation,
excise taxes assessed against such person with respect to any employee benefit
plan), settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had
no reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in
certain instances. A decision as to required indemnification is made by a
disinterested majority of the Board of Directors present at a meeting at which
a disinterested quorum is present, or by a designated committee of the Board,
by special legal counsel, by the shareholders or by a court.
Provisions regarding indemnification of officers and directors of Conseco
Securitizations to the extent permitted by Section 302A.521 are contained in
its articles of incorporation and bylaws.
Item 16. Exhibits.
The exhibits filed as part of this registration statement are:
<TABLE>
<C> <S>
1.1 --Form of Underwriting Agreement (for Grantor Trusts) (incorporated by reference
to Exhibit 1.1 to the Registrant's Registration Statement No. 33-63575).
1.2 --Form of Underwriting Agreement (for Owner Trusts) (incorporated by reference to
Exhibit 1.2 to the Registrant's Registration Statement No. 33-63575).
3.1 --Restated Certificate of Incorporation of Conseco Finance Corp. (incorporated by
reference to Exhibit 3.2 to the Registrant's Registration Statement No. 333-
85037; 333-85037-01).
3.2 --Restated By-Laws of Conseco Finance Corp. (incorporated by reference to Exhibit
3.4 to the Registrant's Registration Statement No. 333-85037; 333-85037-01).
3.3 --Articles of Incorporation of Conseco Finance Securitizations Corp.
(incorporated by reference to Exhibit 3.3 to the Registrant's Registration
Statement on Form S-3 No. 333-85119; 333-85119-01).
3.4 --By-laws of Conseco Securitizations Corp. (incorporated by reference to Exhibit
3.4 to the Registrant's Registration Statement on Form S-3 No. 333-85119; 333-
85119-01).
4.1 --Form of Pooling and Servicing Agreement (for Grantor Trusts) (incorporated by
reference to Exhibit 4.1 to Registrant's Registration Statement No. 33-63575).
* 4.2 --Form of Sale and Servicing Agreement relating to Owner Trusts.
* 4.3 --Form of Trust Agreement relating to Owner Trusts.
* 4.4 --Form of indenture between the Trust and the indenture Trustee, including form
of Note.
* 4.5 --Form of Transfer Agreement.
* 5.1 --Opinion and consent of Dorsey & Whitney LLP with respect to legality.
* 8.1 --Opinion and consent of Dorsey & Whitney LLP with respect to tax matters.
12.1 --Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to
Exhibit 12.1 to Conseco Finance's Form 10-Q for the period ended September 30,
1999).
*23.1 --Consent of KPMG LLP.
*23.2 --Consent of PricewaterhouseCoopers LLP.
23.3 --Consent of Dorsey & Whitney LLP (included as part of Exhibit 5.1).
23.4 --Consent of Dorsey & Whitney LLP (included as part of Exhibit 8.1).
**25.1 --Form of T-1 Statement of Eligibility under the Trust indenture Act of 1939 of
the indenture Trustee.
99.1 --Form of Prospectus Supplement for Grantor Trusts (incorporated by reference to
Exhibit 99.1 to Registrant's Registration Statement No. 333-02725).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
99.2 --Form of Prospectus Supplement for Owner Trusts (incorporated by reference to
Exhibit 99.2 to the Registrant's Registration Statement No. 33-63575).
</TABLE>
- --------
*Filed herewith.
**To be filed subsequently pursuant to section 305(b)(2) of the Trust
Indenture Act of 1939, as amended.
Item 17. Undertakings.
The undersigned registrant on behalf of the trust hereby undertakes that,
for purposes of determining any liability under the Securities Act of 1933,
each filing of the owner trust's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the act and is
unenforceable. In the event that a claim for indemnification against the
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the act and will be governed by the
final adjudication of the issue.
The undersigned registrant hereby undertakes:
(1) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the securities act shall be deemed to be part of this
registration statement as of the time it was declared effective;
(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change to such information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of
II-3
<PAGE>
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the effective registration
statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change in the information set forth in the registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of the securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the SEC under section 305(b)(2) of the
Trust Indenture Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Saint Paul, State of Minnesota, on the 6th day of December, 1999.
Conseco Finance Corp.
/s/ Rollin M. Dick
By____________________________________
Rollin M. Dick
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Director and Chief
* Executive Officer
- ------------------------------------- (Principal
Stephen C. Hilbert Executive Officer)
Director and
* President
- -------------------------------------
Thomas J. Kilian
/s/ Rollin M. Dick Director/Executive
- ------------------------------------- Vice President and December 6, 1999
Rollin M. Dick Chief Financial
Officer (Principal
Financial Officer)
Senior Vice
* President and
- ------------------------------------- Chief Accounting
James S. Adams Officer (Principal
Accounting
Officer)
/s/ Phyllis A. Knight December 6, 1999
*By_____________________________
Phyllis A. Knight
as Attorney-in-Fact
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Saint Paul, State of Minnesota, on the 6th day of December, 1999.
Conseco Finance Securitizations Corp.
/s/ Phyllis A. Knight
By: ______________________________________
Phyllis A. Knight
Senior Vice President and Treasurer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* President and Director
______________________________________ (Principal Executive
Bruce A. Crittenden Officer)
/s/ Phyllis A. Knight Senior Vice President and December 6, 1999
______________________________________ Treasurer (Principal
Phyllis A. Knight Financial Officer and
Principal Accounting
Officer)
* Director
______________________________________
Joel H. Gottesman
* Director
______________________________________
Paul A. Boyum
* Director
______________________________________
Gary P. Mills
*By: /s/ Phyllis A. Knight December 6, 1999
---------------------------------
Phyllis A. Knight
as Attorney-in-Fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1.1 --Form of Underwriting Agreement (for Grantor Trusts)
(incorporated by reference to Exhibit 1.1 to the Registrant's
Registration Statement No. 33-63575).
1.2 --Form of Underwriting Agreement (for Owner Trusts)
(incorporated by reference to Exhibit 1.2 to the Registrant's
Registration Statement No. 33-63575).
3.1 --Restated Certificate of Incorporation of Conseco Finance
Corp. (incorporated by reference to Exhibit 3.2 to the
Registrant's Registration Statement No. 333-85037; 333-85037-
01).
3.2 --Restated By-Laws of Conseco Finance Corp. (incorporated by
reference to Exhibit 3.4 to the Registrant's Registration
Statement No. 333-85037; 333-8503701).
3.3 --Articles of Incorporation of Conseco Finance Securitizations
Corp. (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-3 No. 333-
85119; 333-85119-01).
3.4 --By-laws of Conseco Securitizations Corp. (incorporated by
reference to Exhibit 3.4 to the Registrant's Registration
Statement on Form S-3 No. 333-85119; 333-85119-01).
4.1 --Form of Pooling and Servicing Agreement (for Grantor Trusts)
(incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement No. 333-63575).
* 4.2 --Form of Sale and Servicing Agreement relating to Owner
Trusts.
* 4.3 --Form of Trust Agreement relating to Owner Trusts.
* 4.4 --Form of indenture between the Trust and the indenture
Trustee, including form of Note.
* 4.5 --Form of Transfer Agreement.
* 5.1 --Opinion and consent of Dorsey & Whitney LLP with respect to
legality.
* 8.1 --Opinion and consent of Dorsey & Whitney LLP with respect to
tax matters.
12.1 --Computation of Ratio of Earnings to Fixed Charges
(incorporated by reference to Exhibit 12.1 to Conseco
Finance's Form 10-Q for the period ended September 30, 1999).
*23.1 --Consent of KPMG LLP.
*23.2 --Consent of PricewaterhouseCoopers LLP.
23.3 --Consent of Dorsey & Whitney LLP (included as part of Exhibit
5.1).
23.4 --Consent of Dorsey & Whitney LLP (included as part of Exhibit
8.1).
**25.1 --Form of T-1 Statement of Eligibility under the Trust
indenture Act of 1939 of the indenture Trustee.
99.1 --Form of Prospectus Supplement for Grantor Trusts
(incorporated by reference to Exhibit 99.1 to Registrant's
Registration Statement No. 333-02725).
99.2 --Form of Prospectus Supplement for Owner Trusts (incorporated
by reference to Exhibit 99.2 to the Registrant's Registration
Statement No. 33-63575).
</TABLE>
- --------
*Filed herewith.
**To be filed subsequently pursuant to section 305(b)(2) of the Trust
Indenture Act of 1939, as amended.
<PAGE>
Exhibit 4.2
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
SALE AND SERVICING AGREEMENT
among
CONSECO FINANCE RECREATIONAL, EQUIPMENT &
CONSUMER TRUST 1999-__
as Issuer
CONSECO FINANCE SECURITIZATIONS CORP.
as Seller
and
CONSECO FINANCE CORP.
as Originator, Servicer and Guarantor
Dated as of _____________, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I -- DEFINITIONS.....................................................1-1
SECTION 1.01. General..............................................1-1
SECTION 1.02. Specific Terms.......................................1-1
ARTICLE II -- TRANSFER OF CONTRACTS..........................................2-1
SECTION 2.01. Transfer of Contracts................................2-1
SECTION 2.02. Conditions to Acceptance by Owner Trustee............2-1
ARTICLE III -- REPRESENTATIONS AND WARRANTIES................................3-1
SECTION 3.01. Representations and Warranties Regarding the
Seller and Originator and Covenants of the
Originator...........................................3-1
SECTION 3.02. Representations and Warranties Regarding
Each Contract........................................3-2
SECTION 3.03. Representations and Warranties Regarding
the Contracts in the Aggregate.......................3-5
SECTION 3.04. Representations and Warranties Regarding
the Contract Files...................................3-6
SECTION 3.05. Repurchase of Contracts for Breach of
Representations and Warranties.......................3-6
SECTION 3.06. Additional Representations and Warranties............3-7
ARTICLE IV -- PERFECTION OF TRANSFER AND PROTECTION OF SECURITY
INTERESTS......................................................4-1
SECTION 4.01. Custody of Contracts.................................4-1
SECTION 4.02. Filings..............................................4-2
SECTION 4.03. Name Change or Relocation............................4-2
SECTION 4.04. Chief Executive Office...............................4-2
SECTION 4.05. Costs and Expenses...................................4-2
ARTICLE V -- SERVICING OF CONTRACTS..........................................5-1
SECTION 5.01. Responsibility for Contract Administration...........5-1
SECTION 5.02. Standard of Care.....................................5-1
SECTION 5.03. Records..............................................5-1
SECTION 5.04. Inspection; Computer Tape............................5-1
SECTION 5.05. Collections..........................................5-2
SECTION 5.06. Enforcement..........................................5-3
SECTION 5.07. Satisfaction of Contracts............................5-4
SECTION 5.08. Costs and Expenses...................................5-4
SECTION 5.09. Maintenance of Insurance.............................5-4
SECTION 5.10. Repossession.........................................5-6
SECTION 5.11. Commingling of Funds.................................5-6
SECTION 5.12. Retitling; Security Interests........................5-6
SECTION 5.13. Servicer Advances....................................5-7
SECTION 5.14. Monthly Reports; Certificate of Servicing Officer...5-7
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SECTION 5.15. Annual Report of Accountants.........................5-7
SECTION 5.16. Certain Duties of the Servicer Under the Trust
Agreement............................................5-7
SECTION 5.17. INTENTIONALLY OMITTED................................5-8
SECTION 5.18. Annual Statement as to Compliance; Notice of Servicer
Termination Event....................................5-8
SECTION 5.19. INTENTIONALLY OMITTED................................5-8
SECTION 5.20. Maintenance of Security Interests in Products........5-8
SECTION 5.21. Covenants, Representations, and Warranties of
Servicer.............................................5-9
SECTION 5.22. Purchase of Contracts Upon Breach of Covenant.......5-10
ARTICLE VI -- DISTRIBUTIONS; TRUST ACCOUNTS; LIMITED GUARANTY; STATEMENTS TO
SECURITYHOLDERS................................................6-1
SECTION 6.01. Trust Accounts.......................................6-1
SECTION 6.02. Collection Account Deposits..........................6-2
SECTION 6.03. Permitted Withdrawals................................6-2
SECTION 6.04. INTENTIONALLY OMITTED................................6-3
SECTION 6.05. Limited Guaranty.....................................6-3
SECTION 6.06. Distributions........................................6-3
SECTION 6.07. INTENTIONALLY OMITTED................................6-5
SECTION 6.08. Statements to Securityholders........................6-5
ARTICLE VII -- SERVICE TRANSFER..............................................7-1
SECTION 7.01. Event of Termination.................................7-1
SECTION 7.02. Transfer.............................................7-2
SECTION 7.03. Indenture Trustee to Act; Appointment of Successor...7-2
SECTION 7.04. Notification to Securityholders......................7-3
SECTION 7.05. Effect of Transfer...................................7-3
SECTION 7.06. Transfer of Collection Account.......................7-4
SECTION 7.07. Limits on Liability..................................7-4
SECTION 7.08. Waiver of Past Defaults..............................7-4
ARTICLE VIII -- TERMINATION..................................................8-1
SECTION 8.01. Originator's or Servicer's Repurchase Option.........8-1
SECTION 8.02. Liquidation or Sale of Trust Estate..................8-2
ARTICLE IX -- INDEMNITIES....................................................9-1
SECTION 9.01. Originator's Indemnities.............................9-1
SECTION 9.02. Liabilities to Obligors..............................9-1
SECTION 9.03. Servicer's Indemnities...............................9-1
SECTION 9.04. Operation of Indemnities.............................9-2
ARTICLE X -- MISCELLANEOUS..................................................10-1
SECTION 10.01. Servicer Not to Assign Duties or Resign; Delegation
of Servicing Duties................................10-1
SECTION 10.02. Assignment or Delegation by Originator.............10-1
SECTION 10.03. Amendment..........................................10-2
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SECTION 10.04. Notices............................................10-3
SECTION 10.05. Merger and Integration.............................10-4
SECTION 10.06. Headings...........................................10-5
SECTION 10.07. Governing Law......................................10-5
SECTION 10.08. Limitation of Liability............................10-5
Exhibit A -- Form of Assignment
Exhibit B -- Form of Certificate Regarding Repurchased Contracts
Exhibit C -- Form of Monthly Report
Exhibit D -- Form of Certificate of Servicing Officer
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THIS SALE AND SERVICING AGREEMENT, dated as of __________, 1999, among
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__ (the "Trust"),
Conseco Finance Securitizations Corp., a corporation organized and existing
under the laws of the State of Minnesota, as Seller (the "Seller") and Conseco
Finance Corp., a corporation organized and existing under the laws of the State
of Delaware, as originator of the loans described herein (the "Originator"), as
Servicer (the "Servicer") and as Limited Guarantor of the Class B-2 Certificates
(the "Guarantor").
WHEREAS, in the regular course of its business, Conseco Finance Corp.
purchases, originates and services certain retail installment sales contracts
and promissory notes for the purchase of a variety of consumer products,
including but not limited to 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; and recreational vehicles (collectively, the "Products"),
each of which contracts provides for installment payments by or on behalf of the
purchaser and grants a lien on or security interest in a Product; and
WHEREAS, the Seller, in the ordinary course of its business, acquires
pools of Contracts, as hereinafter defined, from Conseco Finance Corp. and
arranges the securitization of those Contracts; and
WHEREAS, the Seller, the Originator, the Servicer, the Guarantor and
the Trust wish to set forth the terms and conditions pursuant to which the Trust
will acquire the "Contracts," as hereinafter defined, and the Servicer will
service the Contracts;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as provided herein:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. General.
(a) For the purpose of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Article include the plural as well as the singular, the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or other subdivision, and
Section references refer to Sections of this Agreement.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Indenture.
(c) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(d) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person include its permitted successors and assignees.
SECTION 1.02. Specific Terms.
All terms defined in any Related Document and not otherwise defined in
this Agreement shall have the meanings given them in such Related Document.
"Advance Payment" means, with respect to any Monthly Period, any
payment by an Obligor that was not due under the related Contract during or
before such Monthly Period and which payment is not a Principal Prepayment.
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"Affiliate" of any specified Person means any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Sale and Servicing Agreement as the same may be
amended or supplemented from time to time.
"Amount Available" means, as to any Distribution Date, an amount equal
to the Collected Funds for that Distribution Date plus any amounts required to
be deposited in the Collection Account on or before such Distribution Date
pursuant to Sections 6.05, 8.01 and 8.02 of this Agreement, Section 10.04 of the
Indenture or Section 9.3 of the Trust Agreement.
"Amount Held for Future Distribution" means, as to any Distribution
Date, the total of the amounts held in the Collection Account on the last day of
the related Monthly Period on account of Advance Payments in respect of such
Monthly Period.
"Business Day" means any day other than (a) a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of any
successor Servicer, successor Owner Trustee or successor Trustee are authorized
or obligated by law, executive order or governmental decree to be closed.
"Certificate Distribution Account" means the account established and
maintained pursuant to Section 6.01(c).
"Certificate Majority" means Holders of Certificates representing more
than 50% of the Class B-1 Principal Balance and more than 50% of the Class B-2
Principal Balance.
"Certificates" means the ____% Asset-Backed Certificates, Class B-1,
and the ____% Asset-Backed Certificates, Class B-2, issued under the Trust
Agreement.
"Class" means pertaining to each Class of Notes or Certificates, as
applicable.
"Class A-1 Notes" means the Class A-1 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-1 Final Scheduled Distribution Date" means ________ 15, 1999
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-1 Interest Amount" means, with respect to any Distribution
Date, an amount equal to interest at the Class A-1 Interest Rate on the Class
A-1 Principal Balance.
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"Class A-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-1 Notes on such Distribution Date pursuant to Section
8.02(c)(1)(i) of the Indenture is less than the Class A-1 Interest Amount for
such Distribution Date.
"Class A-1 Interest Rate" means a per annum rate of interest equal to
_____%, calculated on the basis of the actual number of days elapsed and a year
of 360 days.
"Class A-1 Principal Balance" means, as to any Distribution Date, the
Original Class A-1 Principal Balance less all amounts distributed to Holders of
Class A-1 Notes on any prior Distribution Date on account of principal pursuant
to Section 8.02(c) of the Indenture.
"Class A-2 Final Scheduled Distribution Date" means _________ 15, 2004
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-2 Interest Amount" means, with respect to any Distribution
Date, an amount equal to one month's interest (or, with respect to the first
Distribution Date, interest from and including the Closing Date to but excluding
_______ 15, 2000) at the Class A-2 Interest Rate on the Class A-2 Principal
Balance.
"Class A-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-2 Notes on such Distribution Date pursuant to Section
8.02(c)(1)(i) of the Indenture is less than the Class A-2 Interest Amount for
such Distribution Date.
"Class A-2 Interest Rate" means a per annum rate of interest equal to
_____%, calculated on the basis of a year of 360 days consisting of twelve
30-day months.
"Class A-2 Notes" means the Class A-2 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-2 Principal Balance" means, as to any Distribution Date, the
Original Class A-2 Principal Balance less all amounts distributed to Holders of
Class A-2 Notes on prior Distribution Dates on account of principal pursuant to
Sections 8.02(c) of the Indenture.
"Class A-3 Final Scheduled Distribution Date" means ________ 15, 2010
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-3 Interest Amount" means, as to any Distribution Date, an
amount equal to one month's interest (or, with respect to the first Distribution
Date, interest from and including the Closing Date to but excluding ________ 15,
2000) at the Class A-3 Interest Rate on the Class A-3 Principal Balance.
"Class A-3 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-3 Notes on such
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Distribution Date pursuant to Section 8.02(c)(1)(i) of the Indenture is less
than the Class A-3 Interest Amount for such Distribution Date.
"Class A-3 Interest Rate" means a per annum rate of interest equal to
____%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class A-3 Notes" means the Class A-3 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-3 Principal Balance" means, as to any Distribution Date, the
Original Class A-3 Principal Balance less all amounts distributed to Holders of
Class A-3 Notes on prior Distribution Dates on account of principal pursuant to
Section 8.02(c) of the Indenture.
"Class A-4 Final Scheduled Distribution Date" means ________ 15, 2013
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-4 Interest Amount" means, with respect to any Distribution
Date, an amount equal to one month's interest (or with respect to the first
Distribution Date, interest from and including the Closing Date to but excluding
_______ 15, 2000) at the Class A-4 Interest Rate on the Class A-4 Principal
Balance.
"Class A-4 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-4 Notes on such Distribution Date pursuant to Section
8.02(c)(1)(i) of the Indenture is less than the Class A-4 Interest Amount for
such Distribution Date.
"Class A-4 Interest Rate" means a per annum rate of interest equal to
____%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class A-4 Notes" means the Class A-4 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-4 Principal Balance" means, as to any Distribution Date, the
Original Class A-4 Principal Balance less all amounts distributed to Holders of
Class A-4 Notes on prior Distribution Dates on account of principal pursuant to
Section 8.02(c) of the Indenture.
"Class A-5 Final Scheduled Distribution Date" means ________ 15, 2013
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-5 Interest Amount" means, with respect to any Distribution
Date, an amount equal to one month's interest (or, with respect to the first
Distribution Date, interest from and including the Closing Date to but excluding
_______ 15, 2000) at the Class A-5 Interest Rate on the Class A-5 Principal
Balance.
"Class A-5 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-5 Notes on such
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Distribution Date pursuant to Section 8.02(c)(1)(i) of the Indenture is less
than the Class A-5 Interest Amount for such Distribution Date.
"Class A-5 Interest Rate" means a per annum rate of interest equal to
____%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class A-5 Notes" means the Class A-5 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-5 Principal Balance" means, as to any Distribution Date, the
Original Class A-5 Principal Balance less all amounts distributed to Holders of
Class A-5 Notes on any prior Distribution Date on account of principal pursuant
to Section 8.02(c) of the Indenture.
"Class A-6 Final Scheduled Distribution Date" means ________ 15, 2013
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-6 Interest Amount" means, with respect to any Distribution
Date, an amount equal to one month's interest (or, with respect to the first
Distribution Date, interest from and including the Closing Date to but excluding
______ 15, 2000) at the Class A-6 Interest Rate on the Class A-6 Principal
Balance.
"Class A-6 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-6 Notes on such Distribution Date pursuant to Section
8.02(c)(3)(i) of the Indenture is less than the Class A-6 Interest Amount for
such Distribution Date.
"Class A-6 Interest Rate" means a per annum rate of interest equal to
____%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class A-6 Notes" means the Class A-6 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-6 Principal Balance" means, as to any Distribution Date, the
Original Class A-6 Principal Balance less all amounts distributed to Holders of
Class A-6 Notes on prior Distribution Dates on account of principal pursuant to
Section 8.02(c) of the Indenture.
"Class A-7 Final Scheduled Distribution Date" means _______ 15, 2018
(or, if such day is not a Business Day, the next succeeding Business Day
thereafter).
"Class A-7 Interest Amount" means, as to any Distribution Date, an
amount equal to one month's interest (or with respect to the first Distribution
Date, interest from and including the Closing Date to but excluding _______ 15,
2000) at the Class A-7 Interest Rate on the Class A-7 Principal Balance.
"Class A-7 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class A-7 Notes on such
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Distribution Date pursuant to Section 8.02(c)(5)(i) of the Indenture is less
than the Class A-7 Interest Amount for such Distribution Date.
"Class A-7 Interest Rate" means a per annum rate of interest equal to
____%, calculated on the basis of a year of 360 days consisting of twelve 30-day
months.
"Class A-7 Notes" means the Class A-7 Asset-Backed Notes issued by the
Trust pursuant to the Indenture.
"Class A-7 Principal Balance" means, as to any Distribution Date, the
Original Class A-7 Principal Balance less all amounts distributed to Holders of
Class A-7 Notes on prior Distribution Dates on account of principal pursuant to
Section 8.02(c) of the Indenture.
"Class B-1 Interest Amount" means, as to any Distribution Date, an
amount equal to one month's interest (or, with respect to the first Distribution
Date, interest from and including the Closing Date to but excluding _______ 15,
2000) at the Class B-1 Rate on the Class B-1 Principal Balance.
"Class B-1 Interest Carryover Shortfall" means as to any Distribution
Date, the amount, if any, by which the amount distributed to Holders of the
Class B-1 Certificates on such Distribution Date pursuant to Section 5.2(a)(1)
of the Trust Agreement is less than the Class B-1 Interest Amount for such
Distribution Date.
"Class B-1 Rate" means ____% per annum, computed on the basis of a year
of 360 days consisting of twelve 30-day months.
"Class B-1 Pool Factor" means, with respect to any Distribution Date,
an eight-digit decimal figure equal to the outstanding principal balance of the
Class B-1 Certificates as of such Distribution Date (after giving effect to all
distributions on such date) divided by the Original Class B-1 Principal Balance.
"Class B-1 Principal Balance" means, as to any Distribution Date, the
Original Class B-1 Principal Balance less all amounts distributed to Holders of
Class B-1 Certificates on Prior Distribution Dates on account of principal
pursuant to Section 5.2(a) of the Trust Agreement.
"Class B-2 Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class B-2 Principal Distributable Amount and
the Class B-2 Interest Distributable Amount.
"Class B-2 Interest Amount" means, as to any Distribution Date, an
amount equal to one month's interest (or, with respect to the first Distribution
Date, interest from and including the Closing Date to but excluding _______ 15,
2000) at the Class B-2 Rate on the Class B-2 Principal Balance.
"Class B-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the amount, if any, by which the amount distributed to
Holders of the Class B-2 Certificates on such
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Distribution Date pursuant to Section 5.2(a)(4) of the Trust Agreement is less
than the Class B-2 Interest Amount for such Distribution Date.
"Class B-2 Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the amounts payable in respect of the Class B-2
Certificates pursuant to Section 5.2(a)(4) of the Trust Agreement.
"Class B-2 Rate" means ____% per annum, computed on the basis of a
360-day year consisting of twelve 30-day months.
"Class B-2 Pool Factor" means, with respect to any Distribution Date,
an eight-digit decimal figure equal to the outstanding principal balance of the
Class B-2 Certificates as of such Distribution Date (after giving effect to all
distributions on such date) divided by the Original Class B-2 Principal Balance.
"Class B-2 Principal Balance" means, as to any Distribution Date, the
Original Class B-2 Certificate Principal Balance less all amounts distributed to
Holders of Class B-2 Certificates on prior Distribution Dates on account of
principal pursuant to Section 5.2(a)(5) of the Trust Agreement.
"Class B-2 Principal Liquidation Loss" means, as to any Distribution
Date, the lesser of: (a) the amount, if any, by which the Class B-1 Certificate
Principal Balance and the Class B-2 Principal Balance and Note Principal Balance
as of the immediately preceding Distribution Date, minus the aggregate amount of
principal distributed on account of the Notes and Class B-1 Certificates on that
Distribution Date (exclusive of any Guaranty Payment on that Distribution Date
in respect of any Class B-2 Principal Liquidation Loss), exceeds the Pool
Scheduled Principal Balance as of such Distribution Date, or (b) the Class B-2
Principal Balance as of the immediately preceding Distribution Date minus the
aggregate amount of principal distributed on account of the Class B-2
Certificates on that Distribution Date (exclusive of any Guaranty Payment on
that Distribution Date in respect of any Class B-2 Principal Liquidation Loss).
"Class B-2 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of (i) after the Class B-1 Principal Balance has been
reduced to $0, the Total Principal Distribution Amount minus, on the
Distribution Date on which the Class B-1 Principal Balance is reduced to $0,
amounts deposited in the Certificate Distribution Account on such Distribution
Date pursuant to Section 5.02(a) of the Trust Agreement to reduce the Class B-1
Principal Balance to zero, plus (ii) the Class B-2 Principal Liquidation Loss,
if any, but in no event more than the Class B-2 Principal Balance.
"Class Percentage Interest" means, as to any Note or Certificate, the
percentage interest evidenced thereby in distributions made on the related
Class, such percentage interest being equal to the percentage (carried to eight
places) obtained from dividing the denomination of such Note or Certificate by
the aggregate denomination of all Notes or Certificates of the related Class
(which equals the Original Class A-1 Principal Balance in the case of a Class
A-1 Note, the Original Class A-2 Principal Balance in the case of a Class A-2
Note, the Original Class A-3 Principal Balance in the case of a Class A-3 Note,
the Original Class A-4 Principal Balance in
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the case of a Class A-4 Note, the Original Class A-5 Principal Balance in the
case of a Class A-5 Note, the Original Class A-6 Principal Balance in the case
of a Class A-6 Note, the Original Class A-7 Principal Balance in the case of a
Class A-7 Note, the Original Class B-1 Principal Balance in the case of a Class
B-1 Certificate or the Original Class B-2 Principal Balance in the case of a
Class B-2 Certificate). The aggregate Class Percentage Interests for each Class
of Notes or Certificates shall equal 100%.
"Class Principal Balance" means, as to any date, the Class A-1
Principal Balance, the Class A-2 Principal Balance, the Class A-3 Principal
Balance, the Class A-4 Principal Balance, the Class A-5 Principal Balance, the
Class A-6 Principal Balance, the Class A-7 Principal Balance, the Class B-1
Principal Balance or the Class B-2 Principal Balance, as appropriate.
"Closing Date" means _______________.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Security" means, with respect to any Contract, (i) the
security interests, if any, granted by or on behalf of the related Obligor with
respect thereto, including a first priority perfected security interest in the
related Product, (ii) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such Contract, whether
pursuant to the agreement giving rise to such Contract or otherwise, together
with all financing statements signed by the Obligor describing any collateral
securing such Contract, (iii) all security agreements granting a security
interest in the related Product and all guarantees, insurance and other
agreements or arrangements of whatever character from time to time supporting or
securing payment of such Contract whether pursuant to the agreement giving rise
to such Contract or otherwise, and (iv) all records in respect of such Contract.
"Collected Funds" means, as to any Distribution Date, an amount equal
to (a) the sum of (i) the amount on deposit in the Collection Account as of the
close of business on the last day of the related Monthly Period (exclusive of
any amounts deposited therein pursuant to Sections 6.05, 8.01 or 8.02 of this
Agreement, Section 10.04 of the Indenture or Section 9.3 of the Trust Agreement,
(ii) any amounts required to be deposited in the Collection Account on or before
the Business Day immediately preceding such Distribution Date pursuant to
Sections 5.09 or 5.13, and (iii) any amount deposited in the Collection Account
in respect of principal on the Contracts (exclusive of any amounts deposited
therein pursuant to Sections 6.05, 8.01 or 8.02 of this Agreement, Section 10.04
of the Indenture or Section 9.3 of the Trust Agreement after the last day of the
related Monthly Period through and including the third Business Day prior to the
Distribution Date, but in no event later than the 10th day of the month in which
such Distribution Date occurs, reduced by (b) the sum as of the close of
business on the last day of the related Monthly Period of (i) the Amount Held
for Future Distribution, (ii) amounts permitted to be withdrawn by the Trustee
from the Collection Account pursuant to clauses (b) - (e), inclusive, of Section
6.03; and (iii) with respect to all Distribution Dates other than the
Distribution Date in July, 1998, any amount deposited in the Collection Account
in respect of principal on the Contracts (exclusive of any amounts deposited
therein pursuant to Sections 6.05, 8.01 or 8.02 of this Agreement, Section 10.04
of the Indenture or Section 9.3 of the Trust Agreement) on or after the first
day of the related Monthly Period and through and including the third Business
Day of
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the preceding Distribution Date, but in no event later than the 10th day of the
related Monthly Period.
"Collection Account" means the account established and maintained
pursuant to Section 6.01.
"Computer Tape" means the computer tape generated by the Originator
which provides information relating to the Contracts and which was used by the
Originator in selecting the Contracts, and includes the master file and the
history file.
"Contract File" means, as to each Contract, (a) the original copy of
the Contract, including the executed evidence of the obligation of the Obligor;
(b) either (i) the original title document for the related 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 Product is located do not provide for
the issuance of title documents for goods of the type including the Product,
other evidence of ownership of the related Product which is customarily relied
upon in such jurisdiction as evidence of title to such goods; (c) evidence of
one or more of the following types of perfection of the security interest in the
related Product granted by such Contract, as appropriate: (i) notation of such
security interest on the title document, (ii) a financing statement meeting the
requirements of the UCC, with evidence of recording indicated thereon (if
required to perfect a security interest in the related Product under the UCC as
in force in the relevant state), (iii) in the case of a Contract secured by a
security interest in an aircraft, evidence of filing with the Federal Aviation
Administration Aircraft Registry or (iv) such other evidence of perfection of a
security interest in goods of the type including the Product as is customarily
relied upon in the jurisdiction in which the related Product is located; (d) the
assignment of the Contract from the originator (if other than the Originator or
a wholly-owned subsidiary of the Originator) to the Originator or a wholly-owned
subsidiary of the Originator; (e) any extension, modification or waiver
agreement(s); (f) a credit application signed by the Obligor, or a copy thereof;
and (g) if required by Section 5.09 with respect to such Contract, a certificate
of insurance or application form for insurance signed by the Obligor, or copies
thereof.
"Contract Rate" means, with respect to any particular Contract, the
rate of interest specified in that Contract and computed in accordance with the
method specified in that Contract.
"Contracts" means the retail installment sales contracts and promissory
notes described in the List of Contracts and constituting part of the corpus of
the Trust, which Contracts are to be assigned and conveyed by the Company to the
Trust, and includes, without limitation, all related security interests and any
and all rights to receive payments which are due pursuant thereto on or after
the Cutoff Date, but excluding any rights to receive payments which are due
pursuant thereto prior to the Cutoff Date.
"Corporate Trust Office" means with respect to the Owner Trustee, the
principal office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the Closing Date
is located at Rodney Square North, 1100 North
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Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; the telecopy number for the Corporate Trust Office of the Owner
Trustee on the date of the execution of this Agreement is 302-651-8882; with
respect to the Indenture Trustee, the principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the Closing Date is located at U.S. Bank Trust
National Association, 180 East Fifth Street, St. Paul, Minnesota 55101
Attention: Corporate Trust Department; the telecopy number for the Corporate
Trust Office of the Indenture Trustee on the date of execution of this Agreement
is 612-244-0089.
"Counsel for the Originator" means _____________________, or other
legal counsel for the Originator.
"Cutoff Date" means _______________.
"Cutoff Date Pool Principal Balance" means the aggregate of the Cutoff
Date Principal Balances of the Contracts.
"Cutoff Date Principal Balance" means, as to any Contract, the unpaid
principal balance thereof at the Cutoff Date after giving effect to all
installments of principal due prior thereto.
"Defaulted Contract" means a Contract with respect to which the
Servicer commenced repossession or foreclosure procedures, made a sale of such
Contract to a third party for repossession, foreclosure or other enforcement, or
as to which there was a payment delinquent 180 or more days (excluding any
Contract deemed delinquent solely because the Obligor's required monthly payment
was reduced as a result of bankruptcy or similar proceedings).
"Delinquent Payment" means, as to any Contract, with respect to any
Monthly Period, any payment or portion of a payment of principal or interest
that was originally scheduled to be made during such Monthly Period under such
Contract and was not received or applied during such Monthly Period, whether or
not any payment extension has been granted by the Servicer.
"Determination Date" means the third Business Day prior to each
Distribution Date during the term of this Agreement.
"Distribution Date" means the fifteenth day of each calendar month
during the term of this Agreement, or if such day is not a Business Day, the
next succeeding Business Day, commencing on ________ 15, 2000.
"Due Date" means, as to any Contract, the date of the month on which
the scheduled monthly payment for such Contract is due.
"Electronic Ledger" means the electronic master record of installment
sale contracts of the Originator.
"Eligible Account" means, at any time, an account which is any of the
following: (i) an account maintained with an Eligible Institution; (ii) a trust
account (which shall be a "segregated
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trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Indenture Trustee, which
depository institution or trust company shall have capital and surplus (or, if
such depository institution or trust company is a subsidiary of a bank holding
company system, the capital and surplus of the bank holding company) of not less
than $50,000,000 and the securities of such depository institution (or, if such
depository institution is a subsidiary of a bank holding company system and such
depository institution's securities are not rated, the securities of the bank
holding company) shall have a credit rating from Standard & Poor's (if rated by
Standard & Poor's) and Fitch (if rated by Fitch) in one of its generic credit
rating categories which signifies investment grade; or (iii) an account that
will not cause Standard & Poor's and Fitch to downgrade or withdraw their
then-current ratings assigned to the Notes, as confirmed in writing by Standard
& Poor's and Fitch.
"Eligible Institution" means any depository institution (which may be
the Owner Trustee, the Indenture Trustee or an Affiliate of either) organized
under the laws of the United States or any State, the deposits of which are
insured to the full extent permitted by law by the Bank Insurance Fund
(currently administered by the Federal Deposit Insurance Corporation), which is
subject to supervision and examination by federal or state authorities and whose
short-term deposits have been rated A-1+ by Standard & Poor's and F-1 by Fitch
(if rated by Fitch), or whose unsecured long-term debt has been rated in one of
the two highest rating categories by Standard & Poor's and Fitch (if rated by
Fitch) in the case of unsecured long-term debt, or who shall otherwise be
acceptable to Standard & Poor's and Fitch.
"Eligible Investments" are any of the following:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, or any agency
or instrumentality of the United States of America the obligations of
which are backed by the full faith and credit of the United States of
America and which are noncallable;
(ii) demand and time deposits in, certificates of deposit of,
bankers' acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or any
Affiliate of the Indenture Trustee, acting in its commercial capacity)
incorporated under the laws of the United States of America or any
State thereof and subject to supervision and examination by federal
and/or state authorities, so long as, at the time of such investment or
contractual commitment providing for such investment, the commercial
paper or other short-term deposits of such depository institution or
trust company (or, in the case of a depository institution which is the
principal subsidiary of a holding company, the commercial paper or
other short-term debt obligations of such holding company) are rated at
least A-1+ by Standard & Poor's and at least F-1+ by Fitch (if rated by
Fitch);
(iii) shares of an investment company registered under the
Investment Company Act of 1940, whose shares are registered under the
Securities Act of 1933 and have the highest credit rating then
available from Fitch (if rated by Fitch) and Standard &
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Poor's and whose only investments are in securities described in
clauses (i) and (ii) above;
(iv) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii) above;
(v) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any State thereof which have a credit rating of at least AAA
by Standard & Poor's and in one of the two highest rating categories
from Fitch (if rated by Fitch) at the time of such investment;
provided, however, that securities issued by any particular corporation
will not be Eligible Investments to the extent that investment therein
will cause the then outstanding principal amount of securities issued
by such corporation and held as part of the corpus of the Trust to
exceed 10% of amounts held in the Collection Account; and
(vi) commercial paper having a rating of at least A-1+ from
Standard & Poor's and at least F-1+ by Fitch (if rated by Fitch) at the
time of such investment or pledge as a security.
Notwithstanding the foregoing, securities that represent the right to receive
payments only of interest due on underlying obligations shall not be included as
Eligible Investments, whether or not such securities otherwise fall within (i)
through (vi) above.
Each of the Indenture Trustee and the Owner Trustee may trade with
itself or an Affiliate in the purchase or sale of such Eligible Investments.
"Eligible Servicer" means Conseco Finance Corp. or any Person qualified
to act as Servicer of the Contracts under applicable federal and state laws and
regulations, which Person services not less than an aggregate of $100,000,000 in
outstanding principal amount of retail installment sales contracts and/or
consumer installment loans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Errors and Omissions Protection Policy" means the employee errors and
omissions policy maintained by the Servicer or any similar replacement policy
covering errors and omissions by the Servicer's employees, and meeting the
requirements of Section 5.09, all as such policy relates to Contracts comprising
a portion of the corpus of the Trust.
"Event of Termination" has the meaning assigned in Section 7.01.
"Fidelity Bond" means the fidelity bond maintained by the Servicer or
any similar replacement bond, meeting the requirements of Section 5.09, as such
bond relates to Contracts comprising a portion of the corpus of the Trust.
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"Final Scheduled Distribution Date" means with respect to each Class of
Notes and Certificates, the following dates (or, if such day is not a Business
Day, the next succeeding Business Day): Class A-1 Notes -- _______ 15, 1999;
Class A-2 Notes -- _______ 15, 2004; Class A-3 Notes -- _______ 15, 2010; Class
A-4 Notes -- _______ 15, 2013; Class A-5 Notes -- _______ 15, 2013; Class A-6
Notes -- _______ 15, 2013; Class A-7 Notes -- _______ 15, 2018; Class B-1
Certificates -- _______ 15, 2018; Class B-2 Certificates -- _______ 15, 2018;
"First Priority Principal Distribution Amount" means with respect to
any Distribution Date, the amount, if any, by which
(i) the aggregate Principal Balance of the Senior Notes is
greater than
(ii) the Pool Scheduled Principal Balance as of the
immediately preceding Distribution Date, minus the aggregate Scheduled
Principal Balance of all Defaulted Contracts, minus $175,000.
"Fitch" means Fitch IBCA, Inc., or any successor thereto; provided that
if Fitch no longer has a rating outstanding on any Class of Notes or
Certificates, then references herein to "Fitch" shall be deemed to refer to the
NRSRO then rating any Class of the Notes or Certificates (or, if more than one
such NRSRO is then rating any Class of the Notes or Certificates, to such NRSRO
as may be designated by the Servicer), and references herein to ratings by or
requirements of Fitch's shall be deemed to have the equivalent meanings with
respect to ratings by or requirements of such NRSRO.
"Formula Principal Distribution Amount" means, as of any Distribution
Date (but subject to the last sentence of this definition), the sum of the
following amounts with respect to the related Monthly Period, in each case
computed in accordance with the method specified in the relevant Contract:
(i) all scheduled payments of principal due on each
outstanding Contract during the related Monthly Period as specified in
the amortization schedule at the time applicable thereto (after
adjustments for previous Partial Principal Prepayments and after any
adjustment to such amortization schedule by reason of any bankruptcy of
an Obligor or similar proceeding or any moratorium or similar waiver or
grace period); plus
(ii) the Scheduled Principal Balance of each Contract which,
during the related Monthly Period, was purchased by Green Tree pursuant
to this Agreement on account of a breach of a representation or
warranty; plus
(iii) all Partial Principal Prepayments applied and all
Principal Prepayments in Full received on Contracts during the related
Monthly Period; plus
(iv) the aggregate Scheduled Principal Balance of all
Contracts that became Liquidated Contracts during the related Monthly
Period; plus the amounts of any reduction in the outstanding principal
balance of a Contract during such Monthly Period
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ordered as a result of a bankruptcy or similar proceeding involving the
related Obligor; plus
(v) all collections in respect of principal on the Contracts
received during the current month up to and including the third
business day prior to such Distribution Date (but in no event later
than the 10th day of the month in which such Distribution Date occurs),
minus
(vi) with respect to all Distribution Dates other than the
Distribution Date in July, 1998, all collections of principal on the
Contracts received during the related Monthly Period up to and
including the third business day prior to the preceding Distribution
Date (but in no event later than the 10th day of the prior month).
The Formula Principal Distribution Amount for the Distribution Date in
__________ 2019 shall be the sum of the Note Principal Balance and the
Certificate Principal Balance.
"Formula Principal Shortfall" means, with respect to any Distribution
Date, the Formula Principal Distribution Amount for such Distribution Date less
the funds available to pay such Formula Principal Distribution Amount pursuant
to Section 6.06(a)(xi) of this Agreement.
"Fourth Priority Principal Distribution Amount" means with respect to
any Distribution Date, the amount, if any, by which
(i) the aggregate Principal Balance of the Notes plus the
Class B-1 Principal Balance, minus the amount of any First Priority
Principal Distribution Amount paid on such Distribution Date, minus the
amount of any Second Priority Principal Distribution Amount paid on
such Distribution Date and minus the amount of any Third Priority
Principal Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the
immediately preceding Distribution Date, minus the aggregate Scheduled
Principal Balance of all Defaulted Contracts, minus $175,000.
"GTGP" means Green Tree Second GP Inc., a Minnesota corporation.
"Guaranty Payment" means, as of any Distribution Date, the amount, if
any, by which (A) the Class B-2 Distributable Amount on such Distribution Date
exceeds (B) the remainder of (x) the sum of the Collected Funds as of that
Distribution Date plus any amounts on deposit in the Collection Account as of
that Distribution Date pursuant to Sections 8.01 or 8.02 of this Agreement,
Section 10.04 of the Indenture or Section 9.3 of the Trust Agreement minus (y)
the amounts to be distributed from the Collection Account on that Distribution
Date pursuant to clauses (i) through (xii) of Section 6.06(a).
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"Indenture" means the Indenture, dated as of _______ 1, 1999, between
the Trust and U.S. Bank Trust National Association, as Indenture Trustee, as the
same may be amended and supplemented from time to time.
"Indenture Trustee" means the Person acting as Trustee under the
Indenture, its successors in interest and any successor Trustee under the
Indenture.
"Independent" means, when used with respect to any specified Person,
Dorsey & Whitney LLP, or any Person who (i) is in fact independent of the Seller
and the Servicer, (ii) does not have any direct financial interest or any
material indirect financial interest in the Seller or the Servicer or in an
Affiliate of either and (iii) is not connected with the Seller or the Servicer
as an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions. Whenever it is provided herein that any
Independent Person's opinion or certificate shall be furnished to the Trustee,
such opinion or certificate shall state that the signatory has read this
definition and is Independent within the meaning set forth herein.
"Insurance Policy" means, with respect to each Contract, the policy of
insurance (if any) required to be maintained for the related Product by Section
5.09, and which, as provided in said Section 5.09, may be a blanket policy
maintained by the Servicer in accordance with the terms and conditions of said
Section 5.09.
"Insurance Proceeds" means proceeds paid by any insurer pursuant to any
insurance policy or contract.
"Limited Guaranty" means the obligation of the Guarantor to make
Guaranty Payments pursuant to Section 6.05.
"Liquidated Contract" means any Defaulted Contract as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Contract through the date of disposition of the related Product
have been recovered; provided that any defaulted Contract in respect of which
the related Product has been realized upon and disposed of and the proceeds of
such disposition have been received shall be deemed to be a Liquidated Contract.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of any
overhead expenses) which are incurred by the Servicer in connection with the
liquidation of any Defaulted Contract, on or prior to the date on which the
related Product is disposed of, including, without limitation, legal fees and
expenses, and any related and unreimbursed expenditures for property taxes,
property preservation or restoration of the property to marketable condition.
"Liquidation Proceeds" means cash (including Insurance Proceeds and
proceeds realized on the repurchase of any Product by the originating dealer for
breach of warranties) received in connection with the liquidation of Defaulted
Contracts, whether through repossession, foreclosure sale or otherwise,
including any rental income realized from any repossessed Product.
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"List of Contracts" means the list identifying each Contract
constituting part of the corpus of the Trust, which list (a) identifies each
Contract and (b) sets forth as to each Contract (i) the Cutoff Date Principal
Balance, (ii) the amount of monthly payments due from the Obligor, (iii) the
Contract Rate and (iv) the maturity date, and which is attached to the
Assignment from the Seller to the Trust, conveying the Company's right, title
and interest in and to the Contracts (substantially in the form of Exhibit A).
"Minimum Purchase Amount" means an amount equal to the sum of: (i) if
Green Tree is no longer the Servicer, the Monthly Servicing Fee for the Monthly
Period preceding the Sale Date, (ii) any unreimbursed advances for which the
Servicer is entitled to reimbursement, (iii) all accrued and unpaid interest on
the Notes and Certificates on the Sale Date and (iv) the aggregate Principal
Balance of all Notes and Certificates on the Sale Date.
"Monthly Period" means a calendar month during the term of this
Agreement. With respect to a Distribution Date, "related Monthly Period" means
the calendar month immediately preceding the month in which the Distribution
Date occurs.
"Monthly Report" has the meaning assigned in Section 5.13.
"Monthly Servicing and Guaranty Fee" means, as to any Distribution
Date, the Amount Available in the Collection Account on that Distribution Date
after payment in full of all amounts payable under Section 6.06(a)(i) through
(xiii).
"Monthly Servicing Fee" means, as of any Distribution Date on which
Conseco Finance Corp. is not acting as Servicer, any amount agreed to by the
Trustee and the successor Servicer that does not exceed one-twelfth of the
product of 0.75% and the Pool Scheduled Principal Balance for the immediately
preceding Distribution Date.
"Net Liquidation Loss" means, as to a Liquidated Contract, the amount,
if any, by which (a) the outstanding principal balance of such Liquidated
Contract plus accrued and unpaid interest thereon to the date on which such
Liquidated Contract became a Liquidated Contract exceeds (b) the Net Liquidation
Proceeds for such Liquidated Contract.
"Net Liquidation Proceeds" means, as to a Liquidated Contract, all
Liquidation Proceeds received on or prior to the last day of the Monthly Period
in which such Contract became a Liquidated Contract, net of Liquidation
Expenses.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 6.01.
"Note Majority" means, as to each Class of Notes, Holders of Notes
representing a majority of the Principal Balance of such Class of Notes.
"Note Pool Factor" means, with respect to any Distribution Date and
each Class of Notes, an eight-digit decimal figure equal to the outstanding
principal balance of such class of Notes as
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of such Distribution Date (after giving effect to all distributions on such
date) divided by the Original Principal Balance of such Class of Notes as of the
Closing Date.
"Note Principal Balance" means, as of any Distribution Date, the sum of
the Class A-1 Principal Balance, the Class A-2 Principal Balance, the Class A-3
Principal Balance, the Class A-4 Principal Balance, the Class A-5 Principal
Balance, the Class A-6 Principal Balance and the Class A-7 Principal Balance.
"Notes" means the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class A-5 Notes, Class A-6 Notes or Class A-7 Notes.
"NRSRO" means any nationally recognized statistical rating
organization.
"MN UCC" means the Uniform Commercial Code as in effect in the State of
Minnesota.
"Obligor" means a Product buyer or other Person who is indebted under a
Contract.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, President or any Vice President
of such Person and delivered to the Owner Trustee and/or the Trustee as
applicable.
"Opinion of Counsel" means a written opinion of counsel, who may,
except as expressly provided herein, be salaried counsel for the Servicer,
acceptable to the Indenture Trustee, the Owner Trustee and the Seller.
"Original Class A-1 Principal Balance" means $__________.
"Original Class A-2 Principal Balance" means $__________.
"Original Class A-3 Principal Balance" means $__________.
"Original Class A-4 Principal Balance" means $__________.
"Original Class A-5 Principal Balance" means $__________.
"Original Class A-6 Principal Balance" means $__________.
"Original Class A-7 Principal Balance" means $__________.
"Original Class B-1 Principal Balance" means $__________.
"Original Class B-2 Principal Balance" means $__________.
"Original Class Principal Balance" means, with respect to any Class,
the Original Class A-1 Principal Balance, the Original Class A-2 Principal
Balance, the Original Class A-3 Principal Balance, the Original Class A-4
Principal Balance, the Original Class A-5 Principal
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Balance, the Original Class A-6 Principal Balance, the Original Class A-7
Principal Balance, the Original Class B-1 Principal Balance or the Original
Class B-2 Principal Balance, as appropriate.
"Original Note Principal Balance" means the sum of the Original Class
A-1 Principal Balance, Original Class A-2 Principal Balance, Original Class A-3
Principal Balance, Original Class A-4 Principal Balance, Original Class A-5
Principal Balance, Original Class A-6 Principal Balance and Original Class A-7
Principal Balance.
"Owner Trustee" means Wilmington Trust Company, acting not individually
but solely as trustee, or its successor in interest, and any successor appointed
as provided in the Trust Agreement.
"Partial Principal Prepayment" means (a) any Principal Prepayment other
than a Principal Prepayment in Full and (b) any cash amount deposited in the
Collection Account pursuant to the proviso in Section 3.05(a).
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Pool Scheduled Principal Balance" means, as of any Distribution Date,
the aggregate Scheduled Principal Balance of all Contracts that were outstanding
during the related Monthly Period.
"Principal Prepayment" means a payment or other recovery of principal
on a Contract (exclusive of Liquidation Proceeds) which is received in advance
of its scheduled due date and applied upon receipt (or, in the case of a Partial
Principal Prepayment, upon the next scheduled payment date on such Contract) to
reduce the outstanding principal amount due on such Contract prior to the date
or dates on which such principal amount is due.
"Principal Prepayment in Full" means any Principal Prepayment of the
entire principal balance of a Contract.
"Products" means 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; and recreational vehicles, financed by and securing the
Contracts.
"Record Date" means the Business Day immediately preceding the related
Distribution Date.
"Related Documents" means the Trust Agreement, the Indenture, the
Administration Agreement, the Certificates, the Notes and the Underwriting
Agreement. The Related Documents executed by any party are referred to herein as
"such party's Related Documents," "its Related Documents" or by a similar
expression.
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"Repurchase Price" means, with respect to a Contract to be repurchased
pursuant to Section 3.05 or Section 5.22, an amount equal to (a) the remaining
principal amount outstanding on such Contract, plus (b) interest at the Contract
Rate on such Contract from the end of the Monthly Period with respect to which
the Obligor last made a payment through the end of the immediately preceding
Monthly Period.
"Responsible Officer" means, with respect to the Owner Trustee, the
chairman and any vice chairman of the board of directors, the president, the
chairman and vice chairman of any executive committee of the board of directors,
every vice president, assistant vice president, the secretary, every assistant
secretary, cashier or any assistant cashier, controller or assistant controller,
the treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
"Sale Date" means the Distribution Date as of which the corpus of the
Trust is sold pursuant to Section 10.04 of the Indenture or Section 9.03 of the
Trust Agreement.
"Scheduled Principal Balance" means, as to any Contract and any
Distribution Date or the Cutoff Date, the principal balance of such Contract as
of the Due Date in the Monthly Period immediately preceding such Distribution
Date or as of the Due Date immediately preceding the Cutoff Date, as the case
may be, as specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any bankruptcy
of an Obligor or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to any previous Partial Principal Prepayments and to
the payment of principal due on such Due Date and irrespective of any
delinquency in payment by, or extension granted to, the related Obligor.
"Second Priority Principal Distribution Amount" shall mean with respect
to any Distribution Date, the amount, if any, by which
(i) the aggregate Principal Balance of the Senior Notes, plus the Class
A-6 Principal Balance, minus the amount of any First Priority Principal
Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately
preceding Distribution Date, minus the aggregate Scheduled Principal
Balance of all Defaulted Contracts, minus $175,000.
"Securities" means the Notes and the Certificates.
"Securityholders" means the Noteholders and the Certificateholders.
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"Senior Interest Amount" means as to any Distribution Date, the sum of
the Class A-1 Interest Amount, the Class A-2 Interest Amount, the Class A-3
Interest Amount, the Class A-4 Interest Amount and the Class A-5 Interest
Amount.
"Service Transfer" has the meaning assigned in Section 7.02.
"Servicer" means the Conseco Finance Corp., a Delaware corporation,
until any Service Transfer hereunder and thereafter means the new servicer
appointed pursuant to Article VII.
"Servicer Advance" means, with respect to any Distribution Date, the
amount, if any, deposited by the Servicer in the Collection Account pursuant to
Section 5.13.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Servicer, as the same may be amended from time
to time.
"Standard & Poor's" means Standard & Poor's Ratings Service, or any
successor thereto; provided that if Standard & Poor's no longer has a rating
outstanding on any Class of Notes or Certificates, then references herein to
"Standard & Poor's" shall be deemed to refer to the NRSRO then rating any Class
of the Notes or Certificates (or, if more than one such NRSRO is then rating any
Class of the Notes or Certificates, to such NRSRO as may be designated by the
Servicer), and references herein to ratings by or requirements of Standard &
Poor's shall be deemed to have the equivalent meanings with respect to ratings
by or requirements of such NRSRO.
"Third Priority Principal Distribution Amount" shall mean with respect
to any Distribution Date, the amount, if any, by which
(i) the aggregate Principal Balance of the Senior Notes, plus the Class
A-6 Principal Balance, plus the Class A-7 Principal Balance, minus the
amount of any First Priority Principal Distribution Amount paid on such
Distribution Date, and minus the amount of any Second Priority
Principal Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately
preceding Distribution Date, minus the aggregate Scheduled Principal
Balance of all Defaulted Contracts, minus $175,000.
"Total Principal Distribution Amount" means, for any Distribution Date,
the sum of:
(i) the Formula Principal Distribution Amount for such
Distribution Date, plus
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(ii) the aggregate of all Formula Principal Shortfalls, if
any, for prior Distribution Dates, plus
(iii) the First Priority Principal Distribution Amount, if
any, the Second Priority Principal Distribution Amount, if any, the
Third Priority Principal Distribution Amount, if any, and the Fourth
Priority Principal Distribution Amount, if any, for such Distribution
Date, minus
(iv) all amounts actually paid on the Notes and Certificates
on prior Distribution Dates in respect of a First Priority Principal
Distribution Amount, Second Priority Principal Distribution Amount,
Third Priority Principal Distribution Amount, or Fourth Priority
Principal Distribution Amount.
"Trust" means the Conseco Finance Recreational, Equipment & Consumer
Trust 1999-__.
"Trust Accounts" means the Collection Account, the Note Distribution
Account and the Certificate Distribution Account.
"Trust Agreement" means the Trust Agreement dated as of ________ 1,
1999 between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.
"Trust Property" means the property conveyed to the Trust pursuant to
Section 2.01(a).
"Uncollectible Advance" means, with respect to any Determination Date,
the portion of any Servicer Advances which the Servicer has determined in good
faith will not be ultimately recoverable by the Servicer from insurance policies
on the Product, the Obligor or out of Net Liquidation Proceeds. The
determination by the Servicer that it has made an Uncollectible Advance shall be
evidenced by an Officer's Certificate delivered to the Trustee.
"Underwriting Agreement" means the Underwriting Agreement and related
Terms Agreement, each dated ____________, 1999, among the Originator, the Seller
and the Underwriter.
"Unpaid Class A-1 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-1 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class A-1 Interest Shortfall determined as of such immediately
prior Distribution Date, minus (z) all amounts distributed to the Holders of
Class A-1 Notes on account of any Unpaid Class A-1 Interest Shortfalls pursuant
to Section 8.02(c)(1)(ii) of the Indenture on such immediately prior
Distribution Date, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-1 Interest Rate on such remainder from such
immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class A-2 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-2 Interest
Carryover Shortfall, if any, for the
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immediately prior Distribution Date, plus (y) the Unpaid Class A-2 Interest
Shortfall determined as of such immediately prior Distribution Date, minus (z)
all amounts distributed to the Holders of Class A-2 Notes on account of any
Unpaid Class A-2 Interest Shortfalls pursuant to Section 8.02(c)(1)(ii) of the
Indenture on such immediately prior Distribution Date, plus accrued interest (to
the extent payment thereof is legally permissible) at the Class A-2 Interest
Rate on such remainder from such immediately prior Distribution Date to the
current Distribution Date.
"Unpaid Class A-3 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-3 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class A-3 Interest Shortfall determined as of such immediately
prior Distribution Date, minus (z) all amounts distributed to the Holders of
Class A-3 Notes on account of any Unpaid Class A-3 Interest Shortfall pursuant
to Section 8.02(c)(1)(ii) of the Indenture on such immediately prior
Distribution Date, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-3 Interest Rate on such remainder from such
immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class A-4 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-4 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class A-4 Interest Shortfall determined as of such immediately
prior Distribution Date, minus (z) all amounts distributed to the Holders of
Class A-4 Notes on account of any Unpaid Class A-4 Interest Shortfall pursuant
to Section 8.02(c)(1)(ii) of the Indenture on such immediately prior
Distribution Date, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-4 Interest Rate on such remainder from such
immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class A-5 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-5 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class A-5 Interest Shortfall determined as of such immediately
prior Distribution Date, minus (z) all amounts distributed to the Holders of
Class A-5 Notes on account of any Unpaid Class A-5 Interest Shortfall pursuant
to Section 8.02(c)(1)(ii) of the Indenture on such immediately prior
Distribution Date, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-5 Interest Rate on such remainder from such
immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class A-6 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-6 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class A-6 Interest Shortfall determined as of such immediately
prior Distribution Date, minus (z) all amounts distributed to the Holders of
Class A-6 Notes on account of any Unpaid Class A-6 Interest Shortfall pursuant
to Section 8.02(c)(3)(ii) of the Indenture on such immediately prior
Distribution Date, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class A-6 Interest Rate on such remainder from such
immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class A-7 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class A-7 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class A-7 Interest Shortfall determined
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as of such immediately prior Distribution Date, minus (z) all amounts
distributed to the Holders of Class A-7 Notes on account of any Unpaid Class A-7
Interest Shortfall pursuant to Section 8.02(c)(5)(ii) of the Indenture on such
immediately prior Distribution Date, plus accrued interest (to the extent
payment thereof is legally permissible) at the Class A-7 Interest Rate on such
remainder from such immediately prior Distribution Date to the current
Distribution Date.
"Unpaid Class B-1 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class B-1 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class B-1 Certificate Interest Shortfall determined as of such
immediately prior Distribution Date, minus (z) all amounts distributed to the
Holders of Class B-1 Certificates on account of any Unpaid Class B-1 Interest
Shortfall pursuant to Section 5.2(a)(1) of the Trust Agreement on such
immediately prior Distribution Date, plus accrued interest (to the extent
payment thereof is legally permissible) at the Class B-1 Rate on such remainder
from such immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class B-2 Interest Shortfall" means, as to any Distribution
Date, the amount, if any, of the remainder of (x) the Class B-2 Interest
Carryover Shortfall, if any, for the immediately prior Distribution Date, plus
(y) the Unpaid Class B-2 Interest Shortfall determined as of such immediately
prior Distribution Date, minus (z) all amounts distributed to the Holders of
Class B-2 Certificates on account of any Unpaid Class B-2 Interest Shortfall
pursuant to Section 5.2(a)(4) of the Trust Agreement on such immediately prior
Distribution Date, plus accrued interest (to the extent payment thereof is
legally permissible) at the Class B-2 Rate on such remainder from such
immediately prior Distribution Date to the current Distribution Date.
"Unpaid Class B-2 Principal Liquidation Loss" means, as to any
Distribution Date, the amount, if any, by which the sum of all Class B-2
Certificate Principal Liquidation Losses for all prior Distribution Dates is in
excess of the amounts distributed on prior Distribution Dates to the Holders of
Class B-2 Certificates pursuant to Section 5.2(a)(5) of the Trust Agreement or
pursuant to a Guaranty Payment.
"Unpaid Senior Interest Shortfall" means as to any Distribution Date,
the sum of Unpaid Class A-1 Interest Shortfall, Unpaid Class A-2 Interest
Shortfall, Unpaid Class A-3 Interest Shortfall, Unpaid Class A-4 Interest
Shortfall and Unpaid Class A-5 Interest Shortfall for such Distribution Date.
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ARTICLE II
TRANSFER OF CONTRACTS
SECTION 2.01. Transfer of Contracts.
(a) Subject to the terms and conditions of this Agreement, the Seller
hereby irrevocably and unconditionally transfers, assigns, sets over and
otherwise conveys to the Trust by execution of an Assignment substantially in
the form of Exhibit A hereto all right, title and interest of the Seller in and
to (1) the Contracts (including, without limitation, the Collateral Security),
and all moneys payable thereon or in respect to the Contracts, including any
liquidation proceeds therefrom but excluding payments due on the Contracts prior
to the Cutoff Date, (2) the Insurance Policies on any Products securing a
Contract for the benefit of the creditor of such Contract and all blanket
insurance policies to the extent they relate to the Contracts, (3) all rights of
the Seller under the Transfer Agreement and each Subsequent Transfer Agreement,
(4) the Errors and Omissions Protection Policy as such policy relates to the
Contracts, (5) all items contained in the Contract Files, (6) the Trust Accounts
and all funds on deposit therein from time to time and all investments and
proceeds thereof (including all income thereon), and (7) all proceeds and
products of the foregoing.
(b) Although the parties intend that the conveyance pursuant to this
Agreement of the Seller's right, title and interest in and to the Contracts and
the Collateral Security pursuant to this Agreement shall constitute a purchase
and sale and not a pledge of security for loans from the Certificateholders
and/or the Noteholders, if such conveyances are deemed to be a pledge of
security for loans from the Certificateholders, the Noteholders or any other
Persons (the "Secured Obligations"), the parties intend that the rights and
obligations of the parties to the Secured Obligations shall be established
pursuant to the terms of this Agreement. The parties also intend and agree that
the Seller shall be deemed to have granted to the Trust, and the Seller does
hereby grant to the Trust, a perfected first-priority security interest in the
items designated in Section 2.01(a)(1) through 2.01(a)(6) above, and all
proceeds thereof, to secure the Secured Obligations, and that this Agreement
shall constitute a security agreement under applicable law. If the trust created
by this Agreement terminates prior to the satisfaction of the claims of any
Person under any Certificates, any Notes or the Secured Obligations, the
security interest created hereby shall continue in full force and effect and the
Owner Trustee shall be deemed to be the collateral agent for the benefit of such
Person.
SECTION 2.02. Conditions to Acceptance by Owner Trustee.
As conditions to the Owner Trustee's execution and delivery of the
Notes on behalf of the Trust and the execution, authentication and delivery of
the Certificates on behalf of the Trust on the Closing Date, the Owner Trustee
on behalf of the Trust shall have received the following on or before the
Closing Date:
(a) The List of Contracts, certified by the Chairman of the
Board, President or any Vice President of the Originator (which
certification may be part of the Assignment delivered pursuant to
Section 2.02(f)).
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(b) A letter from KPMG Peat Marwick or another nationally
recognized accounting firm, stating that such firm has reviewed the
Initial Contracts on a statistical sampling basis and, based on such
sampling, concluding that, except with respect to those Initial
Contracts so specified in the letter, the Contracts conform in all
material respects to the List of Contracts, to a confidence level of
97.5%, with an error rate generally not in excess of 1.8%.
(c) Copies of resolutions of the board of directors of the
Seller and the Originator or of the executive committee of the board of
directors of the Seller and the Originator approving the execution,
delivery and performance of this Agreement, its Related Documents and
the transactions contemplated hereunder, certified in each case by the
secretary or an assistant secretary of the Seller and the Originator,
as applicable.
(d) Officially certified recent evidence of due incorporation
and good standing of the Seller under the laws of the State of
Minnesota and of the Servicer under the laws of the State of Delaware.
(e) Evidence of filing with the Secretary of State of
Minnesota of a UCC-1 financing statement, executed by the Seller as
debtor, naming the Trust as secured party and listing the Contracts as
collateral.
(f) An executed copy of the Assignment substantially in the
form of Exhibit A hereto.
(g) Evidence of continued coverage of the Servicer under the
Errors and Omissions Protection Policy.
(h) Evidence of deposit in the Collection Account of all funds
received with respect to the Contracts prior to the Closing Date which
were due on or after the Cutoff Date, together with an Officer's
Certificate of the Servicer to the effect that such amount is correct.
(i) An Officer's Certificate of the Originator confirming that
the Originator's internal audit department has reviewed the original or
a copy of each Contract and each Contract File, that each Contract and
Contract File conforms in all material respects with the List of
Contracts and that each Contract File is complete in all material
respects and that each Product securing a Contract is covered by an
Insurance Policy as required by Section 3.02(f).
(j) Such other documents and certificates as the Trust may
request.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each of the Seller and the Originator makes the following
representations and warranties, effective as of the Closing Date, on which the
Trust will rely in accepting the Contracts and the other Trust Property in trust
and on which the Owner Trustee relies in executing and delivering, on behalf of
the Trust, the Certificates and the Notes. The repurchase obligation of the
Originator set forth in Section 3.05 constitutes the sole remedy available to
the Trust, the Owner Trustee, the Indenture Trustee, and the Securityholders for
a breach of a representation or warranty of the Originator set forth in the
Officer's Certificate delivered pursuant to Section 2.02(i) or Section 3.02,
3.03 or 3.04 of this Agreement.
SECTION 3.01. Representations and Warranties Regarding the Seller and
Originator and Covenants of the Originator.
The representations and warranties set forth in this Section 3.01 shall
survive delivery by the Seller of the Loans and the Loan Files. As promptly as
practicable, but in any event within 60 days of its discovery or its receipt of
notice from any Person of a material breach of any representation or warranty in
this Section 3.01, the Originator shall cure such breach in all material
respects.
(a) Organization and Good Standing. Each of the Seller and the
Originator, as applicable is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and has
the corporate power to own its assets and to transact the business in which it
is currently engaged. Each of the Seller and the Originator, as applicable, is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Seller.
(b) Authorization; Binding Obligations. Each of the Seller and the
Originator has the power and authority to make, execute, deliver and perform
this Agreement and its Related Documents and all of the transactions
contemplated under this Agreement and thereunder and to sell and assign the
Trust Property to be sold and assigned to the Trust by it and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement and its Related Documents. When executed and delivered, this
Agreement and its Related Documents will constitute the legal, valid and binding
obligations of each of the Seller and the Originator enforceable in accordance
with their terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies.
(c) No Consent Required. Neither the Seller nor the Originator is
required to obtain the consent of any other party or any consent, license,
approval or authorization from, or
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registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.
(d) No Violations. The execution, delivery and performance by the
Seller and the Originator of this Agreement and its Related Documents and the
fulfillment of their terms will not violate any provision of any existing law or
regulation or any order or decree of any court or the related Articles of
Incorporation or Bylaws of the Seller and the Originator, or constitute a
material breach of any mortgage, indenture, contract or other agreement to which
either the Seller or the Originator is a party or by which either the Seller or
the Originator may be bound.
(e) Litigation. No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of the Seller and the Originator threatened, against the Seller and
the Originator or any of its properties or with respect to this Agreement, the
Related Documents, or the Securities which, if adversely determined, would in
the opinion of the Seller and the Originator have a material adverse effect on
the transactions contemplated by this Agreement and Related Documents.
(f) Licensing. Each of the Seller and the Originator is duly registered
as a finance company in each state in which Contracts were originated, to the
extent such registration is required by applicable law.
(g) Chief Executive Office. The chief executive office of each of the
Seller and the Originator is at 1100 Landmark Towers, 345 St. Peter Street, St.
Paul, Minnesota 55102-1639.
(h) Absolute Sale. The Seller intends that the transfer of Contracts
and the Collateral Security constitute a complete and absolute sale, removing
the Contracts and the Collateral Security from the Seller's estate, for purposes
of Section 541 of the United States Bankruptcy Code, as amended.
(i) No Default. Neither the Seller nor the Originator is 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, which default
would materially and adversely affect its condition (financial or other) or
operations or its properties or the consequences of which would materially and
adversely affect its performance hereunder and under its other Related
Documents. Neither the Seller nor the Originator is in default under any
agreement involving financial obligations or on any outstanding obligation which
would materially adversely impact its financial condition or operations or legal
documents associated with the transaction contemplated by this Agreement or the
other Related Documents.
SECTION 3.02. Representations and Warranties Regarding Each Contract.
The Originator has made the following representations and warranties to
the Seller in the Transfer Agreement, which representations and warranties the
Seller has assigned to the Trust for the benefit of the Noteholders and the
Certificateholders, as of the Closing Date with respect to each Initial Loan
and, as of each Subsequent Transfer Date, with respect to each Subsequent Loan
identified on the List of Loans attached to the related Subsequent Transfer
Instrument:
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(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 the Seller, the Originator or
any Person acting at the request of the Seller or the Originator) 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) Insurance Coverage. The Product securing the Contract is covered by
an Insurance Policy to the extent (if any) required by Section 5.09. All
premiums due as of the Closing Date on such insurance have been paid in full.
(g) Origination. The Contract was originated by a dealer of goods of a
class including the Product subject to the Contract, or by the Originator, in
the regular course of its business and, if originated by a dealer, was purchased
by the Originator in the regular course of its business.
(h) 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 or an interest therein pursuant to the Transfer Agreement or this
Agreement, or pursuant to transfers of the Securities, unlawful or render the
Contract unenforceable.
(i) 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 the Originator shall
for at least the period of this Agreement, maintain in its possession, available
for the Owner Trustee's inspection, and shall deliver to the Owner Trustee upon
demand, evidence of compliance with all such requirements. Such compliance is
not affected by the Trust's ownership of the Contract.
(j) Contract in Force. The Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the Product securing the
Contract has not been released from the lien of the Contract in whole or in
part.
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(k) Valid Security Interest. The Contract creates a valid and
enforceable perfected first priority security interest in favor of the
Originator in the Product covered thereby as security for payment of the Cutoff
Date Principal Balance of such Contract. The Originator has assigned all of its
right, title and interest in such Contract, including the security interest in
the Product covered thereby, to the Seller. The Seller has and will have a valid
and perfected and enforceable first priority security interest in such Contract
and Product.
(l) 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.
(m) Good Title. In the case of a Contract purchased from a dealer, the
Originator 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. The Originator has not sold, assigned or pledged
the Contract to any person and prior to the transfer of the Contract by the
Originator to the Seller, the Originator 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 Seller. No financing statement describing or referring to any
Contract (other than any financing statement naming the Seller as secured party,
or filed by the Originator as secured party to perfect its interest in a
Contract purchased from a dealer) is on file in any public office.
(n) 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). The Originator has
not waived any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (b) above. As of the Closing
Date, the related Product is, to the best of the Originator's knowledge, free of
damage and in good repair.
(o) No Liens. There are, to the best of the Originator's knowledge, no
liens or claims which have been filed for work, labor or materials affecting the
Product securing the Contract which are or may be liens prior to, or equal or
coordinate with, the lien of the Contract.
(p) Equal Installments. Each Contract has a fixed Contract Rate and
provides for substantially level monthly payments which fully amortize the loan
over its term.
(q) Enforceability. The Contract 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
security provided thereby.
(r) One Original. There is only one original executed Contract (other
than an original in the possession of the relevant Obligor), which Contract has
been delivered to the Trust or its custodian on or before the Closing Date. Each
Contract has been stamped to reflect the assignment of such Contract to the
Trust.
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(s) Notation of Security Interest. With respect to each Contract, if
the related 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 Product is being applied for such title document will be
issued within 180 days and will show, the Originator as the holder of a first
priority security interest in such Product; if the related 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 Product, such
filings or recordings have been duly made and show the Originator as secured
party; and if the related 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 the Originator as secured party or mortgagee. In any case, the
Trust 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 the Originator and any trustee in bankruptcy of the Originator)
claiming an interest in such Product.
(t) No Government Contracts. No Obligor is the United States government
or an agency, authority, instrumentality or other political subdivision of the
United States government.
SECTION 3.03. Representations and Warranties Regarding the Contracts
in the Aggregate.
(a) Amounts. The aggregate principal amounts payable by Obligors under
the Contracts as of the Cutoff Date equal the Cutoff Date Pool Principal
Balance.
(b) Characteristics. The Contracts have the following characteristics
as of the Cutoff Date: (i) the Obligors on not more than 15% of the Contracts by
Cutoff Date Pool Principal Balance were located in any one state; (ii) no
Contract has a remaining maturity of fewer than 8 months or more than 240
months; (iii) the final scheduled payment date on the Contract with the latest
maturity is in ___________; (iv) each Contract had an original principal balance
of at least $________ and not more than $________ and a remaining principal
balance as of the Cutoff Date of at least $1,003.39 and not more than $________;
and (v) each Contract had a contractual rate of interest of at least _____% and
not more than _____%.
(c) Computer Tape. The Computer Tape made available by the Originator
was complete and accurate as of its date and includes a description of the same
Contracts that are described in the List of Contracts.
(d) Marking Records. By the Closing Date, the Originator has caused the
portions of the Electronic Ledger relating to the Contracts to be clearly and
unambiguously marked to indicate that such Contracts constitute part of the
Trust and are owned by the Trust in accordance with the terms of the trust
created hereunder.
(e) No Adverse Selection. Except for the effect of the representations
and warranties made in Sections 3.02 and 3.03 hereof, no adverse selection
procedures have been employed in selecting the Contracts.
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SECTION 3.04. Representations and Warranties Regarding the Contract
Files.
(a) Possession. Immediately prior to the Closing Date, the Originator
will have possession of each original Contract and the related Contract File and
there are and there will be no custodial agreements in effect materially and
adversely affecting the rights of the Originator to make, or cause to be made,
any delivery required hereunder.
(b) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Contracts and the Contract Files by the Originator pursuant to the Transfer
Agreement, and by Seller pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
SECTION 3.05. Repurchase of Contracts for Breach of Representations
and Warranties.
(a) The Originator shall repurchase a Contract, at its Repurchase
Price, not later than the last day of the Monthly Period prior to the Monthly
Period that is 90 days after the day on which the Originator, the Seller, the
Servicer, the Owner Trustee or the Indenture Trustee first discovers, or the
Originator or the Servicer should have discovered, a breach of a representation
or warranty of the Originator set forth in Sections 3.02, 3.03, 3.04 or 3.06 of
this Agreement or the Officer's Certificate delivered pursuant to Section
2.02(i) that materially adversely affects the interest of the Trust or the
Securityholders in such Contract and which breach has not been cured; provided,
however, that (i) in the event that a party other than the Originator first
becomes aware of such a breach, such discovering party shall notify the
Originator in writing within five Business Days of the date of such discovery
and (ii) with respect to any Contract incorrectly described on the List of
Contracts with respect to unpaid principal balance, which the Originator would
otherwise be required to repurchase pursuant to this Section, the Originator
may, in lieu of repurchasing such Contract, deposit in the Collection Account no
later than the first Determination Date that is 90 or more days from the date of
such discovery cash in an amount sufficient to cure such deficiency or
discrepancy. Any such cash so deposited shall be accounted for as a collection
of principal or interest on such Contract, according to the nature of the
deficiency or discrepancy. Notwithstanding any other provision of this
Agreement, the obligation of the Originator under this Section shall not
terminate upon a Service Transfer pursuant to Article VII. Notwithstanding the
foregoing, the Originator shall repurchase any Contract, at such Contract's
Repurchase Price, if the Originator has failed to deliver the related Contract
File to the Servicer, for the benefit of the Trust within 30 days of the Closing
Date.
(b) Upon receipt by the Trust by deposit in the Collection Account of
the Repurchase Price under subsection (a) above, and upon receipt of a
certificate of a Servicing Officer in the form attached hereto as Exhibit B, the
Indenture Trustee shall release its security interest in such Contract and the
Owner Trustee on behalf of the Trust shall convey and assign to the Originator
all of the Securityholders' right, title and interest in the repurchased
Contract without recourse, representation or warranty, except as to the absence
of liens, charges or encumbrances created by or arising as a result of actions
of the Trust.
(c) The Originator shall defend and indemnify the Owner Trustee, the
Trust, the Indenture Trustee, and the Securityholders against all costs,
expenses, losses, damages, claims
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and liabilities, including reasonable fees and expenses of counsel, arising out
of any claims which may be asserted against or incurred by any of them as a
result of any third-party action arising out of any breach of any representation
set forth in the Officer's Certificate delivered pursuant to Section 2.02(i) or
Section 3.02, 3.03, 3.04 or 3.06 of this Agreement.
SECTION 3.06. Additional Representations and Warranties.
The Seller hereby represents and warrants to the Trust for the benefit
of the Noteholders and the Certificateholders, as of the Closing Date with
respect to each Initial Loan and as of the related Subsequent Transfer Date with
respect to each Subsequent Loan:
(a) 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 under this Agreement or pursuant to transfers of the Notes or
Certificates unlawful or render the Loan unenforceable. The Seller has duly
executed a valid blanket assignment of the Loans transferred to the Trust, and
has transferred all its right, title and interest in such Loans. The Assignment
or Subsequent Transfer Instrument, any and all documents executed and delivered
by the Seller pursuant to Section 2.01(a) or Section 2.03, as applicable, and
this Agreement each constitutes the legal, valid and binding obligation of the
Seller enforceable in accordance with its respective terms.
(b) Good Title. The Seller is the sole owner of the Loan and has the
authority to sell, transfer and assign such Loan to the Trust under the terms of
this Agreement. There has been no assignment, sale or hypothecation of the Loan
by the Seller, which hypothecation terminates upon sale of the Loan to the
Trust. The Seller has good and marketable title to the Loan, free and clear of
any encumbrance, equity, loan, pledge, charge, claim, or security interest of
any type and has full right to transfer the Loan to the Trust.
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ARTICLE IV
PERFECTION OF TRANSFER AND
PROTECTION OF SECURITY INTERESTS
SECTION 4.01. Custody of Contracts.
(a) Subject to the terms and conditions of this Section, the Trust
appoints the Servicer to maintain custody of the Contract Files for the benefit
of the Trust and the Servicer shall maintain custody of the Contract Files for
the benefit of the Trust and shall act as custodian therefor.
(b) The Servicer agrees to maintain the related Contract Files at its
office where they are currently maintained, or at such other offices of the
Servicer in the State of Minnesota as shall from time to time be identified to
the Trust by written notice. The Servicer may temporarily move individual
Contract Files or any portion thereof without notice as necessary to conduct
collection and other servicing activities in accordance with its customary
practices and procedures.
(c) As custodian, the Servicer shall have and perform the following
powers and duties:
(i) hold the Contract Files on behalf of the Trust, Indenture
Trustee and the Securityholders, maintain accurate records pertaining
to each Contract to enable it to comply with the terms and conditions
of this Agreement, maintain a current inventory thereof, conduct annual
physical inspections of Contract Files held by it under this Agreement
and certify to the Trust and the Indenture Trustee annually that it
continues to maintain possession of such Contract Files;
(ii) implement policies and procedures, in writing and signed
by a Servicing Officer, with respect to persons authorized to have
access to the Contract Files on the Servicer's premises and the
receipting for Contract Files taken from their storage area by an
employee of the Servicer for purposes of servicing or any other
purposes; and
(iii) attend to all details in connection with maintaining
custody of the Contract Files on behalf of the Trust, the Indenture
Trustee and the Securityholders.
(d) In performing its duties under this Section, the Servicer agrees to
act with reasonable care, using that degree of skill and care that it exercises
with respect to similar contracts owned and/or serviced by it. The Servicer
shall promptly report to the Trust and the Indenture Trustee any failure by it
to hold the Contract Files as herein provided and shall promptly take
appropriate action to remedy any such failure. In acting as custodian of the
Contract Files, the Servicer agrees further not to assert any beneficial
ownership interests in the Contracts or the Contract Files. The Servicer agrees
to indemnify the Trust, Owner Trustee, the Indenture Trustee and the
Securityholders for any and all liabilities, obligations, losses, damages,
payments, costs or expenses of any kind whatsoever which may be imposed on,
incurred or
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asserted against them as the result of any act or omission by the Servicer
relating to the maintenance and custody of the Contract Files; provided,
however, that the Servicer will not be liable for any portion of any such amount
resulting from the negligence or willful misconduct of any indemnified party.
SECTION 4.02. Filings.
On or prior to the Closing Date, the Seller shall cause the UCC-1
financing statement referred to in Section 2.02(e) to be filed. The Servicer on
behalf of the Trust shall cause to be filed all necessary continuation
statements of the UCC-1 financing statement. From time to time the Servicer
shall take and cause to be taken such actions and execute such documents as are
necessary to perfect and protect the Securityholders' interests in the Contracts
and their proceeds and the Products against all other persons, including,
without limitation, the filing of financing statements, amendments thereto and
continuation statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title. The
Servicer will maintain the first priority perfected security interest of the
Trust in each Product so long as the related Contract is property of the Trust.
SECTION 4.03. Name Change or Relocation.
(a) During the term of this Agreement, the Seller shall not change its
name, identity or structure or relocate its chief executive office without first
giving notice thereof to the Owner Trustee, the Indenture Trustee and the
Servicer. In addition, following any such change in the name, identity,
structure or location of the chief executive office of the Seller, the Seller
shall given written notice of any such change to Standard & Poor's and Fitch.
(b) If any change in the Seller's name, identity or structure or the
relocation of its chief executive office would make any financing or
continuation statement or notice of lien filed under this Agreement seriously
misleading within the meaning of applicable provisions of the UCC or any title
statute or would cause the security interest evidenced by any such financing or
continuation statement or notice of lien to become unperfected (whether
immediately or with lapse of time), the Seller, no later than five days after
the effective date of such change, shall file, or cause to be filed, such
amendments or financing statements as may be required to preserve, perfect and
protect the Securityholders' interests in the Contracts, including the
Collateral Security and all proceeds thereof.
SECTION 4.04. Chief Executive Office.
During the term of this Agreement, the Seller will maintain its chief
executive office in one of the States of the United States, except Tennessee.
SECTION 4.05. Costs and Expenses.
The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Securityholders'
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right, title and interest in and to the Contracts, including the Collateral
Security and all proceeds thereof.
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ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01. Responsibility for Contract Administration.
The Servicer will have the sole obligation to manage, administer,
service and make collections on the Contracts and perform or cause to be
performed all contractual and customary undertakings of the holder of the
Contracts to the Obligor. The Servicer may delegate duties under this Agreement
to any of the Servicer's Affiliates. In addition, the Servicer may at any time
perform the specific duty of repossessing Products through subcontractors who
are in the business of servicing consumer receivables. The Servicer may also
perform other specific duties through subcontractors; provided that the Servicer
gives notice to each of the Trust, the Indenture Trustee, Standard & Poor's and
Fitch of the use of any such subcontractors; and provided further that no such
delegation of duties by the Servicer shall relieve the Servicer of its
responsibility with respect thereto. The Owner Trustee, on behalf of the Trust
and at the request of a Servicing Officer, shall furnish the Servicer with any
powers of attorney or other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder. Conseco
Finance Corp. is hereby appointed the Servicer until such time as any Service
Transfer shall be effected under Article VII.
SECTION 5.02. Standard of Care.
In managing, administering, servicing and making collections on the
Contracts pursuant to this Agreement, the Servicer will exercise that degree of
skill and care consistent with the highest degree of skill and care that the
Servicer exercises with respect to similar contracts serviced by the Servicer;
provided, however, that notwithstanding the foregoing, the Servicer shall not
release or waive the right to collect the unpaid balance on any Contract.
SECTION 5.03. Records.
The Servicer shall, during the period it is servicer hereunder,
maintain such books of account and other records as will enable the Trust and
the Indenture Trustee to determine the status of each Contract.
SECTION 5.04. Inspection; Computer Tape.
(a) At all times during the term hereof, the Servicer shall afford the
Trust and Indenture Trustee and their authorized agents reasonable access during
normal business hours to the Servicer's records relating to the Contracts and
will cause its personnel to assist in any examination of such records by the
Trust and Indenture Trustee or their authorized agents. The examination referred
to in this Section will be conducted in a manner which does not unreasonably
interfere with the Servicer's normal operations or customer or employee
relations. Without otherwise limiting the scope of the examination the Trust and
Indenture Trustee may make, the Trust and Indenture Trustee may, using generally
accepted audit procedures, verify the status of each Contract and review the
Electronic Ledger and records relating thereto for
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conformity to Monthly Reports prepared pursuant to Section 5.14 and compliance
with the standards represented to exist as to each Contract in this Agreement.
The Servicer shall provide to any Securityholder such access to the
records relating to the Contracts only in such cases where the Servicer is
required by applicable statutes or regulations, whether applicable to the
Servicer or to such Securityholder, to permit Securityholder to review such
documentation. In each case, such access shall be afforded without charge but
only upon reasonable request and during normal business hours. Nothing in this
Section shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section. Any
Securityholder, by its acceptance of a Certificate or Note (or by acquisition of
its beneficial interest therein), as applicable, shall be deemed to have agreed
to keep confidential and not to use for its own benefit any information obtained
by it pursuant to this Section, except as may be required by applicable law.
(b) At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office for
inspection by the Trust and the Indenture Trustee.
(c) On or before the ninth Business Day of each month, the Servicer
will provide to the Indenture Trustee a Computer Tape setting forth a list of
all the outstanding Contracts and the outstanding principal balance of each such
Contract as of the end of the next preceding Monthly Period.
SECTION 5.05. Collections.
(a) The Servicer shall pay into the Collection Account: (i) as promptly
as practicable (not later than the next Business Day) following receipt thereof
all payments from Obligors and Net Liquidation Proceeds (other than late payment
penalty fees, extension fees and assumption fees, which shall be retained by the
Servicer as additional compensation for servicing the Contracts, and any
payments that were due prior to the Cutoff Date, which shall be remitted to the
Company); and (ii) on the Business Day immediately prior to each Distribution
Date, all Servicer Advances required to be made with respect to such
Distribution Date pursuant to Section 5.13.
(b) If the Servicer so directs, the institution maintaining the
Collection Account shall, in the name of the Indenture Trustee in its capacity
as such, invest the amounts in the Collection Account in Eligible Investments
that mature not later than one Business Day prior to the next succeeding
Distribution Date. Once such funds are invested, such institution shall not
change the investment of such funds. All income and gain from such investments
shall be added to the Collection Account and distributed on such Distribution
Date pursuant to Section 8.03(a). The Trustee and the Indenture Trustee shall in
no way be liable for losses on amounts invested in accordance with the
provisions hereof. The Servicer shall deposit in the Collection Account an
amount equal to any net loss on such investments immediately as realized. Funds
in the
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Collection Account not so invested must be insured to the extent permitted by
law by the Federal Deposit Insurance Corporation.
SECTION 5.06. Enforcement.
(a) The Servicer shall, consistent with customary servicing procedures
and the terms of this Agreement, act with respect to the Contracts in such
manner as will maximize the receipt of principal and interest on such Contracts
and Liquidation Proceeds with respect to Liquidated Contracts.
(b) The Servicer may sue to enforce or collect upon Contracts, in its
own name, if possible, or as agent for the Trust. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement shall
be deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Owner Trustee on behalf of the Trust shall, at the Servicer's
expense, take such steps as the Servicer deems necessary to enforce the
Contract, including bringing suit in its name or the names of the
Securityholders.
(c) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with the
Servicer's usual practice. Without limitation of the foregoing, in exercising
recourse rights, the Servicer is authorized on behalf of the Trust to reassign
the Contract or to resell the related Product to the person against whom
recourse exists at the price set forth in the document creating the recourse.
(d) So long as the Originator is the Servicer, the Servicer may grant
to the Obligor on any Contract any rebate, refund or adjustment out of the
Collection Account that the Servicer in good faith believes is required because
of prepayment in full of the Contract. The Servicer will not permit any
rescission or cancellation of any Contract.
(e) So long as Conseco Finance Corp. is the Servicer, the Servicer may,
consistent with its customary servicing procedures and consistent with Section
5.02, grant to the Obligor on any Contract an extension of payments due under
such Contract, provided that Obligors may not be solicited for extensions and no
more than one extension of payments under a Contract may be granted in any
twelve-month period. The Servicer may not permit the extension of any payment
beyond _____________.
(f) The Servicer shall enforce any due-on-sale clause in a Contract if
such enforcement is called for under its then current servicing policies for
obligations similar to the Contracts, provided that such enforcement is
permitted by applicable law and will not adversely affect any applicable
insurance policy. If an assumption of a Contract is permitted by the Servicer,
upon conveyance of the related real property or Product the Servicer shall use
its best efforts to obtain an assumption agreement in connection therewith.
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(g) Any provision of this Agreement to the contrary notwithstanding,
the Servicer shall not agree to the modification or waiver of any provision of a
Contract, if such modification or waiver, when aggregated with all previous
modifications or waivers of the provisions of Contracts, would cause any Notes
to be treated as having been exchanged for other Notes in a taxable exchange
under Section 1001 of the Code or any proposed, temporary or final Treasury
Regulations issued thereunder.
SECTION 5.07. Satisfaction of Contracts.
Upon payment in full on any Contract, the Servicer will notify the
Trust, the Indenture Trustee, and the Originator (if the Originator is not the
Servicer) on the next succeeding Distribution Date by certification of a
Servicing Officer (which certification shall include a statement to the effect
that all amounts received in connection with such payments which are required to
be deposited in the Collection Account pursuant to Section 5.05 have been so
deposited). The Servicer is authorized to execute an instrument in satisfaction
of such Contract and to do such other acts and execute such other documents as
the Servicer deems necessary to discharge the Obligor thereunder and eliminate
the lien on the related Product. The Servicer shall determine when a Contract
has been paid in full; to the extent that insufficient payments are received on
a Contract credited by the Servicer as prepaid or paid in full and satisfied,
the shortfall shall be paid by the Servicer out of its own funds.
SECTION 5.08. Costs and Expenses.
All costs and expenses incurred by the Servicer in carrying out its
duties hereunder, including all fees and expenses incurred in connection with
the enforcement of Contracts (including enforcement of defaulted Contracts and
repossessions of Products securing such Contracts) shall be paid by the Servicer
and the Servicer shall not be entitled to reimbursement hereunder, except that
the Servicer shall be reimbursed out of the Liquidation Proceeds of a Liquidated
Contract for Liquidation Expenses incurred by it. The Servicer shall not incur
such Liquidation Expenses unless it determines in its good faith business
judgment that incurring such expenses will increase the Net Liquidation Proceeds
on the related Contract.
SECTION 5.09. Maintenance of Insurance.
(a) Except as otherwise provided in subsection (b) of this Section
5.09, the Servicer shall cause to be maintained:
(i) with respect to each Contract financing the purchase of an
aircraft, one or more insurance policies providing complete coverage in
flight and on the ground;
(ii) with respect to each Contract financing the purchase of a
truck, one or more physical damage insurance policies; and
(iii) with respect to each Contract financing the purchase of
a Product other than an aircraft, truck or keyboard instrument, with an
original principal balance of
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$7,501 or more, one or more insurance policies providing comprehensive
and collision coverage that is customary for goods of the class
including the relevant Product;
in each case, issued by a company authorized to issue such policies in the state
in which the related Product is located and in an amount which is not less than
the maximum insurable value of such Product or the principal balance due from
the Obligor on the related Contract, whichever is less; provided, however, that
the amount of coverage provided by each Insurance Policy shall be sufficient to
avoid the application of any co-insurance clause contained therein; and
provided, further, that such Insurance Policies may provide for customary
deductible amounts. Each Insurance Policy caused to be maintained by the
Servicer shall contain a standard loss payee clause in favor of the Servicer and
its successors and assigns. If any Obligor is in default in the payment of
premiums on its Insurance Policy or Policies, the Servicer shall pay such
premiums out of its own funds and may separately add such premium to the
Obligor's obligation as provided by the Contract, but shall not add such premium
to the remaining principal balance of the Contract.
(b) The Servicer may, in lieu of causing individual Insurance Policies
to be maintained pursuant to subsection (a) of this Section 5.09, maintain one
or more blanket insurance policies covering any losses caused by damage to such
Product that would have been covered by an individual Insurance Policy. Any such
blanket policy shall be substantially in the form and in the amount carried by
the Servicer as of the date of this Agreement. The Servicer shall pay the
premium for such policy on the basis described therein and shall deposit into
the Collection Account from its own funds any deductible amount with respect to
claims under such blanket insurance policy relating to the Contracts. The
Servicer shall not, however, be required to deposit any deductible amount with
respect to claims under individual Insurance Policies maintained pursuant to
subsection (a) of this Section. If the insurer under such blanket insurance
policy shall cease to be acceptable to the Servicer, the Servicer shall exercise
its best reasonable efforts to obtain from another insurer a replacement policy
comparable to such policy.
(c) With respect to each Product that has been repossessed in
connection with a defaulted Contract, the Servicer shall either (i) maintain one
or more Insurance Policies thereon or (ii) self-insure such Products and deposit
into the Collection Account from its own funds any losses caused by damage to
such Product that would have been covered by an Insurance Policy.
(d) The Servicer shall keep in force throughout the term of this
Agreement (i) a policy or policies of insurance covering errors and omissions
for failure to maintain insurance as required by this Agreement and (ii) a
fidelity bond. Such policy or policies and such fidelity bond shall be in such
form and amount as is generally customary among Persons which service a
portfolio of retail installment sales agreements having an aggregate principal
amount of $100,000,000 or more and which are generally regarded as servicers
acceptable to institutional investors.
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SECTION 5.10. Repossession.
Notwithstanding the standard of care specified in Section 5.02, the
Servicer shall commence procedures for the repossession of any Product or take
such other steps that in the Servicer's reasonable judgment will maximize the
receipt of principal and interest or Net Liquidation Proceeds with respect to
the Contract secured by such Product (which may include retitling) subject to
the requirements of the applicable state and federal law, no later than five
Business Days after the time when such Contract becomes a Defaulted Contract. In
connection with such repossession or other conversion, the Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be consistent with Section 5.02. In the event that title to any Product is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Indenture Trustee, as trustee, or, at
its election, to its nominee on behalf of the Indenture Trustee, as trustee.
SECTION 5.11. Commingling of Funds.
So long as the Originator is Servicer, any collections in respect of
Contracts collected by the Originator shall, prior to the deposit thereof in the
Collection Account, be held in bank accounts entitled substantially as follows:
"[name of depository], as agent for U.S. Bank Trust National Association and
other trustees and Conseco Finance Corp., as their interests may appear."
SECTION 5.12. Retitling; Security Interests.
(a) If, at any time, a Service Transfer has occurred and the Originator
is no longer the Servicer and the new Servicer is unable to foreclose upon a
Product because the title document for such Product does not show such Servicer
or the Indenture Trustee as the holder of the first priority security interest
in the Product, such Servicer shall take all necessary steps to apply for a
replacement title document showing it or the Indenture Trustee as the secured
party.
(b) In order to facilitate the Servicer's actions, as described in
subsection (a) of this section, the Originator will provide the Servicer with
any necessary power of attorney permitting it to retitle the Product. If the
Servicer is still unable to retitle the Product, the Originator will take all
actions necessary to act with the Servicer to foreclose upon the Product.
(c) If at any time during the term of this Agreement the Trust or the
Indenture Trustee receives written notice from the Originator or the Servicer
that the Originator does not have a long-term senior debt rating from Standard &
Poor's of BBB- or higher and from Fitch of BBB or higher, or if the Trust or the
Indenture Trustee otherwise becomes aware of the same, the Trust, the Indenture
Trustee and the Servicer, at the Originator's expense, shall take such action as
may, in the opinion of counsel to the Indenture Trustee, be necessary to perfect
the security interests in the Products securing the Contracts in the name of the
Indenture Trustee by amending the title documents of such Products or by such
other reasonable means as may, in the opinion of counsel to the Indenture
Trustee, be necessary or prudent. The Originator agrees to pay all expenses
related to such perfection and to take all action necessary therefor.
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SECTION 5.13. Servicer Advances.
Not later than the Business Day immediately preceding each Distribution
Date, the Servicer shall advance to the Trust (each such advance, a "Servicer
Advance") all Delinquent Payments for the immediately preceding Monthly Period
by depositing the aggregate amount of such Delinquent Payments in the Collection
Account, provided, however, that the Servicer shall be obligated to advance
Delinquent Payments only to the extent that the Servicer, in its sole
discretion, expects to be able to recover such advances from subsequent
collections, including Net Liquidation Proceeds.
SECTION 5.14. Monthly Reports; Certificate of Servicing Officer.
(a) No later than 1:00 p.m. (Minnesota time) on each Determination
Date, the Servicer shall deliver to the Trust, the Indenture Trustee, the Paying
Agent, the Originator (if the Originator is not the Servicer), Standard & Poor's
and Fitch a "Monthly Report," substantially in the form of Exhibit C hereto.
(b) Each Monthly Report pursuant to Section 5.14(a) shall be
accompanied by a certificate of a Servicing Officer substantially in the form of
Exhibit D, certifying the accuracy of the Monthly Report and that no Event of
Termination or event that with notice or lapse of time or both would become an
Event of Termination has occurred, or if such event has occurred and is
continuing, specifying the event and its status.
(c) The Originator and (if different from the Originator) the Servicer
shall, on request of the Trust, the Indenture Trustee, Standard & Poor's, Fitch
or a Securityholder, furnish the Trust, the Indenture Trustee, Standard &
Poor's, Fitch or a Securityholder such underlying data as may be reasonably
requested.
SECTION 5.15. Annual Report of Accountants.
On or before March 31 of each year, commencing March 31, ____, the
Servicer at its expense shall cause a firm of independent public accountants
which is a member of the American Institute of Certified Public Accountants to
make available to the Trust, the Indenture Trustee, Standard & Poor's and Fitch
a report stating that such firm has examined selected documents and records
relating to the servicing of retail installment sales contracts, including the
contracts covered by this Agreement, in accordance with the Mortgage Bankers
Association of America's Uniform Single Attestation Program for Mortgage
Bankers, or any successor uniform program, and that, on the basis of such
examination, such servicing has been conducted in compliance with the minimum
servicing standards identified therein, except for such significant exceptions
or errors in records that, in the opinion of such firm, generally accepted
auditing standards requires it to report.
SECTION 5.16. Certain Duties of the Servicer Under the Trust
Agreement.
The Servicer shall, and hereby agrees that it will, monitor the Trust's
compliance with all applicable provisions of state and federal securities laws,
notify the Trust and the Administrator
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of any actions to be taken by the Trust necessary for compliance with such laws
and prepare on behalf of the Trust and the Administrator all notices, filings or
other documents or instruments required to be filed under such laws.
SECTION 5.17. INTENTIONALLY OMITTED.
SECTION 5.18. Annual Statement as to Compliance; Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Trust, the Indenture Trustee, and
each of Standard & Poor's and Fitch, on or before March 31 (or 90 days after the
end of the Servicer's fiscal year, if other than December 31) of each year,
beginning on March 31, 1998, an officer's certificate signed by any Responsible
Officer of the Servicer, dated as of December 31 (or other applicable date) of
the immediately preceding year, stating that (i) a review of the activities of
the Servicer during the preceding 12-month period (or such other period as shall
have elapsed from the Closing Date to the date of the first such certificate)
and of its performance under this Agreement has been made under such officer's
supervision, and (ii) to such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
period, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof.
(b) The Originator or the Servicer shall deliver to the Trust, the
Indenture Trustee, the Servicer or the Originator (as applicable) and each
Rating Agency promptly after having obtained knowledge thereof, but in no event
later than 2 Business Days thereafter, written notice in an officer's
certificate of any event which with the giving of notice or lapse of time, or
both, would become an Event of Termination under Section 7.01.
SECTION 5.19. INTENTIONALLY OMITTED.
SECTION 5.20. Maintenance of Security Interests in Products.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Contract in the related
Product on behalf of the Trust, including but not limited to obtaining the
execution by the Obligors and the recording, registering, filing, re-recording,
refiling, and re-registering of all security agreements, financing statements
and continuation statements as are necessary to maintain the security interest
granted by the Obligors under the respective Contracts. The Trust hereby
authorizes the Servicer, and the Servicer agrees, to take any and all steps
necessary to re-perfect such security interest on behalf of the Trust as
necessary because of the relocation of a Product or for any other reason. In the
event that the assignment of a Contract to the Trust is insufficient, without a
notation on the related Product's certificate of title, or without fulfilling
any additional administrative requirements under the laws of the state in which
the Product is located, to perfect a security interest in the related Product in
favor of the Trust, the Servicer hereby agrees that the Servicer's designation
as the secured party on the certificate of title is in its capacity as agent of
the Trust.
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(b) Upon the occurrence of an Event of Termination, the Trust and the
Servicer shall take or cause to be taken such action as may, in the opinion of
counsel to the Trust, be necessary to perfect or re-perfect the security
interests in the Products securing the Contracts in the name of the Trust by
amending the title documents of such Products or by such other reasonable means
as may, in the opinion of counsel to the Trust, be necessary or prudent. The
Servicer hereby agrees to pay all expenses related to such perfection or
re-perfection and to take all action necessary therefor.
SECTION 5.21. Covenants, Representations, and Warranties of Servicer.
By its execution and delivery of this Agreement, the Servicer makes the
following representations, warranties and covenants on which the Trust relies in
accepting the Contracts and issuing the Notes and the Certificates and on which
the Indenture Trustee relies in authenticating the Notes and the Owner Trustee
relies in authenticating the Certificates.
(a) Organization and Good Standing. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its assets
and to transact the business in which it is currently engaged. The Servicer is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Servicer.
(b) Authorization; Binding Obligations. The Servicer has the power and
authority to make, execute, deliver and perform this Agreement and its Related
Documents and all of the transactions contemplated under this Agreement and
thereunder and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and its Related Documents.
When executed and delivered, this Agreement and its Related Documents will
constitute the legal, valid and binding obligations of the Servicer enforceable
in accordance with their terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies.
(c) No Consent Required. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, except for such consents, licenses, approvals
and authorizations as have been obtained.
(d) No Violations. The execution, delivery and performance by the
Servicer of this Agreement and its Related Documents and the fulfillment of
their terms will not violate any provision of any existing law or regulation or
any order or decree of any court or the related Certificate of Incorporation or
Bylaws of the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party or by
which the Servicer may be bound.
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(e) Litigation. No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of the Servicer threatened, against the Servicer or any of its
properties or with respect to this Agreement, the Related Documents, or the
Securities which, if adversely determined, would in the opinion of the Servicer
have a material adverse effect on the transactions contemplated by this
Agreement and Related Documents.
(f) Chief Executive Office. The chief executive office of the Servicer
is at 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota
55102-1639.
(g) No Default. The Servicer 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, which default would materially and
adversely affect its condition (financial or other) or operations or its
properties or the consequences of which would materially and adversely affect
its performance hereunder and under its other Related Documents. The Servicer is
not in default under any agreement involving financial obligations or on any
outstanding obligation which would materially adversely impact its financial
condition or operations or legal documents associated with the transaction
contemplated by this Agreement or the other Related Documents.
(h) Liens in Force. The Product securing each Contract shall not be
released in whole or in part from the security interest granted by the Contract,
except upon payment in full of the Contract or as otherwise contemplated herein.
(i) No Impairment. The Servicer shall do nothing to impair the rights
of the Trust, the Indenture Trustee or the Securityholders in the Contracts, the
Insurance Policies or the other Trust Property.
(j) No Amendments. The Servicer shall not extend or otherwise amend the
terms of any Contract, except in accordance with Section 5.06.
SECTION 5.22. Purchase of Contracts Upon Breach of Covenant.
Upon discovery by any of the Servicer, the Trust or the Indenture
Trustee of a breach of any of the covenants set forth in Section 5.20(a) or
5.21, the party discovering such breach shall give prompt written notice to the
others; provided, however, that the failure to give any such notice shall not
affect any obligation of the Servicer. Not later than the last day of the
Monthly Period that is 90 days after its discovery or receipt of notice of any
breach of any such covenant which materially and adversely affects the interests
of the Securityholders or the Trust in any Contract (including any Liquidated
Contract), the Servicer shall, unless it shall have cured such breach in all
material respects, purchase from the Trust the Contract affected by such breach
and pay the related Repurchase Price. It is understood and agreed that the
obligation of the Servicer to purchase any Contract (including any Liquidated
Contract) with respect to which such a breach has occurred and is continuing
shall, if such obligation is fulfilled, constitute the sole remedy against the
Servicer for such breach available to the Securityholders, the Trust, or the
Indenture Trustee on behalf of the Noteholders; provided, however, that the
Servicer shall indemnify the Owner Trustee, the Trust, the Indenture Trustee,
and the Securityholders against all costs,
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expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach.
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ARTICLE VI
DISTRIBUTIONS; TRUST ACCOUNTS; LIMITED GUARANTY;
STATEMENTS TO SECURITYHOLDERS
SECTION 6.01. Trust Accounts.
(a) The Servicer shall establish the Collection Account in the name of
the Indenture Trustee for the benefit of the Securityholders. The Collection
Account shall be an Eligible Account and initially shall be a segregated trust
account established with the Indenture Trustee and maintained with the Indenture
Trustee.
(b) The Servicer shall establish the Note Distribution Account in the
name of the Indenture Trustee for the benefit of the Noteholders. The Note
Distribution Account shall be an Eligible Account and initially shall be a
segregated trust account established with the Indenture Trustee and maintained
with the Indenture Trustee.
(c) The Servicer shall establish the Certificate Distribution Account
in the name of the Owner Trustee for the benefit of the Certificateholders. The
Certificate Distribution Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Indenture Trustee and
maintained with the Indenture Trustee, so long as the Indenture Trustee is
acting as Paying Agent under Section 3.9 of the Trust Agreement.
(d) All amounts held in the Collection Account and the Note
Distribution Account (but not the Certificate Distribution Account) shall, to
the extent permitted by applicable laws, rules and regulations, be invested, as
directed by the Servicer, in Eligible Investments that mature not later than one
Business Day prior to the Distribution Date for the Monthly Period to which such
amounts relate. Any such written direction shall certify that any such
investment is authorized by this Section 6.01(d). Such investments in Eligible
Investments shall be made in the name of the Indenture Trustee on behalf of the
Trust, and such investments shall not be sold or disposed of prior to their
maturity. Any investment of funds in the Collection Account or the Note
Distribution Account shall be made in Eligible Investments held by a financial
institution with respect to which (a) such institution has noted the Indenture
Trustee's interest therein by book entry or otherwise and (b) a confirmation of
the Indenture Trustee's interest has been sent to the Indenture Trustee by such
institution, provided that such Eligible Investments are (i) specific
certificated securities (as such term is used in MN UCC ss. 336.8-313(1)(d)(i)),
and (ii) either (A) in the possession of such institution or (B) in the
possession of a clearing corporation (as such term is used in MN UCC ss.
336.8-313(1)(g)) in New York or Minnesota, registered in the name of such
clearing corporation, not endorsed for collection or surrender or any other
purpose not involving transfer, not containing any evidence of a right or
interest inconsistent with the Indenture Trustees security interest therein, and
held by such clearing corporation in an account of such institution. Subject to
the other provisions hereof, the Indenture Trustee shall have sole control over
each such investment and the income thereon, and any certificate or other
instrument evidencing any such investment, if any, shall be delivered directly
to the Indenture Trustee or its agent, together with each document of transfer,
if any, necessary to transfer title to such investment to the Indenture Trustee
in a manner which complies with this Section 6.01. All
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interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Collection Account and the Note Distribution Account
shall be deposited in the Collection Account and distributed on the next
Distribution Date pursuant to Section 6.06. The Servicer shall deposit in the
applicable Collection Account and the Note Distribution Account an amount equal
to any net loss on such investments immediately as realized.
SECTION 6.02. Collection Account Deposits.
(a) Collections. The Servicer shall remit directly to the Collection
Account (no later than the next Business Day as specified in Section 5.05) all
payments by or on behalf of the Obligors on the Contracts and all Liquidation
Proceeds received by the Servicer.
(b) Servicer Advances. The Servicer shall deposit in the Collection
Account immediately prior to each Distribution Date all Servicer Advances
required to be made pursuant to Section 5.13.
(c) Repurchased Contracts. The Originator shall deposit in the
Collection Account the Repurchase Price for each Contract repurchased by it
under Section 3.05. The Servicer shall deposit in the Collection Account the
Repurchase Price for each Contract repurchased by it under Section 5.22.
SECTION 6.03. Permitted Withdrawals.
The Indenture Trustee may, from time to time as provided herein, make
withdrawals from the Collection Account of amounts deposited in said account
that are attributable to the Contracts only for the following purposes:
(a) to make payments in the amounts and in the manner
provided for in Section 6.06;
(b) to pay to the Originator with respect to each Contract or
property acquired in respect thereof that has been repurchased pursuant
to Section 3.05, all amounts received thereon and not required to be
distributed to Noteholders or Certificateholders as of the date on
which the related Scheduled Principal Balance or Repurchase Price is
determined;
(c) to reimburse the Servicer out of Liquidation Proceeds for
Liquidation Expenses incurred by it, to the extent such reimbursement
is permitted pursuant to Section 5.08;
(d) to withdraw any amount deposited in the Collection Account
that was not required to be deposited therein; or
(e) to make any rebates or adjustments deemed necessary by the
Servicer pursuant to Section 5.06(d).
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Since, in connection with withdrawals pursuant to clauses (a) and (b),
the Originator's or the Servicer's entitlement thereto is limited to collections
or other recoveries on the related Contract, the Servicer shall keep and
maintain a separate accounting, on a Contract by Contract basis, for the purpose
of justifying any withdrawal from the Collection Account pursuant to such
clauses.
SECTION 6.04. INTENTIONALLY OMITTED
SECTION 6.05. Limited Guaranty.
(a) No later than the Determination Date prior to each Distribution
Date, the Servicer (if other than the Guarantor) shall notify the Guarantor of
the amount of the Guaranty Payment (if any) for such Distribution Date. Not
later than the Business Day preceding each Distribution Date, the Guarantor
shall deposit the Guaranty Payment, if any, for such Distribution Date into the
Collection Account.
(b) The obligations of the Guarantor under this Section shall not
terminate upon or otherwise be affected by a Service Transfer pursuant to
Article VII of this Agreement.
(c) The obligation of the Guarantor to provide the Limited Guaranty
under this Agreement shall terminate on the later of the Final Scheduled
Distribution Date and the date the Guarantor has made all Guaranty Payments
required to be made by it.
(d) The obligation of the Guarantor to make the Guaranty Payments
described in subsection (a) above shall be unconditional and irrevocable. The
Guarantor acknowledges that its obligation to make the Guaranty Payments
described in subsection (a) above shall be deemed a guaranty by the Guarantor of
that portion of the Obligors' obligations under the Contracts that is allocable
to the Certificateholders.
(e) If the Guarantor fails to make a Guaranty Payment in whole or in
part, the Seller shall promptly notify the Owner Trustee, and the Owner Trustee
shall promptly notify Standard & Poor's and Fitch.
SECTION 6.06. Distributions.
(a) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee (based on the information contained in the Monthly Certificate
delivered pursuant to Section 5.14) to make the following deposits and
distributions by 11:00 a.m. (Minnesota time), to the extent of the Amount
Available for such Distribution Date and in the following order of priority,
provided that any Guaranty Payment shall be distributed solely to the
Certificate Distribution Account pursuant to Section 6.06(b):
(i) Servicing Fee. If Conseco Finance Corp. or an
Affiliate is not the Servicer, then to the Servicer, the Servicing
Fee for the related Monthly Period.
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(ii) Servicer Advances. After payment of the amount specified
in clause (i) above, to reimburse the Servicer for Uncollectible
Advances and for Servicer Advances made with respect to Delinquent
Payments that were recovered during the related Monthly Period.
(iii) Senior Note Interest. After payment of the amounts
specified in clauses (i) and (ii) above, to the Note Distribution
Account, the sum of the Senior Interest Amount and any Unpaid Senior
Interest Shortfall;
(iv) First Priority Principal Distribution Amount. After
payment of the amounts specified in clauses (i) through (iii) above,
to the Note Distribution Account, any First Priority Principal
Distribution Amount;
(v) Class A-6 Interest. After payment of the amounts specified
in clauses (i) through (iv) above, to the Note Distribution Account,
the Class A-6 Interest Amount and any Unpaid Class A-6 Interest
Shortfall;
(vi) Second Priority Principal Distribution Amount. After
payment of the amounts specified in clauses (i) through (v) above, to
the Note Distribution Account, any Second Priority Principal
Distribution Amount;
(vii) Class A-7 Interest. After payment of the amounts
specified in clauses (i) through (vi) above, to the Note Distribution
Account, the Class A-7 Interest Amount and any Unpaid Class A-7
Interest Shortfall;
(viii) Third Priority Principal Distribution Amount. After
payment of the amounts specified in clauses (i) through (vii) above,
to the Note Distribution Account, any Third Priority Principal
Distribution Amount;
(ix) Class B-1 Certificate Interest. After payment of the
amounts specified in clauses (i) through (viii) above, to the
Certificate Distribution Account, the sum of the Class B-1 Interest
Amount and any Unpaid Class B-1 Interest Shortfall.
(x) Fourth Priority Principal Distribution Amount. After
payment of the amounts specified in clauses (i) through (ix) above, to
the Note Distribution Account, any Fourth Priority Principal
Distribution Amount payable to any Class of Notes then entitled to
receive the Total Principal Distribution, or if all the Notes have been
paid in full, to the Certificate Distribution Account, any Fourth
Priority Principal Distribution Amount then payable to the Class B-1
Certificates.
(xi) Formula Principal. After payment of the amounts specified
in clauses (i) through (x) above, to the Note Distribution Account (or,
if all the Notes have been paid in full, to the Certificate
Distribution Account), the Formula Principal Distribution Amount, plus
any Formula Principal Shortfall, minus all First Priority Principal
Distribution Amounts (if any), all Second Priority Principal
Distribution Amounts (if any), all Third
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Priority Principal Distribution Amounts (if any), and all Fourth
Priority Principal Distribution Amounts (if any), paid on prior
Distribution Dates.
(xii) Class B-2 Certificate Interest. After payment of the
amounts specified in clauses (i) through (xi) above, to the Certificate
Distribution Account, the sum of the Class B-2 Interest Amount and any
Unpaid Class B-2 Interest Shortfall.
(xiii) Class B-2 Certificate Principal. After payment of the
amounts specified in clauses (i) through (xii) above, to the
Certificate Distribution Account and after payment of all Notes and all
Class B-1 Certificates in full, the Class B-2 Principal Distributable
Amount.
(xiv) Monthly Servicing and Guaranty Fee. After payment of
the amounts specified in clauses (i) through (xiii) above, to Conseco
Finance Corp., the Monthly Servicing and Guaranty Fee (which shall be
due and payable even if Conseco Finance Corp. is no longer acting as
Servicer) equal to the remaining Amount Available as compensation for
its providing the Limited Guaranty and acting as initial Servicer and
(if Conseco Finance Corp. is acting as Servicer) any other compensation
owed to the Servicer pursuant to Section 7.02.
(b) Guaranty Payments. On each Distribution Date the Servicer shall
instruct the Indenture Trustee to distribute to the Certificate Distribution
Account any Guaranty Payment deposited in the Collection Account pursuant to
Section 6.05.
SECTION 6.07. INTENTIONALLY OMITTED
SECTION 6.08. Statements to Securityholders.
(a) On each Distribution Date, the Indenture Trustee shall include with
each distribution to each Noteholder, and the Owner Trustee shall include with
each distribution to each Certificateholder, a statement (which statement shall
also be provided to each Rating Agency) based on information in the Monthly
Report delivered on the related Determination Date pursuant to Section 5.14,
setting forth the following information:
(i) the amount of such distribution to Holders of each Class
of Notes and the Certificates allocable to interest, separately
identifying any Unpaid Class A-1 Interest Shortfall, Unpaid Class A-2
Interest Shortfall, Unpaid Class A-3 Interest Shortfall, Unpaid Class
A-4 Interest Shortfall, Unpaid Class A-5 Interest Shortfall, Unpaid
Class A-6 Interest Shortfall, Unpaid Class A-7 Interest Shortfall, and
any Unpaid Class B-1 Interest Shortfall and Unpaid Class B-2 Interest
Shortfall included in such distribution and any remaining Unpaid Class
A-1 Interest Shortfall, Unpaid Class A-2 Interest Shortfall, Unpaid
Class A-3 Interest Shortfall, Unpaid Class A-4 Interest Shortfall,
Unpaid Class A-5 Interest Shortfall, Unpaid Class A-6 Interest
Shortfall, Unpaid Class A-7 Interest Shortfall, any Unpaid Class B-1
Interest Shortfall and Unpaid Class B-2 Interest Shortfall after giving
effect to such distribution;
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(ii) the Class A-1 Interest Carryover Shortfall, the Class A-2
Interest Carryover Shortfall, the Class A-3 Interest Carryover
Shortfall, the Class A-4 Interest Carryover Shortfall, the Class A-5
Interest Carryover Shortfall, the Class A-6 Interest Carryover
Shortfall, the Class A-7 Interest Carryover Shortfall, the Class B-1
Interest Carryover Shortfall and the Class B-2 Interest Carryover
Shortfall, if any, for such Distribution Date;
(iii) the amount of such distribution to Holders of each Class
of Notes and the Certificates allocable to principal, separately
identifying the Formula Principal Distribution Amount, any Formula
Principal Shortfall, any First Priority Principal Distribution Amount,
any Second Priority Principal Distribution Amount, any Third Priority
Principal Distribution Amount and any Fourth Priority Principal
Distribution Amount included therein;
(iv) the Class A-1 Principal Balance, the Class A-2 Principal
Balance, the Class A-3 Principal Balance, the Class A-4 Principal
Balance, the Class A-5 Principal Balance, the Class A-6 Principal
Balance, the Class A-7 Principal Balance, the Class B-1 Principal
Balance and the Class B-2 Principal Balance after giving effect to the
distribution of principal on such Distribution Date;
(v) the amount, if any, of the Guaranty Payment on such
Distribution Date;
(vi) the amount of the Monthly Servicing and Guaranty Fee, if
any, paid to the Guarantor with respect to the related Monthly Period
and (if Conseco Finance Corp. is not acting as Servicer) the amount of
the Monthly Servicing Fee paid to the Servicer with respect to such
Monthly Period;
(vii) the amount of any payment to GTGP;
(viii) the Pool Scheduled Principal Balance for such
Distribution Date;
(ix) the Note Pool Factor for each Class, the Class B-1
Certificate Pool Factor and Class B-2 Certificate Pool Factor after
giving effect to the distribution of principal on such Distribution
Date;
(x) the number and aggregate principal balances of Contracts
delinquent (a) 30-59 days and (b) 60 or more days;
(xi) the number and aggregate Scheduled Principal Balance of
Contracts that become Defaulted Contracts during the related Monthly
Period;
(xii) the number and aggregate Scheduled Principal Balance of
Defaulted Contracts as of the last day of the related Monthly Period;
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(xiii) the number and aggregate Schedule Principal Balance of
Contracts that became Liquidated Contracts during the related Monthly
Period and the related Net Liquidation Losses; and
(xiv) the aggregate amount of Servicer Advances made by the
Servicer with respect to such Distribution Date, and the aggregate
amount paid to the Servicer as reimbursement of Servicer Advances made
on prior Distribution Dates.
In the case of information furnished pursuant to clauses (i) through
(vi) above, the amounts shall be expressed as a dollar amount per $1,000
denomination of Note or Certificate, as applicable.
(b) The Owner Trustee and the Indenture Trustee shall inform any of the
Noteholders, Certificateholders or [underwriter] inquiring by telephone of the
information contained in the most recent Monthly Report.
(c) Certificateholders may obtain copies of the statements delivered by
the Owner Trustee pursuant to subsection (a) above upon written request to the
Owner Trustee at the Corporate Trust Office (together with a certification that
such Person is a Certificateholder and payment of any expenses associated with
the distribution thereof). Noteholders may obtain copies of the statements
delivered by the Indenture Trustee pursuant to subsection (a) above upon written
request to the Indenture Trustee at its Corporate Trust Office (together with a
certification that such Person is a Noteholder and payment of any expenses
associated with the distribution thereof).
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ARTICLE VII
SERVICE TRANSFER
SECTION 7.01. Event of Termination.
"Event of Termination" means the occurrence of any of the following
(each a "Servicer Termination Event"):
(a) Any failure by the Servicer to make any deposit into an account
required to be made hereunder and the continuance of such failure for a period
of five Business Days after the Servicer has become aware, or should have become
aware, that such deposit was required;
(b) Failure on the Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement (other than a
covenant or agreement which is elsewhere in this Section specifically dealt
with), which failure shall (i) materially and adversely affect the rights of the
Trust, the Indenture Trustee, or the Securityholders and (ii) continue
unremedied for 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by Holders of
Notes evidencing not less than 25% of the Note Principal Balance or, if the
Notes have been paid in full, by Certificateholders evidencing not less than 25%
of the Certificate Principal Balance.
(c) Any assignment by the Servicer of its duties hereunder except as
specifically permitted hereunder, or any attempt to make such an assignment;
(d) A court or other governmental authority having jurisdiction in the
premises shall have entered a decree or order for relief in respect of the
Servicer in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Servicer, as the case may be, or for any substantial liquidation of its
affairs, and such order remains undischarged and unstayed for at least 60 days;
(e) The Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Servicer or for any
substantial part of its property, or shall have made any general assignment for
the benefit of its creditors, or shall have failed to, or admitted in writing
its inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing; or
(f) The failure of the Servicer to be an Eligible Servicer.
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SECTION 7.02. Transfer.
If an Event of Termination has occurred and is continuing, either the
Trust, the Indenture Trustee, a Note Majority, or a Certificate Majority, by
notice in writing to the Servicer (and to the Indenture Trustee and Trust if
given by the Certificateholders or Noteholders) may terminate all (but not less
than all) of the Servicer's management, administrative, servicing and collection
functions (such termination being herein called a "Service Transfer"). On
receipt of such notice (or, if later, on a date designated therein), or upon
resignation of the Servicer in accordance with Section 10.01, all authority and
power of the Servicer under this Agreement, whether with respect to the
Contracts, the Contract Files or otherwise (except with respect to the
Collection Account, the transfer of which shall be governed by Section 7.06),
shall pass to and be vested in the Indenture Trustee pursuant to and under this
Section 7.02; and, without limitation, the Indenture Trustee is authorized and
empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments (including, without
limitation, documents required to make the Indenture Trustee or a successor
servicer the sole lienholder or legal title holder of record of each Product)
and to do any and all acts or things necessary or appropriate to effect the
purposes of such notice of termination. Each of the Originator and the Servicer
agrees to cooperate with the Indenture Trustee in effecting the termination of
the responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the Indenture Trustee for administration by it of
all cash amounts which shall at the time be held by the Servicer for deposit, or
have been deposited by the Servicer, in the Collection Account, or for its own
account in connection with its services hereafter or thereafter received with
respect to the Contracts and the execution of any documents required to make the
Indenture Trustee or a successor servicer the sole lienholder or legal title
holder of record in respect of each Product. The Servicer shall be entitled to
receive any other amounts which are payable to the Servicer under this
Agreement, at the time of the termination of its activities as Servicer. The
Servicer shall transfer to the new servicer (i) the Servicer's records relating
to the Contracts in such electronic form as the new servicer may reasonably
request and (ii) any Contracts and Contract Files in the Servicer's possession.
SECTION 7.03. Indenture Trustee to Act; Appointment of Successor.
On and after the time the Servicer receives a notice of termination
pursuant to Section 7.02 or the resignation of the Servicer in accordance with
Section 10.01, the Indenture Trustee shall be the successor in all respects to
the Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof and the Servicer shall be relieved of such
responsibilities, duties and liabilities arising after such Service Transfer;
provided, however, that (i) the Indenture Trustee will not assume any
obligations of the Originator pursuant to Section 3.05 and (ii) the Indenture
Trustee shall not be liable for any acts or omissions of the Servicer occurring
prior to such Service Transfer or for any breach by the Servicer of any of its
obligations contained herein or in any related document or agreement. As
compensation therefor, the Indenture Trustee shall be entitled to receive
reasonable compensation not in excess of the Monthly Servicing Fee.
Notwithstanding the above, the Indenture Trustee may, if it shall be unwilling
so to act, or shall, if it is legally unable so to act, appoint, or petition a
court of competent jurisdiction to appoint, an
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Eligible Servicer as the successor to the Servicer hereunder in the assumption
of all or any part of the responsibilities, duties or liabilities of the
Servicer hereunder. Pending appointment of a successor to the Servicer
hereunder, unless the Indenture Trustee is prohibited by law from so acting, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor out of payments on
Contracts as it and such successor shall agree; provided, however, that no such
monthly compensation shall, without the written consent of 100% of the
Noteholders, exceed the Monthly Servicing Fee. The Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
SECTION 7.04. Notification to Securityholders.
(a) Promptly following the occurrence of any Event of Termination, the
Servicer shall give written notice thereof to the Indenture Trustee, the Trust,
Standard & Poor's, and Fitch.
(b) Within ten days following any termination or appointment of a
successor to the Servicer pursuant to this Article VII, the Owner Trustee on
behalf of the Trust shall give written notice thereof to Standard & Poor's,
Fitch and the Certificateholders at their respective addresses appearing on the
Certificate Register and the Indenture Trustee shall give written notice thereof
to Noteholders at their respective addresses appearing in the Note Register.
(c) The Owner Trustee on behalf of the Trust shall give written notice
to Standard & Poor's and Fitch at least 30 days prior to the date upon which any
Eligible Servicer (other than the Trustee) is to assume the responsibilities of
Servicer pursuant to Section 7.03, naming such successor Servicer.
SECTION 7.05. Effect of Transfer.
(a) After the Service Transfer, the Indenture Trustee or new Servicer
may notify Obligors to make payments directly to the new Servicer that are due
under the Contracts after the effective date of the Service Transfer.
(b) After the Service Transfer, the replaced Servicer shall have no
further obligations with respect to the management, administration, servicing or
collection of the Contracts and the new Servicer shall have all of such
obligations, except that the replaced Servicer will transmit or cause to be
transmitted directly to the new Servicer for its own account, promptly on
receipt and in the same form in which received, any amounts (properly endorsed
where required for the new Servicer to collect them) received as payments upon
or otherwise in connection with the Contracts.
(c) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer
and the Originator pursuant to Article IX and Sections 3.05 and 5.19) other than
those relating to the management, administration, servicing or collection of the
Contracts.
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SECTION 7.06. Transfer of Collection Account.
Notwithstanding the provisions of Section 7.02, if the Collection
Account shall be maintained with the Servicer and an Event of Termination shall
occur and be continuing, the Servicer shall, after five days' written notice
from the Indenture Trustee, or in any event within ten days after the occurrence
of the Event of Termination, establish an Eligible Account with an institution
other than the Servicer and promptly transfer all funds in the Collection
Account to such new account, which shall thereafter be deemed the Collection
Account for the purposes hereof.
SECTION 7.07. Limits on Liability.
The Servicer will be liable to the Trust, the Owner Trustee, the
Indenture Trustee and the Securityholders only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement and will have no
other obligations or liabilities hereunder. Neither the Servicer nor any of its
directors, officers, employees or agents will have any liability to the Trust,
the Owner Trustee, the Indenture Trustee or the Securityholders (except as
explicitly provided in this Agreement) for any action taken, or for refraining
from taking any action, pursuant to this Agreement, other than any liability
that would otherwise be imposed by reason of the Servicer's breach of this
Agreement or willful misfeasance, bad faith or negligence (including errors in
judgment) in the performance of its duties, or by reason of reckless disregard
of obligations and duties under this Agreement or any violation of law.
SECTION 7.08. Waiver of Past Defaults.
A Note Majority and Certificate Majority may, on behalf of all Holders
of Notes and Certificates, waive any default by the Servicer in the performance
of its obligations hereunder and its consequences. Upon any such waiver of a
past default, such default shall cease to exist, and any Event of Termination
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
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ARTICLE VIII
TERMINATION
SECTION 8.01. Originator's or Servicer's Repurchase Option.
(a) Subject to the conditions in subsection (b) below, the Originator
or the Servicer may repurchase all of the Contracts and all Products acquired in
respect of any Contract remaining in the Trust at a price equal to the greatest
of:
(i) the sum of (x) 100% of the principal balance of each
Contract (other than any Contract as to which title to the underlying
Product has been acquired and whose fair market value is included
pursuant to clause (y) below), plus (y) the fair market value of such
acquired Product (as determined by the Originator);
(ii) the aggregate fair market value (as determined by the
Originator) of all of the assets of the Trust (but in no event more
than the amount sufficient to pay all principal and interest
outstanding on the Securities, plus any unpaid fees and expenses of the
Indenture Trustee and the Owner Trustee); or
(iii) the aggregate Note Principal Balance, Class B-1
Principal Balance and Class B-2 Principal Balance,
plus, one month's interest at the applicable Contract Rate on the
Scheduled Principal Balance of each Contract (including any Contract as
to which the related Product has been repossessed).
(b) The purchase by the Originator or the Servicer of all of the
Contracts pursuant to Section 8.01(a) shall be at the option of the Originator
or the Servicer on any Distribution Date, but shall be conditioned upon (1) the
Pool Scheduled Principal Balance, as of the end of the Monthly Period
immediately preceding such Distribution Date, aggregating an amount equal to or
less than 10% of the Cutoff Date Pool Principal Balance, (2) the Originator or
the Servicer having provided the Indenture Trustee and the Owner Trustee and the
Depository (if any) with at least 30 days' written notice (which may be given
prior to the end of the Monthly Period referred to in clause (1) above) and (3)
the Originator or the Servicer (as applicable) shall have delivered to the
Indenture Trustee and the Owner Trustee an unqualified Opinion of Counsel
stating that payment of the purchase price to the Securityholders will not
constitute a voidable preference or fraudulent transfer under the United States
Bankruptcy Code. In the event the notice described in the preceding sentence is
given in connection with the Originator's election to purchase the Contracts,
the Originator shall deposit in the Collection Account on the relevant
Distribution Date in immediately available funds an amount equal to the
above-described purchase price and the Indenture Trustee shall distribute the
amounts so deposited in accordance with Section 6.06. Upon certification to the
Indenture Trustee by a Servicing Officer, following such final deposit, the
Indenture Trustee shall promptly release to the Originator the Contract Files
for the remaining Contracts, and the Indenture Trustee and Owner Trustee on
behalf of the Trust shall execute all assignments, endorsements and other
instruments necessary to effectuate such transfer.
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SECTION 8.02. Liquidation or Sale of Trust Estate.
Upon any sale of the assets of the Trust pursuant to Sections 10.03 or
10.04 of the Indenture or Sections 9.2 or 9.3 of the Trust Agreement, the Trust
shall instruct the Indenture Trustee or the Owner Trustee, as the case may be,
to deposit the proceeds from such sale after all payments and reserves therefrom
have been made in the Collection Account. On the Distribution Date on which such
proceeds are deposited in the Collection Account (or, if such proceeds are not
so deposited on a Distribution Date, on the Distribution Date immediately
following such deposit), the Trust shall instruct the Indenture Trustee to
distribute such funds, together with all other amounts available, in accordance
with the terms of Section 6.06(a).
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ARTICLE IX
INDEMNITIES
SECTION 9.01. Originator's Indemnities.
The Originator will defend and indemnify the Trust, the Owner Trustee,
the Indenture Trustee (including the paying agent and any other agents of the
Owner Trustee and the Indenture Trustee), and the Securityholders against any
and all costs, expenses, losses, damages, taxes, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation of
any third-party claims arising out of or resulting from (i) the origination of
any Contract (including but not limited to truth in lending requirements) or the
servicing of such Contract prior to its transfer to the Trust (but only to the
extent such cost, expense, loss, damage, tax, claim or liability is not provided
for by the Originator's repurchase of such Contract pursuant to Section 3.05),
(ii) the use or ownership of any Products by the Originator or the Servicer or
any Affiliate of either, or (iii) the Originator's or the Trust's violation of
federal or state securities laws in connection with the offering and sale of the
Securities. Notwithstanding any other provision of this Agreement, the
obligation of the Originator under this Section shall not terminate upon a
Service Transfer pursuant to Article VII, except that the obligation of the
Originator under this Section shall not relate to the actions of any subsequent
Servicer after a Service Transfer.
SECTION 9.02. Liabilities to Obligors.
No obligation or liability to any Obligor under any of the Contracts is
intended to be assumed by the Trust, the Owner Trustee, Indenture Trustee, or
the Securityholders under or as a result of this Agreement and the transactions
contemplated hereby and, to the maximum extent permitted and valid under
mandatory provisions of law, the Trust, the Owner Trustee, Indenture Trustee,
and the Securityholders expressly disclaim such assumption.
SECTION 9.03. Servicer's Indemnities.
The Servicer shall defend and indemnify the Trust, the Owner Trustee,
the Indenture Trustee (including the Paying Agent and any other agents of the
Owner Trustee and the Indenture Trustee) and the Securityholders against any and
all costs, expenses, losses, damages, taxes, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation, in respect
of any action taken or omitted to be taken by the Servicer with respect to any
Contract. This indemnity shall survive any Service Transfer (but the original
Servicer's obligations under this Section 9.03 shall not relate to any actions
of any subsequent Servicer after a Service Transfer) and any payment of the
amount owing under, or any repurchase by the Originator of, any such Contract.
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SECTION 9.04. Operation of Indemnities.
Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Originator or the Servicer has made any indemnity payments pursuant to this
Article and the recipient thereafter collects any of such amounts from others,
the recipient will repay such amounts collected to the Originator or the
Servicer, as the case may be, without interest.
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<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Servicer Not to Assign Duties or Resign; Delegation
of Servicing Duties.
The Servicer may not sell or assign its rights and duties as Servicer
hereunder, except as expressly provided for herein, provided that the Servicer
may pledge or assign the right to receive all or any portion of the Monthly
Servicing Fee or Monthly Servicing and Guaranty Fee payable to it. The Servicer
shall not resign from the obligations and duties hereby imposed on it except
upon determination that the performance of its duties hereunder is no longer
permissible under applicable law or is in material conflict by reason of
applicable law with any other activities carried on by it. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel for the Servicer to such effect addressed and delivered to
the Trust and the Indenture Trustee. No such resignation shall become effective
until the Indenture Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Sections
7.02 and 7.03.
Notwithstanding the foregoing:
(a) Any person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Servicer shall be a party, or any Person
succeeding to the business of the Servicer, shall be the successor of
the Servicer hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person to the Servicer shall satisfy the
criteria set forth in the definition of an Eligible Servicer. The
Servicer shall promptly notify Standard & Poor's and Fitch of any such
merger to which it is a party.
(b) The Servicer may delegate duties under this Agreement to
any of the Servicer's Affiliates. In addition, the Servicer may at any
time perform the specific duty of repossessing Products through
subcontractors who are in the business of servicing consumer
receivables, and may also perform other specific duties through
subcontractors; provided that the Servicer gives notice to the Trust
and the Indenture Trustee and each of Standard & Poor's and Fitch, and
provided further that no such delegation of duties by the Servicer
shall relieve the Servicer of its responsibility with respect thereto.
SECTION 10.02. Assignment or Delegation by Originator.
Except as specifically authorized hereunder, and except for its
obligations as Servicer which are dealt with under Article V and Article VII,
the Originator may not convey and assign or delegate any of its rights or
obligations hereunder absent the prior written consent of a Note Majority and a
Certificate Majority, and any attempt to do so without such consent shall be
void.
10-1
<PAGE>
It is understood that the foregoing does not prohibit the pledge or assignment
by the Originator of any right to payment pursuant to Article VI.
Notwithstanding the foregoing, any person into which the Originator may
be merged or consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Originator shall be a party, or any
Person succeeding to the business of the Originator, shall be the successor of
the Originator hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Originator shall promptly notify Standard & Poor's
and Fitch of any such merger to which it is a party.
SECTION 10.03. Amendment.
(a) This Agreement may be amended from time to time by the Originator,
the Servicer, the Seller and the Trust, with the prior written consent of the
Indenture Trustee but without the consent of any of the Securityholders, to
correct manifest error, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein, as
the case may be, including, without limitation, to add or amend any provision as
required by Standard & Poor's, Fitch, or any other nationally recognized
statistical rating organization in order to improve or maintain the rating of
any Class of Notes or the Certificates, provided, however, that such action
shall not, as evidenced by an Opinion of Counsel for the Originator, adversely
affect in any material respect the interests of any Securityholder.
(b) This Agreement may also be amended from time to time by the
Originator, the Servicer, the Seller and the Trust with the prior written
consent of the Indenture Trustee and with the consent of a Certificate Majority
and a Note Majority with respect to each Class (which consent of any Holder of a
Certificate or Note given pursuant to this Section or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
on all future Holders of such Certificate or Note and of any Certificate or Note
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Certificate or Note)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Certificates or Notes; provided, however, no
such amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Contracts or
distributions required to be made on any Certificate or Note or the Class B-1
Rate, the Class B-2 Rate, the Class A-1 Interest Rate, Class A-2 Interest Rate,
Class A-3 Interest Rate, Class A-4 Interest Rate, Class A-5 Interest Rate, Class
A-6 Interest Rate or Class A-7 Interest Rate, (b) amend any provisions of
Section 6.06 in such a manner as to affect the priority of payment of interest,
principal or premium to Noteholders or Certificateholders, or (c) reduce the
aforesaid percentage required to consent to any such amendment or any waiver
hereunder, without the consent of the Holders of all Securities then
outstanding, and provided further, that the Rating Agency Condition has been
satisfied.
(c) Concurrently with the solicitation of any consent pursuant to this
Section 10.03, the Indenture Trustee shall furnish written notification to
Standard & Poor's and Fitch of such
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<PAGE>
solicitation. Promptly after the execution of any amendment pursuant to this
Section 10.03, the Indenture Trustee shall furnish written notification of the
substance of such amendment to Standard & Poor's, Fitch and each Securityholder.
(d) It shall not be necessary for the consent of Securityholders under
this Section 10.03 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Securityholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
(e) Each of the Owner Trustee and Indenture Trustee may, but shall not
be obligated to, enter into any such amendment which affects its own rights,
duties or immunities under this Agreement or otherwise.
(f) In connection with any amendment pursuant to this Section, the
Owner Trustee and Indenture Trustee shall be entitled to receive an unqualified
Opinion of Counsel to the Servicer to the effect that such amendment is
authorized or permitted by the Agreement.
(g) Upon the execution of any amendment or consent pursuant to this
Section 10.03, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall form a part of this Agreement for all purposes,
and every Securityholder hereunder shall be bound thereby.
SECTION 10.04. Notices.
All communications and notices pursuant hereto to the Servicer, the
Originator, the Trust, the Owner Trustee, the Indenture Trustee, Standard &
Poor's and Fitch shall be in writing and delivered (by facsimile or other means)
or mailed to it at the appropriate following address:
If to the Originator, the Guarantor or the Servicer:
Conseco Finance Corp.
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Attention: Chief Financial Officer
Telecopier Number: (651) 293-5746
If to the Seller:
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Attention: Chief Financial Officer
Telecopier Number: (651) 293-5846
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<PAGE>
If to the Trust or Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier Number: 302-651-8882
If to the Indenture Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration,
Structured Finance
Telecopier Number: (612) 244-0089
If to Standard & Poor's:
Standard & Poor's Ratings Services
55 Water Street
New York, New York 10041
Attention: Asset-Backed Surveillance
Telecopier Number: (212) 208-8208
If to Fitch:
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention: ABS Surveillance Group
Telecopier Number: (212) 635-0474
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Securityholder
shall be in writing and delivered or mailed at the address shown in the Note
Register or the Certificate Register, as applicable.
SECTION 10.05. Merger and Integration.
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
10-4
<PAGE>
SECTION 10.06. Headings.
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 10.07. Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Minnesota.
SECTION 10.08. Limitation of Liability.
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as trustee of Green Tree Recreational,
Equipment & Consumer Trust 1999-__ under the Trust Agreement, in the exercise of
the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or the other Related Documents.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized this ___
day of _________, 1999.
ISSUER:
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely on behalf of the Issuer as
Owner Trustee under the Trust
Agreement
By __________________________________
Name: ____________________________
Title: ___________________________
SELLER:
CONSECO FINANCE SECURITIZATIONS CORP.
By __________________________________
Name: ____________________________
Title: _________________________
SERVICER:
CONSECO FINANCE CORP.
By __________________________________
Name: ____________________________
Title: _________________________
10-6
<PAGE>
Acknowledged and Accepted:
U.S. BANK TRUST NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee
By __________________________________
Name: ____________________________
Title: _________________________
By __________________________________
Name: ____________________________
Title: _________________________
10-7
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT
In accordance with the Sale and Servicing Agreement (the "Agreement")
dated as of _________, 1999 among Conseco Finance Corp. (the "Originator"),
Conseco Finance Securitizations Corp., as Seller, (the "Seller") and Conseco
Finance Recreational, Equipment & Consumer Trust 1999-__, the Seller does hereby
transfer, assign, set over and otherwise convey to the Trust all right, title
and interest of the Originator in (i) the retail installment sales contracts and
promissory notes for the purchase of a variety of Products (collectively, the
"Contracts") identified in the List of Contracts delivered pursuant to Section
2.02(a) of the Agreement, a copy of which List is attached hereto, including,
without limitation, all related Collateral Security, all security interests
created thereby and any and all rights to receive payments which are due
pursuant thereto from and after _________, 1999, but excluding any rights to
receive payments which were due pursuant thereto prior to ___________, 1999,
(ii) the Insurance Policies on any Products securing a Contract for the benefit
of the creditor of such Contract and all rights under all blanket insurance
policies to the extent they relate to the Contracts, (iii) the Errors and
Omissions Protection Policy as such policy relates to the Contracts, (iv) all
items contained in the Contract Files, (v) the Trust Accounts and all funds on
deposit therein from time to time and all investments and proceeds thereof
(including all income thereon), and (vi) all proceeds in any way derived from
any of the foregoing. Capitalized terms used herein but not defined herein have
the meanings assigned to them in the Agreement.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed this ______ day of ___________, 1999.
CONSECO FINANCE SECURITIZATIONS
CORP.
By: ________________________________
Name: __________________________
Title: _______________________
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<PAGE>
EXHIBIT B
FORM OF CERTIFICATE REGARDING
REPURCHASED CONTRACTS
CONSECO FINANCE CORP.
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certifies that he is a [title] of Conseco Finance
Corp., a Delaware corporation (the "Originator"); he is duly authorized to
execute and deliver this certificate on behalf of the Servicer pursuant to
Section 3.05 of the Sale and Servicing Agreement (the "Agreement"), dated as of
__________, 1999 among the Originator, Conseco Finance Securitizations Corp., as
Seller, and Conseco Finance Recreational, Equipment & Consumer Trust 1999-__
(the "Trust") (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement):
1. The Contracts on the attached schedule are to be
repurchased by the [Originator] [Servicer] on the date hereof pursuant
to Section [3.05] [5.22] of the Agreement.
2. Upon deposit of the Repurchase Price for such Contracts,
such Contracts may, pursuant to Section [3.05] [5.22] of the Agreement,
be assigned by the Trust to the [Originator] [Servicer].
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day
of ________, 19__.
CONSECO FINANCE CORP.
By: ________________________________
Name: __________________________
Title: _______________________
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<PAGE>
EXHIBIT C
FORM OF MONTHLY REPORT
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
Distribution Date: ________
1. Amount Available ______
(a) Collection Account balance as of last day
of related Monthly Period ______
(b) Payments on account
of principal deposited during ______
first 10 days of current month
(c) Less payments on account of principal deposited
during first 10 days of preceding month ______
(d) Repurchase Proceeds ______
(e) Servicer Advances ______
(f) Guaranty Payment ______
(g) Self-Insurance Payments ______
(h) Termination Payments ______
(j) Payments on Liquidation or Auction of Trust Estate ______
2. Monthly Servicing Fee (if Conseco Finance is not the Servicer) ______
3. Servicer Advances reimbursed ______
Senior Note Interest
- --------------------
4. Amount actually distributed on account of Class A-1, Class A-2,
Class A-3, Class A-4 plus Class A-5 interest
(current plus carryover) ______
5. Class A-1 Principal Balance ______
6. Class A-1 Interest Amount ______
7. Class A-2 Principal Balance ______
8. Class A-2 Interest Amount ______
9. Class A-3 Principal Balance ______
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<PAGE>
10. Class A-3 Interest Amount ______
11. Class A-4 Principal Balance ______
12. Class A-4 Interest Amount ______
13. Class A-5 Principal Balance ______
14. Class A-5 Interest Amount ______
15. Amount applied to Class A-1 Interest Amount ______
16. Amount applied to Class A-2 Interest Amount ______
17. Amount applied to Class A-3 Interest Amount ______
18. Amount applied to Class A-4 Interest Amount ______
19. Amount applied to Class A-5 Interest Amount ______
20. Class A-1 Interest Carryover Shortfall ______
21. Amount applied to Unpaid Class A-1 Interest Shortfall ______
22. Remaining Unpaid Class A-1 Interest Shortfall ______
23. Class A-2 Interest Carryover Shortfall ______
24. Amount applied to Unpaid Class A-2 Interest Shortfall ______
25. Remaining Unpaid Class A-2 Interest Shortfall ______
26. Class A-3 Interest Carryover Shortfall ______
27. Amount applied to Unpaid Class A-3 Interest Shortfall ______
28. Remaining Unpaid Class A-3 Interest Shortfall ______
29. Class A-4 Interest Carryover Shortfall ______
30. Amount applied to Unpaid Class A-4 Interest Shortfall ______
31. Remaining Unpaid Class A-4 Interest Shortfall ______
32. Class A-5 Interest Carryover Shortfall ______
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<PAGE>
33. Amount applied to Unpaid Class A-5 Interest Shortfall ______
34. Remaining Unpaid Class A-5 Interest Shortfall ______
First Priority Principal Distribution Amount
- --------------------------------------------
35. Senior Note Principal Balance ______
36. Pool Scheduled Principal Balance for prior Distribution Date,
minus Scheduled Principal Balance of all Defaulted Contracts,
minus $175,000 ______
37. First Priority Principal Distribution Amount (line 34 minus
line 35, but not less than zero) ______
38. Amount actually distributed in respect of First Priority
Principal Distribution Amount (lesser of line 36 or remaining
Amount Available) ______
Class A-6 Interest
- ------------------
39. Amount actually distributed on account of Class A-6 interest
(current plus carryover) ______
40. Class A-6 Principal Balance ______
41. Class A-6 Interest Amount ______
42. Amount applied to Class A-6 Interest Amount ______
43. Class A-6 Interest Carryover Shortfall ______
44. Amount applied to Unpaid Class A-6 Interest Shortfall ______
45. Remaining Unpaid Class A-6 Interest Shortfall ______
Second Priority Principal Distribution Amount
- ---------------------------------------------
46. Senior Note Principal Balance, plus Class A-6 Principal Balance,
minus any First Priority Principal Distribution Amount paid
on this Distribution Date ______
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<PAGE>
47. Pool Scheduled Principal Balance, minus Scheduled
Principal Balance of all Defaulted Contracts, minus $175,000 ______
48. Second Priority Principal Distribution Amount (line 45 minus
line 46, but not less than zero) ______
49. Amount actually distributed in respect of Second Priority
Principal Distribution Amount (lesser of line 47 or remaining
Amount Available) ______
Class A-7 Interest
- ------------------
50. Amount actually distributed on account of Class A-7 interest
(current plus carryover) ______
51. Class A-7 Principal Balance ______
52. Class A-7 Interest Amount ______
53. Amount applied to Class A-7 Interest Amount ______
54. Class A-7 Interest Carryover Shortfall ______
55. Amount applied to Unpaid Class A-7 Interest Shortfall ______
56. Remaining Unpaid Class A-7 Interest Shortfall ______
Third Priority Principal Distribution Amount
- --------------------------------------------
57. Senior Note Principal Balance, plus Class A-6 Principal
Balance, plus Class A-7 Principal Balance, minus any
First Priority Principal Distribution Amount paid on this
Distribution Date, minus any Second Priority Principal
Distribution Amount paid on this Distribution Date ______
58. Pool Scheduled Principal Balance, minus Scheduled
Principal Balance of all Defaulted Contracts, minus $175,000 ______
59. Third Priority Principal Distribution Amount (line 56 minus
line 57, but not less than zero) ______
60. Amount actually distributed in respect of Third Priority
Principal Distribution Amount (lesser of line 58 or remaining
Amount Available) ______
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<PAGE>
Class B-1 Interest
- ------------------
61. Amount actually distributed on account of Class B-1 interest
(current plus carryover) ______
62. Class B-1 Principal Balance ______
63. Class B-1 Interest Amount ______
64. Amount applied to Class B-1 Interest Amount ______
65. Class B-1 Interest Carryover Shortfall ______
66. Amount applied to Unpaid Class B-1 Interest Shortfall ______
67. Remaining Unpaid Class B-1 Interest Shortfall ______
Fourth Priority Principal Distribution Amount
- ---------------------------------------------
68. Senior Note Principal Balance, plus Class A-6 Principal
Balance, plus Class A-7 Principal Balance, plus Class B-1
Principal Balance, minus any First Priority Principal
Distribution Amount paid on this Distribution Date, minus
any Second Priority Principal Distribution Amount paid on
this Distribution Date, minus any Third Priority
Principal Distribution Amount paid on this Distribution Date ______
69. Pool Scheduled Principal Balance, minus Scheduled
Principal Balance of all Defaulted Contracts, minus $175,000 ______
70. Fourth Priority Principal Distribution Amount (line 67 minus
line 68, but not less than zero) ______
71. Amount actually distributed in respect of Fourth Priority
Principal Distribution Amount (lesser of line 69 or remaining
Amount Available) ______
Total Principal Distribution Amount
- -----------------------------------
72. Formula Principal Distribution Amount: ______
(a) Scheduled principal ______
(b) Principal Prepayments ______
(c) Liquidated Contracts ______
(d) Repurchases ______
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<PAGE>
73. Aggregate of Formula Principal Shortfalls from prior
Distribution Dates ______
74. First Priority Principal Distribution Amount, plus
Second Priority Principal Distribution Amount, plus
Third Priority Principal Distribution Amount, plus
Fourth Priority Principal Distribution Amount, for this
Distribution Date ______
75. Total amounts actually paid in respect of any First Priority
Principal Distribution Amount, plus any Second Priority
Principal Distribution Amount, plus any Third Priority
Principal Distribution Amount, plus any Fourth Priority
Principal Distribution Amount, for all prior
Distribution Dates ______
76. Total Principal Distribution Amount (line 71, plus line 72,
plus line 73, minus line 74) ______
77. Amount actually distributed on account of principal
(lesser of line 75 or remaining Amount Available):
(a) Class A-1 ______
(b) Class A-2 ______
(c) Class A-3 ______
(d) Class A-4 ______
(e) Class A-5 ______
(f) Class A-6 ______
(g) Class A-7 ______
(h) Class B-1 ______
78. Formula Principal Shortfall for this Distribution Date (line
71 minus line 76, but not less than zero) ______
Class B-2 Certificates
- ----------------------
Class B-2 Interest
79. Amount actually distributed on account of Class B-2 interest
(current plus carryover) ______
80. Class B-2 Principal Balance ______
81. Class B-2 Interest Amount ______
82. Amount applied to Class B-2 Certificate Interest Amount ______
C-6
<PAGE>
83. Class B-2 Interest Carryover Shortfall ______
84. Amount applied to Unpaid Class B-2 Interest
Carryover Shortfall ______
85. Remaining Unpaid Class B-2 Interest
Carryover Shortfall ______
86. Amount of Guaranty Payment in respect of Class B-2 interest ______
Class B-2 Principal
87. Amount actually distributed on account of Class B-2 principal ______
88. Total Principal Distribution Amount (after Class B-1
is retired) ______
89. Class B-2 Liquidation Loss Amount ______
90. Class B-2 Principal Distribution Amount (line 87 plus
line 88) ______
91. Amount of Guaranty Payment in respect of Class B-2 principal ______
Portfolio Information
- ---------------------
92. Monthly Servicing and Guaranty Fee ______
93. GTGP Fee ______
94. Pool Scheduled Principal Balance ______
95. Pool Factor
(a) Class A-1 ______
(b) Class A-2 ______
(c) Class A-3 ______
(d) Class A-4 ______
(e) Class A-5 ______
(f) Class A-6 ______
(g) Class A-7 ______
(h) Class B-1 ______
(i) Class B-2 ______
C-7
<PAGE>
Aggregate Scheduled Balances of delinquent Contracts as of
Determination Date
96. 30 - 59 days
(a) Number ______
(b) Aggregate Principal Amount ______
97. 60 - 89 days
(a) Number ______
(b) Aggregate Principal Amount ______
98. 90 days or more
(a) Number ______
(b) Aggregate Principal Amount ______
99. Aggregate Scheduled Balances and number of Contracts that
became Defaulted Contracts this month (by Product type) ______
100. Aggregate Scheduled Balances and number of all Defaulted
Contracts as of end of month (by Product type) ______
101. Number of Contracts that became Liquidated Contracts ______
102. Aggregate Amount of Servicer Advances with
respect to current Distribution Date ______
103. Amount paid to Servicer as reimbursement for
prior Servicer Advances ______
The amounts of principal and interest distributions set out above are
expressed as a dollar amount per Note or Certificate with a 1% Class Percentage
Interest or per $1,000 denomination of Note or Certificate.
Please contact ____________________ of U.S. Bank Trust National
Association, ____________________ with any questions regarding this Statement or
your Distribution.
C-8
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE OF SERVICING OFFICER
CONSECO FINANCE CORP.
The undersigned certifies that [s]he is a [title] of Conseco Finance
Corp., a Delaware corporation (the "Originator"), and that as such he is duly
authorized to execute and deliver this certificate on behalf of the Servicer
pursuant to Section 5.14 of the Sale and Servicing Agreement (the "Agreement")
dated as of ________, 1999 among the Servicer, Conseco Finance Securitizations
Corp., as Seller, and Conseco Finance Recreational, Equipment & Consumer Trust
1999-__ (all capitalized terms used herein without definition having the
respective meanings specified in the Agreement), and further certifies that:
1. The Monthly Report for the period from ___________________
to ____________________ attached to this certificate is complete and
accurate in accordance with the requirements of Section 5.14 of the
Agreement; and
2. As of the date hereof, no Event of Termination or event
that with notice or lapse of time or both would become an Event of
Termination has occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature this _______
day of ______________, 19__.
CONSECO FINANCE CORP.
By: ________________________________
Name: __________________________
Title: _______________________
D-1
<PAGE>
EXHIBIT 4.3
CONSECO FINANCE RECREATIONAL ENTHUSIAST CONSUMER TRUST 1999-__
TRUST AGREEMENT
Dated as of _____________, 1999
among
CONSECO FINANCE SECURITIZATIONS CORP.,
as Depositor
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................1-1
SECTION 1.1. Definitions..............................................1-1
SECTION 1.2. Usage of Terms...........................................1-4
SECTION 1.3. Calculations.............................................1-5
SECTION 1.4. Section References.......................................1-5
SECTION 1.5. Action by or Consent of Certificateholders...............1-5
ARTICLE II CREATION OF TRUST..............................................2-1
SECTION 2.1. Creation of Trust........................................2-1
SECTION 2.2. Office...................................................2-1
SECTION 2.3. Purposes and Powers......................................2-1
SECTION 2.4. Appointment of Owner Trustee.............................2-2
SECTION 2.5. Initial Capital Contribution of Trust Estate.............2-2
SECTION 2.6. Declaration of Trust.....................................2-2
SECTION 2.7. Liability of the Certificateholders......................2-3
SECTION 2.8. Title to Trust Property..................................2-3
SECTION 2.9. Situs of Trust...........................................2-4
SECTION 2.10. Representations and Warranties of the Depositor..........2-4
SECTION 2.11. Federal Income Tax Allocations...........................2-7
SECTION 2.12. Covenants of the Certificateholders......................2-7
ARTICLE III THE CERTIFICATES..............................................3-1
SECTION 3.1. Initial Ownership........................................3-1
SECTION 3.2. The Certificates.........................................3-1
SECTION 3.3. Authentication of Certificates...........................3-1
SECTION 3.4. Registration of Transfer and Exchange of Certificates....3-2
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates........3-3
SECTION 3.6. Persons Deemed Certificateholders........................3-4
SECTION 3.7. Access to List of Certificateholders' Names and
Addresses................................................3-4
SECTION 3.8. Maintenance of Office or Agency..........................3-4
SECTION 3.9. Appointment of Paying Agent..............................3-5
ARTICLE IV ACTIONS BY OWNER TRUSTEE.......................................4-1
SECTION 4.1. Restriction on Power of Certificateholders...............4-1
SECTION 4.2. Prior Notice to Certificateholders with Respect
to Certain Matters.......................................4-1
SECTION 4.3. Action by Certificateholders with Respect to
Bankruptcy...............................................4-1
SECTION 4.4. Restrictions on Certificateholders' Power................4-2
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES......................5-1
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<PAGE>
SECTION 5.1. Trust Accounts...........................................5-1
SECTION 5.2. Application of Funds in Certificate Distribution
Account..................................................5-2
SECTION 5.3. Method of Payment........................................5-4
SECTION 5.4. No Segregation of Monies; No Interest....................5-4
SECTION 5.5. Accounting; Reports; Tax Returns.........................5-4
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE..........................6-1
SECTION 6.1. General Authority........................................6-1
SECTION 6.2. General Duties...........................................6-1
SECTION 6.3. Action upon Instruction..................................6-2
SECTION 6.4. No Duties Except as Specified in this Agreement
or in Instructions.......................................6-3
SECTION 6.5. No Action Except under Specified Documents
or Instructions..........................................6-4
SECTION 6.6. Restrictions.............................................6-4
SECTION 6.7. Administration Agreement.................................6-4
ARTICLE VII CONCERNING THE OWNER TRUSTEE..................................7-1
SECTION 7.1. Acceptance of Trust and Duties...........................7-1
SECTION 7.2. Furnishing of Documents..................................7-3
SECTION 7.3. Representations and Warranties...........................7-3
SECTION 7.4. Reliance; Advice of Counsel..............................7-4
SECTION 7.5. Not Acting in Individual Capacity........................7-4
SECTION 7.6. Owner Trustee Not Liable for Certificates,
Notes or Contracts.......................................7-4
SECTION 7.7. Owner Trustee May Own Certificates and Notes.............7-5
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE................................8-1
SECTION 8.1. Owner Trustee's Fees and Expenses........................8-1
SECTION 8.2. Indemnification..........................................8-1
SECTION 8.3. Nonrecourse Obligations..................................8-1
ARTICLE IX TERMINATION....................................................9-1
SECTION 9.1. Termination of the Trust.................................9-1
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES.........10-1
SECTION 10.1. Eligibility Requirements for Owner Trustee..............10-1
SECTION 10.2. Resignation or Removal of Owner Trustee.................10-1
SECTION 10.3. Successor Owner Trustee.................................10-2
SECTION 10.4. Merger or Consolidation of Owner Trustee................10-2
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee...........10-3
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<PAGE>
ARTICLE XI MISCELLANEOUS PROVISIONS......................................11-1
SECTION 11.1. Amendment...............................................11-1
SECTION 11.2. No Recourse.............................................11-2
SECTION 11.3. Governing Law...........................................11-2
SECTION 11.4. Severability of Provisions..............................11-2
SECTION 11.5. Certificates Nonassessable and Fully Paid...............11-3
SECTION 11.6. Third-Party Beneficiaries...............................11-3
SECTION 11.7. Counterparts............................................11-3
Exhibit A -- Form of Certificate of Trust..............................A-1
Exhibit B-1 -- Form of Class B-1 Certificate.............................B-1
Exhibit B-2 -- Form of Class B-2 Certificate.............................B-2
Exhibit C -- Form of Class C Certificate...............................C-1
Exhibit D -- Form of Representation Letter and Certification...........D-1
Exhibit E -- Form of Certificate Depository Agreement..................E-1
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<PAGE>
THIS TRUST AGREEMENT, dated as of ____________, 1999, is made among Conseco
Finance Securitizations Corp., a Delaware corporation, as depositor (the
"Seller") and Wilmington Trust Company, a Delaware banking corporation, as owner
trustee (in such capacity, the "Owner Trustee").
In consideration of the mutual agreements herein contained, and of other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
Unless otherwise expressly defined herein, the terms defined in the Sale
and Servicing Agreement (defined below) shall have the same meanings in this
Agreement. Whenever capitalized and used in this Agreement, the following words
and phrases, unless otherwise specified, shall have the following meanings:
Administration Agreement: The Administration Agreement, dated as of
_____________, 1999, among the Administrator, the Trust, and the Indenture
Trustee, as the same may be amended and supplemented from time to time.
Administrator: Conseco Finance Securitizations Corp., a Delaware
Corporation, or any successor Administrator under the Administration Agreement.
Agreement or "this Agreement": This Trust Agreement, all amendments and
supplements thereto and all exhibits and schedules to any of the foregoing.
Authentication Agent: Wilmington Trust Company, or its successor in
interest, and any successor authentication agent appointed as provided in this
Agreement.
Book-Entry Certificate: any Certificate registered in the name of the
Depository or its nominee ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code ss. 3801 et seq., as the same may be amended from time to time.
Certificates: The Class ___ Certificates and the Class ___ Certificates.
Certificate Owner: The Person who is the beneficial owner of a Book-Entry
Certificate.
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<PAGE>
Certificate Majority: means holders of Certificates representing more than
50% of the interests of the Certificateholders as a whole.
Certificate Depository Agreement: The agreement among the Trust, the Owner
Trustee, the Administrator and The Depository Trust Company, dated as of the
Closing Date, relating to the Class B-1 and Class B-2 Certificates,
substantially in the form attached hereto as Exhibit E.
Certificate Distribution Account: The account designated as the
Certificate Distribution Account in, and which is established and maintained
pursuant to, Section 5.1.
Certificate of Trust: The Certificate of Trust substantially in the form of
Exhibit A hereto, filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
Certificate Register and Certificate Registrar: The register maintained and
the registrar appointed pursuant to Section 3.4.
Certificateholder or Holder: A Person in whose name a Certificate is
registered in the Certificate Register.
Class ___ Certificates: The Class ____ Asset-Backed Certificates evidencing
a beneficial interest of an Owner in the Trust, substantially in the form
attached as Exhibit B-1.
Class ___ Certificates: The Class ____ Asset-Backed Certificates evidencing
a beneficial interest of an Owner in the Trust, substantially in the form
attached as Exhibit B-2.
Code: The meaning assigned to such term in Section 5.2(f).
Corporate Trust Office: The principal office of the Owner Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the Closing Date is located at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration; the telecopy number for the Corporate Trust Office on the date
of the execution of this Agreement is 302-651-8882.
Definitive Certificates: The meaning assigned in Section 3.4(i).
Depositor: The Seller in its capacity as depositor hereunder.
"Depository" means the initial Depository, The Depository Trust Company,
the nominee of which is CEDE & CO., as the registered Holder of:
(i) one Certificate evidencing $__________ in initial aggregate principal
balance of the Class ____ Certificates, and
(ii) one Certificate evidencing $__________ in initial aggregate principal
balance of the Class ____ Certificates,
1-2
<PAGE>
and any permitted successor depository. The Depository shall at all times be a
"clearing corporation" as defined in the Uniform Commercial Code of the State of
New York.
"Depository Participant" means a broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
ERISA: The meaning assigned to such term in Section 3.4(e).
Expenses: The meaning assigned to such term in Section 8.2.
GTFC-2: Green Tree Finance Corp.-Two, a Minnesota corporation.
Indemnified Parties: The meaning assigned to such term in Section 8.2.
[Insolvency Event: With respect to a specified Person, (a) the commencement
of an involuntary case against such Person under the federal bankruptcy laws, as
now or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law, and such case is not dismissed within 60
days; or (b) the filing of a decree or entry of an order for relief by a court
having jurisdiction in the premises in respect of such Person or any substantial
part of its property in an involuntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs; or (c) the
commencement by such Person of a voluntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.]
Note Depository Agreement: The agreement among the Trust, the Indenture
Trustee, the Administrator and The Depository Trust Company, dated as of the
Closing Date, relating to the Notes, substantially in the form attached as
Exhibit B to the Indenture.
Original Class ___ Certificate Principal Balance: $_________.
Original Class ___ Certificate Principal Balance: $_________.
Owner Trustee: Wilmington Trust Company, or its successor in interest,
acting not individually but solely as trustee hereunder, and any successor
trustee appointed as provided in this Agreement.
1-3
<PAGE>
Paying Agent: Any paying agent or co-paying agent appointed pursuant to
Section 3.9, which initially shall be U.S. Bank Trust National Association.
Record Date: With respect to any Distribution Date, the close of business
on the last Business Day immediately preceding such Distribution Date.
Related Documents: The Sale and Servicing Agreement, the Indenture, the
Certificates, the Notes, the Administration Agreement, the Note Depository
Agreement and the Underwriting Agreement. The Related Documents executed by any
party are referred to herein as "such party's Related Documents," "its Related
Documents" or by a similar expression.
Sale and Servicing Agreement: The Sale and Servicing Agreement, dated as of
_________, 1999 among the Trust, the Seller and Conseco Finance Corp., as
Originator Servicer and Limited Guarantor, as the same may be amended and
supplemented from time to time.
Secretary of State: The Secretary of State of the State of Delaware.
Seller: Conseco Finance Securitizations Corp., or its successor in
interest.
Servicer's Certificate: The Monthly Report delivered by the Servicer to the
Trust pursuant to Section 5.11 of the Sale and Servicing Agreement.
Trust: The trust created by this Agreement, the estate of which consists of
the Trust Property, which trust shall be known as "Conseco Finance Recreational
Enthusiast Consumer Trust 1999-__."
Trust Accounts: The Collection Account, the Certificate Distribution
Account, the Note Distribution Account and the Pre-funding Account.
Trust Property: The property and proceeds of every description conveyed
pursuant to Section 2.5 hereof and Section 2.01 of the Sale and Servicing
Agreement, together with the Trust Accounts (including all Eligible Investments
therein and all proceeds therefrom) and the Limited Guaranty.
Underwriting Agreement: The Underwriting Agreement and related Terms
Agreement, each dated ____________, 1999, by and among Conseco Finance
Securitizations Corp. and Conseco Finance Corp.
Wilmington Trust: Wilmington Trust Company, a Delaware banking corporation.
SECTION 1.2. Usage of Terms.
With respect to all terms used in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to "writing" include printing, typing, lithography, and
other means of reproducing words in a visible form; references to agreements and
other contractual instruments include all subsequent amendments
1-4
<PAGE>
thereto or changes therein entered into in accordance with their respective
terms and not prohibited by this Agreement; references to Persons include their
permitted successors and assigns; and the terms "include" or "including" mean
"include without limitation" or "including without limitation." To the extent
that definitions are contained in this Agreement, or in any such certificate or
other document, such definitions shall control.
SECTION 1.3. Calculations.
All calculations of the amount of interest accrued on the Certificates
shall be made on the basis of a 360-day year consisting of twelve 30-day months.
SECTION 1.4. Section References.
All references to Articles, Sections, paragraphs, subsections, clauses,
exhibits and schedules shall be to such portions of this Agreement unless
otherwise specified.
SECTION 1.5. Action by or Consent of Certificateholders.
(a) Except as expressly provided herein, any action that may be taken by
the Certificateholders under this Agreement may be taken by a Certificate
Majority. Except as expressly provided herein, any written notice or consent of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Holders of the Certificates evidencing not less than a Certificate
Majority at the time of the delivery of such notice.
(b) Whenever any provision of this Agreement refers to action to be taken,
or consented to, by Certificateholders, such provision shall be deemed to refer
to Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate owned by or registered in
the name of GTFC-2, the Seller or any Affiliate thereof shall be deemed not to
be outstanding and the Class ___ or Class ___ Principal Balance, as applicable,
represented thereby shall not be taken into account in determining whether the
requisite percentage of the Class ___ or Class ___ Principal Balance, as
applicable, necessary to effect any such action or consent has been obtained;
provided, however, that, solely for the purpose of determining whether the Owner
Trustee is entitled to rely upon any such action or consent, only Certificates
which the Owner Trustee knows to be so owned shall be so disregarded.
1-5
<PAGE>
ARTICLE II
CREATION OF TRUST
SECTION 2.1. Creation of Trust.
There is hereby formed a trust to be known as "Conseco Finance Recreational
Enthusiast Consumer Trust 1999-__," in which name the Trust may conduct
business, make and execute contracts and other instruments and sue and be sued.
SECTION 2.2. Office.
The office of the Trust shall be in care of the Owner Trustee at the
Corporate Trust Office or at such other address in Delaware as the Owner Trustee
may designate by written notice to the Certificateholders and the Depositor.
SECTION 2.3. Purposes and Powers.
The sole purpose of the Trust is to conserve the Trust Property and collect
and disburse the periodic income therefrom for the use and benefit of the
Certificateholders and the Noteholders, and in furtherance of such purpose the
Trust shall have the power and authority, to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Certificates
pursuant to this Agreement and to sell the Notes and the Certificates;
(ii) with the proceeds of the sale of the Notes and the Certificates,
to pay the organizational, start-up and transactional expenses of the Trust
and to pay the balance (net of the Pre-Funded Amount, if any) to the Seller
pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate to the Indenture Trustee pursuant to the Indenture for the
benefit of the Noteholders and to hold, manage and distribute to the
Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Trust Property released from the lien of, and
remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Related
Documents to which it is or is to be a party;
(v) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith; and
2-1
<PAGE>
(vi) subject to compliance with the Related Documents, to engage in
such other activities as may be required in connection with conservation of
the Trust Property and the making of distributions to the
Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities and any
activities that are necessary or incidental thereto. The Trust shall not engage
in any activity other than in connection with the foregoing or other than as
required or expressly authorized by the terms of this Agreement or the Related
Documents. Similarly, the Owner Trustee shall have no discretionary duties other
than performing those ministerial acts set forth above necessary to accomplish
the purpose of this Trust as set forth in the introductory sentence of this
Section.
SECTION 2.4. Appointment of Owner Trustee.
The Depositor hereby appoints the Owner Trustee as trustee of the Trust
effective as of the date hereof, to have all the rights, powers and duties set
forth herein and in the Business Trust Statute, and the Owner Trustee hereby
accepts such appointment.
SECTION 2.5. Initial Capital Contribution of Trust Estate.
The Depositor hereby sells, assigns, transfers, conveys and sets over to
the Owner Trustee, as of the date hereof, the sum of $10.00. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the initial Trust Property
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.6. Declaration of Trust.
The Owner Trustee hereby declares that it will hold the Trust Property in
trust upon and subject to the conditions set forth herein for the use and
benefit of the Certificateholders, subject to the interests and rights in the
Trust Property granted to other Persons by the Related Documents. It is the
intention and agreement of the parties hereto that the Trust constitute a
business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the intention
and agreement of the parties hereto that, solely for income and franchise tax
purposes, the Trust shall be treated as a partnership, with the assets of the
partnership being the Contracts and the other Trust Property, the partners of
the partnership being the Certificateholders, and the Notes being debt of the
Partnership. None of the parties hereto shall make the election provided in
Treasury Regulation ss. 301.7701-3(c) to have the Trust classified as an
association taxable as a corporation. The parties agree that, unless otherwise
required by appropriate tax authorities, the Trust will file or cause to be
filed annual or other necessary returns, reports and other forms consistent with
the characterization of the Trust as a partnership for such tax purposes. On or
before the date hereof, the Owner Trustee shall file in the Office of the
Secretary of State the Certificate of Trust required by Section 3810(a) of the
Business Trust Statute, to be effective on the Closing Date. Effective as of the
date hereof, the
2-2
<PAGE>
Owner Trustee shall have all rights, powers and duties set forth herein and in
the Business Trust Statute with respect to accomplishing the purposes of the
Trust.
SECTION 2.7. Liability of the Certificateholders.
No Certificateholder shall have any personal liability for any liability or
obligation of the Trust or by reason of any action taken by the parties to this
Agreement pursuant to any provisions of this Agreement or any Related Document.
SECTION 2.8. Title to Trust Property.
(a) Legal title to all the Trust Property shall be vested at all times in
the Trust as a separate legal entity except where applicable law in any
jurisdiction requires title to any part of the Trust Property to be vested in a
trustee or trustees, in which case title shall be deemed to be vested in the
Owner Trustee, a co-trustee and/or a separate trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any part of the
Trust Property. The Certificateholders shall be entitled to receive
distributions with respect to their undivided ownership interest therein only in
accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest by any Certificateholder of its
ownership interest in the Trust Property shall operate to terminate this
Agreement or the trusts hereunder or entitle any transferee to an accounting or
to the transfer to it of legal title to any part of the Trust Property.
SECTION 2.9. Situs of Trust.
The Trust will be located and administered in the State of Delaware. All
bank accounts maintained by the Owner Trustee on behalf of the Trust shall be
located in the State of Delaware or the State of Minnesota. The Trust shall not
have any employees in any state other than Delaware; provided, however, that
nothing herein shall restrict or prohibit the Owner Trustee, the Servicer or any
agent of the Trust from having employees within or without the State of
Delaware. Payments will be received by the Trust only in Delaware or Minnesota,
and payments will be made by the Trust only from Delaware or Minnesota. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor and GTGP.
By execution of this Agreement, the Depositor makes the following
representations and warranties with respect to itself on which the Owner Trustee
relies in accepting the Trust Property in trust and issuing the Certificates.
(a) Organization and Good Standing. It has been duly organized and is
validly existing as a corporation in good standing under the laws of the
State of Minnesota, with power and authority to own its properties and to
conduct its business as such properties are currently owned and as such
business is currently conducted and is proposed to be conducted pursuant to
this Agreement and the Related Documents.
2-3
<PAGE>
(b) Due Qualification. It is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property, the conduct of its business and the performance of
its obligations under this Agreement and the Related Documents requires
such qualification.
(c) Power and Authority; Binding Obligations. It has the power and
authority to execute and deliver this Agreement and its Related Documents
and to perform its obligations pursuant thereto; and the execution,
delivery and performance of this Agreement and its Related Documents have
been duly authorized by all necessary corporate action. When executed and
delivered, this Agreement and the Related Documents will constitute the
legal, valid and binding obligations of the Depositor enforceable in
accordance with their terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies.
(d) No Consent Required. No consent, license, approval or
authorization or registration or declaration with any Person or with any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the Related
Documents, except for such as have been obtained, effected or made.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Depositor's Related Documents and the fulfillment of
its obligations under this Agreement and its Related Documents shall not
conflict with, result in any breach of any of the terms and provisions of
or constitute (with or without notice, lapse of time or both) a default
under, its articles of incorporation or bylaws, or any indenture,
agreement, mortgage, deed of trust or other instrument to which it is a
party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, or
violate any law, 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
properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to its knowledge, threatened against it before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over it or its properties (A) asserting
the invalidity of this Agreement or any of the Related Documents, (B)
seeking to prevent the issuance of the Certificates or the Notes or the
consummation of any of the transactions contemplated by this Agreement or
any of the Related Documents, (C) seeking any determination or ruling that
might materially and adversely affect its performance of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Related Documents, or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the Certificates or
the Notes.
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SECTION 2.11. Federal Income Tax Allocations.
Net income of the Trust for any month as determined for Federal income tax
purposes (and each item of income, gain, loss and deduction entering into the
computation thereof) shall be allocated:
(a) among the Certificateholders as of the first Record Date following
the end of such month, in proportion to their ownership of the sum of the
Class B-1 Principal Balance plus the Class B-2 Principal Balance on such
date, an amount of net income up to the sum of (i) the interest payable in
respect of the Certificates of the applicable class for such month pursuant
to Section 5.2(a), and (ii) the portion of the market discount on the
Contracts accrued during such month that is allocable to the excess of the
Original Class ___ Certificate Principal Balance or the Original Class ___
Certificate Principal Balance, as applicable, over such class' initial
aggregate issue price; and
(b) next, to the Class C Certificateholder to the extent of any
remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in clause (b). Net
losses of the Trust, if any, for any month as determined for Federal income tax
purposes (and each item of income, gain, loss and deduction entering into the
computation thereof) shall be allocated to the Class ___ Certificateholder to
the extent the Class ___ Certificateholder is reasonably expected to bear the
economic burden of such net losses, then net losses shall be allocated among the
Certificateholders as of the first Record Date following the end of such month
in proportion to their ownership of principal amount of Certificates on such
Record Date until the total amount of losses allocated to the Certificateholders
pursuant to this Section 2.11 plus the total principal amount distributed to the
Certificateholders equals the sum of the Original Class ___ Principal Balance
plus the Original Class ___ Principal Balance, and any remaining net losses
shall be allocated to the Class ___ Certificateholder. The Class ___
Certificateholder is authorized to modify the allocations in this paragraph if
necessary or appropriate, in its sole discretion, for the allocations to fairly
reflect the economic income, gain or loss to the Class ___ Certificateholder,
the Class ___ Certificateholders, or to comply with the provisions of the Code
and the accompanying Treasury Regulations.
SECTION 2.12. Covenants of the Certificateholders.
Each Certificateholder by becoming a Certificateholder agrees:
(a) to be bound by the terms and conditions of the Certificates and of
this Agreement, including any supplements or amendments hereto and to
perform the obligations of a Certificateholder as set forth therein or
herein, in all respects as if it were a signatory hereto. This undertaking
is made for the benefit of the Trust, the Owner Trustee and all other
Certificateholders present and future.
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(b) if requested by the Trust, it will sign such federal income tax
information return in its capacity as holder of an interest in the Trust.
Each Certificateholder also hereby agrees that in its tax returns it will
not take any position inconsistent with those taken in any tax returns
filed by the Trust.
(c) until the completion of the events specified in Section 9.1(e),
not to, for any reason, institute proceedings for the Trust or the Seller,
or to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against the Trust or the Seller, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Trust or the Seller or a substantial part of
its property, or cause or permit the Trust or the Seller to make any
assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any action in furtherance of any
such action.
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ARTICLE III
THE CERTIFICATES
SECTION 3.1. Initial Ownership.
Upon the formation of the Trust by the contribution by the Depositor
pursuant to Section 2.5 and until the issuance of the Certificates, the
Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2. The Certificates.
Class ___ Certificates, in an aggregate principal amount of $__________,
and Class ___ Certificates, in an aggregate principal amount of $__________,
shall be issued in denominations of $1,000 initial principal amount and integral
multiples thereof, except for one Class B-2 Certificate in a denomination equal
to an integral multiple of $1,000, plus $828. The Certificates shall be executed
on behalf of the Trust by manual or facsimile signature of any authorized
signatory of the Owner Trustee having such authority under the Owner Trustee's
seal imprinted or otherwise affixed thereon and attested on behalf of the Owner
Trustee by the manual or facsimile signature of any authorized signatory of the
Owner Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Owner Trustee shall be validly issued and entitled to
the benefits of this Agreement, notwithstanding that such individuals or any of
them have ceased to be so authorized prior to the authentication and delivery of
such Certificates. The Class C Certificate shall be evidenced by a single
certificate issued on the Closing Date to GTFC-2
SECTION 3.3. Authentication of Certificates.
Simultaneously with the sale, assignment and transfer to the Trust of the
Contracts and the delivery to the Trust of the Contract Files and the other
Trust Property pursuant to the Sale and Servicing Agreement, the Owner Trustee
shall cause Class ___ Certificates in authorized denominations in an aggregate
principal amount equal to the Original Class ___ Certificate Principal Balance,
and Class ___ Certificates in authorized denominations in an aggregate principal
amount equal to the Original Class ___ Principal Balance to be executed on
behalf of the Trust, authenticated and delivered to or upon the order of the
Depositor. No Certificate shall entitle its Holder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit B-1 or B-2, as applicable, executed by the Owner Trustee or the
Authentication Agent, by manual or facsimile signature; such authentication
shall constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. Wilmington Trust Company is hereby
initially appointed Authentication Agent. All Certificates shall be dated the
date of their authentication.
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SECTION 3.4. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall maintain, or cause to be maintained, at
the office or agency maintained pursuant to Section 3.8, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as provided in this Agreement. The Owner Trustee is
hereby initially appointed Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as provided in this
Agreement.
(b) Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause the Authentication Agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
class and aggregate proportion of the Class ___ Principal Balance or the Class
___ Principal Balance, as applicable, dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of a Holder,
Certificates may be exchanged for other Certificates of the same class in
authorized denominations of a like aggregate amount upon surrender of the
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
(c) (1) No transfer of a Class C Certificate shall be made by GTFC-2 or any
other Person unless such transfer is exempt from the registration requirements
of the Securities Act of 1933 (the "Act"), as amended, and any applicable state
securities laws or is made in accordance with the Act and laws. In the event
that any such transfer is to be made, (A) the Depositor may require a written
Opinion of Counsel acceptable to and in form and substance satisfactory to the
Depositor that such transfer may be made pursuant to an exemption, describing
the applicable exemption and the basis therefor, from the Act and laws or is
being made pursuant to the Act and laws, which Opinion of Counsel shall not be
an expense of the Owner Trustee or the Depositor, and (B) the Owner Trustee
shall require the transferee to execute an investment letter substantially in
the form of Exhibit D attached hereto, which investment letter shall not be an
expense of the Owner Trustee or the Depositor. Any Class C Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Owner Trustee, the Depositor and the Certificate Registrar against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws. In addition, no transfer of a Class C
Certificate shall be made by GTFC-2 or any other person to an Affiliate of the
Originator without (i) the written Opinion of Counsel acceptable to and in form
and substance satisfactory to the Depositor that in the event the Originator
became a debtor under the United States Bankruptcy Code, a court exercising
reasonable judgment under then existing statutes and precedents would not order
that the assets of such Affiliate be consolidated with those of the Originator,
which opinion shall not be an expense of the Owner Trustee or the Depositor, and
(ii) written notification from each Rating Agency to the effect that such
transfer will not cause such Rating Agency to downgrade its then-current
ratings, if any, of any of the Securities below the lower of the then-current
rating or the rating assigned to such Securities as of the Closing Date by such
Rating Agency.
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(2) Any transfer, sale or other disposition not in compliance with
the provisions of this Section 3.4(c) shall be deemed to be void and of no legal
force or effect whatsoever and such transferee shall be deemed to not be the
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Certificate, and shall be deemed to have no
interest whatsoever in such Certificate.
(d) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
(e) The Certificates may not be acquired by or for the account of (i) a
pension, profit sharing or other employee benefit plan, or an individual
retirement account or Keogh plan, subject to Title I of ERISA or Section 4975 of
the Internal Revenue Code of 1986, as amended (a "Benefit Plan"), or (ii) any
entity whose underlying assets include "plan assets" (within the meaning of
Department of Labor ("DOL") Regulation Section 2510.3-101, 29 C.F.R. ss.
2510.3-101 or otherwise under ERISA) by reason of a Benefit Plan's investment in
the entity, including, without limitation, an insurance company acting on behalf
of its general account.
(f) Notwithstanding anything contained herein to the contrary, the Owner
Trustee and the Certificate Registrar shall not be responsible for ascertaining
whether any transfer complies with the registration provisions or exemptions
from the Securities Act of 1933, as amended, the Securities and Exchange Act of
1934, as amended, or applicable state securities law or the Investment Company
Act of 1940, as amended; provided, however, that if a certificate is
specifically required to be delivered to the Owner Trustee by a purchaser or
transferee of a Certificate, the Owner Trustee shall be under a duty to examine
the same to determine whether it conforms to the requirements of this Agreement
and shall promptly notify the party delivering the same if such certificate does
not so conform.
(g) Notwithstanding the preceding provisions of this Section, the Owner
Trustee shall not be required to make, and the Certificate Registrar shall not
be required to register, transfers or exchanges of Certificates for a period of
15 days preceding the due date for any payment with respect to the Certificate.
(h) Except as provided in paragraph (i) below, the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times:
(i) registration of the Class ___ and Class ___ Certificates may not be
transferred by the Owner Trustee except to another Depository;
(ii) the Depository shall maintain book-entry records with respect to the
Certificate Owners and with respect to ownership and transfers of such
Class B-1 and Class B-2 Certificates;
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(iii) ownership and transfers of registration of the Class ___ and Class
___ Certificates on the books of the Depository shall be governed by
applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants;
(v) the Owner Trustee shall deal with the Depository, Depository
Participants and indirect participating firms as representatives of the
Certificate Owners of the Class ___ and Class ___ Certificates for purposes
of exercising the rights of Holders under this Agreement, and requests and
directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners;
and
(vi) the Owner Trustee may rely and shall be fully protected in relying
upon information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
(i) If (i) the Depositor or the Depository advises the Owner Trustee in
writing that the Depository is no longer willing or able properly to discharge
its responsibilities as Depository and (ii) the Owner Trustee or the Depositor
is unable to locate a qualified successor or (iii) the Depositor at its sole
option advises the Owner Trustee in writing that it elects to terminate the
book-entry system through the Depository, the Owner Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such event
and of the availability of definitive, fully registered Class ___ and Class ___
Certificates (the "Definitive Certificates") to Certificate Owners requesting
the same. Upon surrender to the Owner Trustee of the Class ___ and Class ___
Certificates by the Depository, accompanied by registration instructions from
the Depository for registration, the Owner Trustee shall issue the Definitive
Certificates. Neither the Depositor nor the Owner Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates all references herein to obligations imposed upon or to
be performed by the Depository shall be deemed to be imposed upon and performed
by the Owner Trustee, to the extent applicable with respect to such Definitive
Certificates and the Owner Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
(j) On or prior to the Closing Date, there shall be delivered to the
Depository one Class ___ Certificate and one Class ___ Certificate, each in
registered form registered in the name of the Depository's nominee, Cede & Co.,
the total face amount of which represents 100%
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of the related Original Class ___ Certificate Principal Balance or the Original
Class ___ Certificate Principal Balance, as applicable. Each such Class B
Certificate registered in the name of the Depository's nominee shall bear the
following legend:
"Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the
Trust or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or in such
other name as requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein." .
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Certificate Registrar or the Owner Trustee that such Certificate
has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the
Trust shall execute, authenticate and deliver (or the Authentication Agent shall
authenticate and deliver), in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor. In
connection with the issuance of any new Certificate under this Section 3.5, the
Owner Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Owner Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 3.5 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 3.6. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of transfer,
the Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee
or the Certificate Registrar may treat the person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.2 and for all other purposes whatsoever, and
neither the Owner Trustee, the Certificate Registrar nor any agent of the Owner
Trustee or the Certificate Registrar shall be affected by any notice to the
contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer,
within 15 days after receipt by the Owner Trustee of a written request therefor,
a list, in such form as the
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Servicer may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date for payment of
distributions to Certificateholders. If three or more Certificateholders of a
Class, or one or more Certificateholders holding not less than 25% of the
interests of the Certificateholders as a whole (hereinafter referred to as
"Applicants"), apply in writing to the Owner Trustee, and such application
states that the Applicants desire to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Certificates and
is accompanied by a copy of the communication that such Applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such Applicants access, during normal
business hours, to the current list of Certificateholders. Every
Certificateholder, by receiving and holding a Certificate, agrees that none of
the Servicer or the Owner Trustee, nor any agent thereof, shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Certificateholders under this Agreement, regardless of the
source from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency.
The Owner Trustee shall maintain in Wilmington, Delaware, an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Certificates and the Related Documents may
be served. The Owner Trustee initially designates its Corporate Trust Office for
such purposes. The Owner Trustee shall give prompt written notice to the
Depositor and to the Certificateholders of any change in the location of the
Certificate Register or any such office of agency.
SECTION 3.9. Appointment of Paying Agent.
The Paying Agent shall make distributions to Certificateholders from the
Certificate Distribution Account pursuant to Section 5.2 and shall report the
amounts of such distributions to the Owner Trustee. Any Paying Agent shall have
the revocable power to withdraw funds from the Certificate Distribution Account
for the purpose of making the distributions referred to above. The Owner Trustee
may revoke such power and remove the Paying Agent if the Owner Trustee
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The Trust
hereby appoints U.S. Bank Trust National Association as Paying Agent. U.S. Bank
Trust National Association shall be permitted to resign as Paying Agent upon 30
days' written notice to the Owner Trustee. In the event that U.S. Bank Trust
National Association shall no longer be the Paying Agent, the Owner Trustee
shall appoint a successor to act as Paying Agent (which shall be a bank or trust
company). The Owner Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Owner Trustee to execute and deliver to
the Owner Trustee an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Owner Trustee that as Paying Agent,
such successor Paying Agent or additional Paying Agent will hold all sums, if
any, held by it for payment to the Certificateholders in trust for the benefit
of the Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Owner Trustee, and upon removal of a Paying Agent, such Paying Agent shall also
return all funds in its possession to the Owner
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Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.1 shall apply to the
Owner Trustee also in its role as Paying Agent for so long as the Owner Trustee
shall act as Paying Agent and, to the extent applicable, to any other Paying
Agent appointed hereunder. Any reference in this Agreement to the Paying Agent
shall include any co-paying agent unless the context requires otherwise.
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ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Restriction on Power of Certificateholders.
No Certificateholder shall have any right to vote or in any manner
otherwise control the operation and management of the Trust except as expressly
provided in this Agreement.
SECTION 4.2. Prior Notice to Certificateholders with Respect to Certain
Matters.
The Owner Trustee shall not take any of the following actions, unless at
least 30 days (or such shorter period as shall be required under the
circumstances) before the taking of such action, the Owner Trustee shall have
notified the Certificateholders in writing of the proposed action and the
Certificateholders shall not have notified the Owner Trustee in writing prior to
the 30th day after such notice is given that such Certificateholders have
withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the Certificate
of Trust unless such amendment is required to be filed under the Business
Trust Statute or unless such amendment would not materially and adversely
affect the interests of the Certificateholders;
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required unless such
amendment would not materially and adversely affect the interests of the
Certificateholders; or
(c) the amendment, change or modification of the Administration
Agreement, unless such amendment would not materially and adversely affect
the interests of the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the unanimous prior
approval of all Certificateholders and the delivery to the Owner Trustee by each
such Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action, or proceeding
in equity or at law upon or under or with respect to this Agreement or any
Related Document, unless the Certificateholders are the instructing party
pursuant to Section 6.3 and unless a Certificateholder previously shall have
given to the Owner Trustee a written notice of default and of the continuance
thereof, as provided in this Agreement and unless Holders of Certificates
evidencing in the aggregate not less than a
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25% interest of the Certificates as a whole shall have made written request upon
the Owner Trustee to institute such action, suit or proceeding in its own name
as Owner Trustee under this Agreement and shall have offered to the Owner
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Owner Trustee, for 30
days after its receipt of such notice, request, and offer of indemnity, shall
have neglected or refused to institute any such action, suit, or proceeding, and
during such 30-day period no request or waiver inconsistent with such written
request has been given to the Owner Trustee pursuant to and in compliance with
this Section or Section 6.3; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common benefit
of all Certificateholders. For the protection and enforcement of the provisions
of this Section 4.4, each and every Certificateholder and the Owner Trustee
shall be entitled to such relief as can be given either at law or in equity.
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ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Trust Accounts.
(a) On or prior to the Closing Date, the Depositor shall cause the Servicer
to establish the Certificate Distribution Account in the name of the Owner
Trustee for the benefit of the Certificateholders as provided in Section 6.01(c)
of the Sale and Servicing Agreement. The Certificate Distribution Account shall
be an Eligible Account and initially shall be a segregated trust account
established with the Indenture Trustee and maintained with the Indenture
Trustee, so long as the Indenture Trustee is acting as Paying Agent under
Section 3.9.
(b) The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. If, at any time, the Certificate Distribution Account
ceases to be an Eligible Account, the Owner Trustee shall within 5 Business Days
(or such longer period, not to exceed 30 calendar days, as to which each Rating
Agency may consent) establish a new Certificate Distribution Account as an
Eligible Account and shall transfer any cash and/or any investments to such new
Certificate Distribution Account.
(c) All amounts held in the Certificate Distribution Account shall, to the
extent permitted by applicable laws, rules and regulations, be invested by the
Paying Agent in Eligible Investments as provided in Section 6.01 of the Sale and
Servicing Agreement and pursuant to the written instructions of the
Administrator that mature not later than one Business Day prior to the Payment
Date for the Due Period to which such amounts relate. Investments in Eligible
Investments shall be made in the name of the Trust, and such investments shall
not be sold or disposed of prior to their maturity. Any investment of funds in
the Certificate Distribution Account shall be made in Eligible Investments held
by a financial institution with respect to which (a) such institution has noted
the Owner Trustee's interest therein by book entry or otherwise and (b) a
confirmation of the Owner Trustee's interest has been sent to the Owner Trustee
by such institution, provided that such Eligible Investments are (i) specific
certificated securities, and (ii) either (A) in the possession of such
institution or (B) in the possession of a clearing corporation in New York or
Delaware, registered in the name of such clearing corporation, not endorsed for
collection or surrender or any other purpose not involving transfer, not
containing any evidence of a right or interest inconsistent with the Owner
Trustee's security interest therein, and held by such clearing corporation in an
account of such institution. Subject to the other provisions hereof, the Paying
Agent on behalf of the Owner Trustee shall have sole control over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the Owner
Trustee or its agent, together with each document of transfer, if any, necessary
to transfer title to such investment to the Owner Trustee in a manner which
complies with this Section 5.1. All interest, dividends, gains upon sale and
other income from, or earnings on investment of funds in the Certificate
Distribution Account shall be distributed on the next Payment Date pursuant to
Section 5.2(a). The Depositor shall cause the Seller to deposit in the
Certificate Distribution Account an amount equal to any net loss on such
investments immediately as realized.
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SECTION 5.2. Application of Funds in Certificate Distribution Account.
(a) On each Payment Date the Paying Agent will, based on the information
contained in the Monthly Report delivered on the related Payment Date pursuant
to Section 5.11 of the Sale and Servicing Agreement, distribute to
Certificateholders, on a pro rata basis among such Class to the extent of the
funds available, amounts distributable to such Class and deposited in the
Certificate Distribution Account pursuant to Section 6(a) of the Sale and
Servicing Agreement:
[1. To the holders of the Class ___ Certificates, the Class ___ Interest
Amount and any Unpaid Class ___ Interest Shortfall.]
[2. To the holders of the Class ___ Certificates, any Fourth Priority
Principal Distribution Amount.]
[3. To the holders of the Class ___ Certificates, the Total Principal
Distribution Amount, but in no event more than the Class ___ Principal Balance.]
[4. To the holders of the Class ___ Certificates, the Class ___ Interest
Amount and any Unpaid Class ___ Interest Shortfall.]
[5. To the holders of the Class ___ Certificates, the Class ___ Principal
Distributable Amount.]
(b) On the Payment Date following the date on which amounts received in
respect of the Class C Certificateholder's exercise of its option to purchase
the corpus of the Trust pursuant to Section 8.01 of the Sale and Servicing
Agreement, or pursuant to the auction of the Contracts as described in Section
8.01 of the Sale and Servicing Agreement, are deposited in the Certificate
Distribution Account or the Paying Agent will distribute such amounts to
Certificateholders in the manner described in Section 5.2(a).
(c) On the Payment Date on which proceeds are deposited in the Certificate
Distribution Account pursuant to Section 8.02 of the Sale and Servicing
Agreement (or on the Payment Date immediately following such deposit if such
proceeds are not deposited in the Certificate Distribution Account on a Payment
Date), the Paying Agent will distribute the proceeds so deposited in the
Certificate Distribution Account to Certificateholders in the manner described
in Section 5.2(a).
(d) On the Payment Date following the date on which the Indenture Trustee
makes payments of money or property in respect of liquidation of the Trust
Property pursuant to Section 5.06 of the Indenture and deposits funds received
in connection with such liquidation in the Certificate Distribution Account, the
Paying Agent will distribute such funds to Certificateholders in the manner
described in Section 5.2(a).
(e) On each Payment Date, the Owner Trustee shall send or cause to be sent
to each Certificateholder the statement required pursuant to Section 6.07 of the
Sale and Servicing Agreement.
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(f) To the extent required by the Internal Revenue Code, and applicable
federal regulations promulgated thereunder, as the same may be amended from time
to time (collectively, the "Code"), the Paying Agent shall withhold from each
payment due hereunder or under any Certificate, United States withholding taxes
at the appropriate rate, and, on a timely basis, to deposit such amounts with an
authorized depository and make such returns, filings and other reports in
connection therewith as are required of it under the Code. Any Certificateholder
which is eligible for an exemption from or reduction of withholding of United
States federal income taxes shall, from time to time, provide to the Owner
Trustee and the Paying Agent in a timely manner all appropriate and properly
completed forms indicating such eligibility, as may be necessary to permit the
Paying Agent shall not withhold taxes from payments due to such
Certificateholder. In connection with the foregoing, the Owner Trustee shall
promptly furnish or cause to be furnished to each Certificateholder in a timely
fashion such U.S. Treasury forms as are required by the Code to be furnished to
such Certificateholder indicating payment of any taxes withheld from any
payments by the Paying Agent to such Certificateholder. The Owner Trustee and
the Paying Agent shall be fully protected in relying upon, and each
Certificateholder by its acceptance of a Certificate hereunder agrees to
indemnify and hold the Owner Trustee harmless against all claims or liability of
any kind arising in connection with or related to the Owner Trustee's or the
Paying Agent's reliance upon any documents, forms or information provided by any
Certificateholder to the Owner Trustee. In addition, if the Paying Agent has not
withheld taxes on any payment made to any Certificateholder, and the Paying
Agent is subsequently required to remit to any taxing authority any such amount
not withheld, such Certificateholder shall return such amount to the Paying
Agent upon written demand by the Paying Agent. In no event shall the Owner
Trustee or the Paying Agent be liable for consequential damages to any
Certificateholder.
(g) Any funds remaining in the Certificate Distribution Account after
distribution of all amounts specified in this Section 5.2 shall be distributed
to the Class C Certificateholder in the manner described in Section 5.2(a).
SECTION 5.3. Method of Payment.
Subject to Section 9.1(c), distributions required to be made to
Certificateholders on any Payment Date shall be made to each Certificateholder
of record on the preceding Record Date either by wire transfer, in immediately
available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder shall have provided
to the Certificate Registrar appropriate written instructions at least five
Business Days prior to such Payment Date and such Holder's Certificates in the
aggregate evidence a denomination of not less than $1,000,000, or, if not, by
check mailed to such Certificateholder at the address of such holder appearing
in the Certificate Register.
SECTION 5.4. No Segregation of Monies; No Interest.
Subject to Sections 5.1 and 5.2, monies received by or on behalf of the
Owner Trustee hereunder need not be segregated in any manner except to the
extent required by law or by the Sale and Servicing Agreement and may be
deposited under such general conditions as may be
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prescribed by law, and neither the Owner Trustee or the Paying Agent shall not
be liable for any interest thereon.
SECTION 5.5. Accounting; Reports; Tax Returns.
(a) It is the intention of the parties that the Trust will be treated as a
partnership for tax purposes. Accordingly, the Administrator has agreed pursuant
to the Administration Agreement that the Administrator shall, as appropriate:
(i) maintain (or cause to be maintained) the books of the Trust on a calendar
year basis on the accrual method of accounting, (ii) deliver to each
Certificateholder, as may be required by the Code and applicable Treasury
Regulations, such information as may be required to enable each
Certificateholder to prepare its federal and state income tax returns, (iii)
obtain a federal tax identification number for the Trust, and file or cause to
be filed such tax returns relating to the Trust, and direct the Owner Trustee to
make such elections as may from time to time be required or appropriate under
any applicable state or federal statute or rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (iv) collect or cause to be collected any withholding tax as described
in and in accordance with Section 5.2(f) with respect to income or distributions
to Certificateholders and (v) file or cause to be filed all documents required
to be filed by the Trust with the Commission and otherwise take or cause to be
taken all such actions as are notified by the Servicer to the Administrator as
being required for the Trust's compliance with all applicable provisions of
state and federal securities laws.
(b) The Owner Trustee shall sign on behalf of the Trust the tax returns of
the Trust, unless applicable law requires the Class C Certificateholder to sign
such documents, in which case such documents shall be signed the Class C
Certificateholder.
(c) None of the parties hereto shall make the election provided in Treasury
Regulation ss. 301.7701-3(c) to have the Trust classified as an association
taxable as a corporation.
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ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority.
The Owner Trustee is authorized and directed to execute and deliver the
Related Documents to which the Trust is to be a party and each certificate or
other document attached as an exhibit to or contemplated by the Related
Documents to which the Trust is to be a party and any amendment thereto, and on
behalf of the Trust, to direct the Indenture Trustee to authenticate and deliver
the Class ___ Notes in the aggregate principal amount of $___________, the Class
___ Notes in the aggregate principal amount of $___________, the Class ___ Notes
in the aggregate principal amount of $___________, the Class ___ Notes in the
aggregate principal amount of $___________, the Class A-5 Notes in the aggregate
principal amount of $___________, the Class A-6 Notes in the aggregate principal
amount of $___________ and the Class ___ Notes in the aggregate principal amount
of $___________ In addition to the foregoing, the Owner Trustee is authorized,
but shall not be obligated, to take all actions required of the Trust pursuant
to the Related Documents. The Owner Trustee is further authorized, on behalf of
the Trust, to enter into the Administration Agreement, to appoint a successor
Administrator.
SECTION 6.2. General Duties.
It shall be the duty of the Owner Trustee to discharge (or cause to be
discharged through the Administrator or such agents as shall be appointed) all
of its responsibilities pursuant to the terms of this Agreement and the Related
Documents and to administer the Trust in the interest of the Certificateholders,
subject to the Related Documents and in accordance with the provisions of this
Agreement. The Owner Trustee undertakes to perform such duties, and only such
duties, as are specifically set forth in this Agreement or as it shall be
directed in writing by the instructing party. No implied covenants or agreements
shall be read into this Agreement. Notwithstanding the foregoing, the Owner
Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Related Documents to the extent the Administrator has
agreed in the Administration Agreement to perform any act or to discharge any
duty of the Trust or the Owner Trustee hereunder or under any Related Document,
and the Owner Trustee shall not be liable for the default or failure of the
Administrator to carry out its obligations under the Administration Agreement.
SECTION 6.3. Action upon Instruction.
(a) Subject to Article IV, the Certificateholders shall have the exclusive
right to direct the actions of the Owner Trustee in the management of the Trust,
so long as such instructions are not inconsistent with the express terms set
forth herein or in any Related Document. The Certificateholders shall not
instruct the Owner Trustee in a manner inconsistent with this Agreement or the
Related Documents.
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(b) The Owner Trustee shall not be required to take any action hereunder or
under any Related Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is contrary
to the terms hereof or of any Related Document or is otherwise contrary to law.
(c) No provision of this Agreement shall require the Owner Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of its duties hereunder or in the exercise of any of its rights or
powers if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) In accepting the trusts hereby created, the Owner Trustee acts solely
as trustee hereunder and not in its individual capacity. The Owner Trustee
agrees to disburse all moneys actually received by it constituting part of the
Trust Property upon the terms of this Agreement. Notwithstanding anything in
this Agreement to the contrary, the Owner Trustee, when acting in such capacity,
shall not be personally liable or accountable to any Person, under any
circumstances, except by reason of its gross negligence, willful misconduct or
breach of its representations, warranties or covenants.
(e) The Owner Trustee shall be under no liability (except as provided in
(d) above) for any action taken by the Owner Trustee in good faith in reliance
upon any paper, order, list, demand, request, consent, affidavit, notice,
opinion, direction, endorsement, assignment, resolution, draft or other
document, believed by it to be genuine and to have been signed by the proper
party or parties or for the disposition of moneys or Trust Property pursuant to
this Agreement. As to any fact or matter, the manner of ascertainment of which
is not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officer of the relevant party, as to such
fact or matter, and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(f) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Related Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Certificateholders
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction received from the Certificateholders, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the Related Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(g) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Related Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event
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that this Agreement permits any determination by the Owner Trustee or is silent
or is incomplete as to the course of action that the Owner Trustee is required
to take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Related
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions.
The Owner Trustee shall not have any duty or obligation to manage, make any
payment with respect to, register, record, sell, dispose of, or otherwise deal
with the Trust Property, or to otherwise take or refrain from taking any action
under, or in connection with, any document contemplated hereby to which the
Trust is a party, except as expressly provided by the terms of this Agreement
(including as provided in Section 6.2) or in any written instruction received by
the Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Related Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for preparing,
monitoring or filing any financing or continuation statements in any public
office at any time or otherwise to perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to record this Agreement or
any Related Document; however, the Owner Trustee will from time to time execute
and deliver such financing or continuation statements as are prepared by the
Servicer and delivered to the Owner Trustee in final execution form for its
execution on behalf of the Trust for the purpose of perfecting or maintaining
the perfection of such a security interest or lien or effecting such a
recording. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense (and not at the expense of the Trust), promptly take all action as
may be necessary to discharge any liens on any part of the Trust Property that
are attributable to claims against the Owner Trustee in its individual capacity
that are not related to the ownership or the administration of the Trust
Property.
SECTION 6.5. No Action Except under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or
otherwise deal with any part of, the Trust Property except (i) in accordance
with the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) in accordance with the Related Documents and
(iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
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SECTION 6.6. Restrictions.
The Owner Trustee shall not take any action (a) that is inconsistent with
the purposes of the Trust set forth in Section 2.3 or (b) that, to the actual
knowledge of the Owner Trustee, would result in the Trust's becoming taxable as
a corporation for Federal income tax purposes. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the provisions of
this Section.
SECTION 6.7. Administration Agreement.
(a) The Administrator is authorized to execute on behalf of the Trust all
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust to prepare, file or deliver pursuant to the Related
Documents. Upon written request, the Owner Trustee shall execute and deliver to
the Administrator a power of attorney appointing the Administrator its agent and
attorney-in-fact to execute all such documents, reports, filings, instruments,
certificates and opinions.
(b) If the Administrator shall resign or be removed pursuant to the terms
of the Administration Agreement, the Owner Trustee may, and is hereby authorized
and empowered to, appoint or consent to the appointment of a successor
Administrator pursuant to the Administration Agreement.
(c) If the Administration Agreement is terminated, the Owner Trustee may,
and is hereby authorized and empowered to, appoint or consent to the appointment
of a Person to perform substantially the same duties as are assigned to the
Administrator in the Administration Agreement pursuant to an agreement
containing substantially the same provisions as are contained in the
Administration Agreement.
(d) The Owner Trustee shall promptly notify each Certificateholder of any
default by or misconduct of the Administrator under the Administration Agreement
of which the Owner Trustee has received written notice or of which a Responsible
Officer of the Owner Trustee has actual knowledge.
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ARTICLE VII
CONCERNING THE OWNER TRUSTEE
SECTION 7.1. Acceptance of Trust and Duties.
The Owner Trustee accepts the trusts hereby created and agrees to perform
its duties hereunder with respect to such trusts but only upon the terms of this
Agreement. The Owner Trustee also agrees to disburse all monies actually
received by it constituting part of the Trust Property upon the terms of the
Related Documents and this Agreement. The Owner Trustee shall not be answerable
or accountable hereunder or under any Related Document under any circumstances,
except (i) for its own willful misconduct or gross negligence, (ii) in the case
of the inaccuracy of any representation or warranty contained in Section 7.3,
(iii) for liabilities arising from the failure of the Owner Trustee to perform
obligations expressly undertaken by it in the last sentence of Section 6.4
hereof, (iv) for any investments issued by the Owner Trustee or any branch or
affiliate thereof in its commercial capacity or (v) for taxes, fees or other
charges on, based on or measured by, any fees, commissions or compensation
received by the Owner Trustee in connection with any of the transactions
contemplated by this Agreement or any Related Document. In particular, but not
by way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the instructions
of the Certificateholders;
(c) no provision of this Agreement or any Related Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Related Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under this Agreement or any of the Related
Documents, including the principal of and interest on the Certificates or the
Notes;
(e) the Owner Trustee shall not be responsible for or in respect of the
recitals herein, the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Property or for or in respect
of the validity or sufficiency of the Related Documents, other than the
certificate of authentication on the Certificates, and the Owner Trustee shall
in no event assume or incur any liability, duty, or obligation to the Indenture
Trustee, any Noteholder or to any Certificateholder, other than as expressly
provided for herein and in the Related Documents;
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(f) the Owner Trustee shall not be liable for the default or misconduct of
the Administrator, the Paying Agent the Indenture Trustee or the Servicer under
any of the Related Documents or otherwise and the Owner Trustee shall have no
obligation or liability to monitor the performance of or to perform the
obligations of the Trust under this Agreement or the Related Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture, the Paying Agent under
this Agreement or the Servicer under the Sale and Servicing Agreement;
(g) the Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Related Document, at the request, order or direction of the
Certificateholders, unless such Certificateholders have offered to the Owner
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The
right of the Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any Related Document shall not be construed as a duty, and the
Owner Trustee shall not be answerable for other than its gross negligence or
willful misconduct in the performance of any such act;
(h) the Owner Trustee shall not be under any obligation to appear in,
prosecute or defend any action, which in its opinion may require it to incur any
out-of-pocket expense or any liability unless it shall be furnished with such
reasonable security and indemnity against such expense or liability as it may
require in accordance with the terms hereof. The Owner Trustee may, but shall be
under no duty to, undertake such action as it may deem necessary at any and all
times to protect the Trust Property and the respective rights and interests of
the Noteholders and the Certificateholders pursuant to the terms of the
Indenture and this Agreement;
(i) the Owner Trustee may (at the expense of the Seller) consult with
counsel, and the written advice of counsel or any opinion of counsel shall be
full and complete authorization and protection in respect of any action taken or
omitted by the Owner Trustee in good faith reliance thereon; and
(j) notwithstanding anything contained herein to the contrary, neither
Wilmington Trust nor the Owner Trustee shall be required to take any action in
any jurisdiction other than in the State of Delaware if the taking of such
action will (i) require the consent or approval or authorization or order of or
giving of notice to, or the registration with or the taking of any other action
in respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware; (ii) result in any fee, tax or
other governmental charge under the laws of any jurisdiction or any political
subdivisions thereof in existence on the date hereof other than the State of
Delaware becoming payable by Wilmington Trust; or (iii) subject Wilmington Trust
to personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust or the Owner Trustee as the case may be,
contemplated hereby. The Owner Trustee shall be entitled to obtain (at the
expense of the Seller) an opinion of counsel to determine whether any action
required to be taken pursuant to this Agreement results in the consequences
described in clauses (i), (ii) and (iii) of the preceding sentence. In the event
that said counsel advises the Owner
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Trustee that such action will result in such consequences, the Owner Trustee
will appoint an additional or separate trustee to proceed with such action.
SECTION 7.2. Furnishing of Documents.
The Owner Trustee shall furnish to the Certificateholders, promptly upon
receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Owner Trustee under the Related Documents unless
the Certificateholders have previously received such items.
SECTION 7.3. Representations and Warranties.
The Owner Trustee hereby represents and warrants to the Depositor and the
Certificateholders that:
(a) It is a banking corporation duly organized and validly existing in good
standing under the laws of the State of Delaware. It has all requisite corporate
power and authority and all franchises, grants, authorizations, consents, orders
and approvals from all governmental authorities of the State of Delaware and the
United States governing its banking and trust powers necessary to execute,
deliver and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the execution
and delivery by it of this Agreement and each Related Document to which the
Trust is a party, and this Agreement and each Related Document will be executed
and delivered by one of its officers who is duly authorized to execute and
deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor the
consummation by it of the transactions contemplated hereby nor compliance by it
with any of the terms or provisions hereof will contravene any Federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound or result in the creation or imposition of
any lien, charge or encumbrance on the Trust Property resulting from actions by
or claims against the Owner Trustee individually which are unrelated to this
Agreement or the Related Documents.
SECTION 7.4. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any
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vice president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Related
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Related Document.
SECTION 7.5. Not Acting in Individual Capacity.
Except as provided in this Article VII, in accepting the trusts hereby
created Wilmington Trust Company acts solely as Owner Trustee hereunder and not
in its individual capacity and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Related Document shall look only to the Trust Property for payment or
satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates, Notes or Contracts.
The recitals contained herein and in the Certificates and the Notes (other
than the signature and counter-signature of the Owner Trustee on the
Certificates and the Notes) shall be taken as the statements of the Depositor,
and the Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Related Document or of the Certificates (other than the
signature and counter-signature of the Owner Trustee on the Certificates) or the
Notes (other than the signature and counter-signature of the Owner Trustee on
the Notes), or of any Contract or related documents. The Owner Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Contract, or the perfection and
priority of any security interest created by any Contract in any Product or the
maintenance of any such perfection and priority of any security interest created
by any Contract in any Product, or for or with respect to the sufficiency of the
Trust Property or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
including, without limitation: the existence, condition and ownership of any
Product; the existence and enforceability of any insurance thereon; the
existence and contents of any Contract or any computer or other record thereof;
the validity of the assignment of any Contract to the Trust or of any
intervening assignment; the completeness of any Contract; the performance or
enforcement of any Contract; the compliance by the Seller or the Servicer with
any warranty or representation made under any Related Document or in any related
document or the accuracy of any such warranty or representation or any action of
the Indenture Trustee or the Servicer taken in the name of the Owner Trustee.
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SECTION 7.7. Owner Trustee May Own Certificates and Notes.
The Owner Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates or Notes and may deal with the Depositor, the
Seller, the Indenture Trustee and the Servicer in banking or other transactions
with the same rights as it would have if it were not Owner Trustee.
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ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1. Owner Trustee's Fees and Expenses.
The Owner Trustee shall receive as compensation for its services hereunder
such fees as have been separately agreed upon before the date hereof between
Conseco Finance Corp. and the Owner Trustee (or, with respect to any successor
Owner Trustee, reasonable compensation for all services rendered by it
hereunder), and the Owner Trustee shall be entitled to be reimbursed by Conseco
Finance Corp. for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder; provided, however, that the Owner Trustee shall only be entitled to
reimbursement for such expenses hereunder to the extent such expenses (i) are
fees of outside counsel engaged by the Owner Trustee in respect of the
performance of its obligations hereunder or (ii) relate to the performance of
its obligations pursuant to Section 5.5 hereof.
SECTION 8.2. Indemnification.
The Originator shall be liable as primary obligor for, and shall indemnify
the Owner Trustee in its individual capacity and its successors, assigns, agents
and servants, and any co-trustee (collectively, the "Indemnified Parties") from
and against, any and all liabilities, obligations, losses, damages, taxes,
claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever (collectively, "Expenses") which may at any time be imposed
on, incurred by, or asserted against the Owner Trustee or any Indemnified Party
in any way relating to or arising out of this Agreement, the Related Documents,
the Trust Property, the administration of the Trust Property or the action or
inaction of the Owner Trustee hereunder, except only that the Originator shall
not be liable for or required to indemnify the Owner Trustee from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.1. The indemnities contained in this Section shall survive
the resignation or termination of the Owner Trustee or the termination of this
Agreement.
SECTION 8.3. Nonrecourse Obligations.
Notwithstanding anything in this Agreement or any Related Document, the
Owner Trustee agrees in its individual capacity and in its capacity as Owner
Trustee for the Trust that all obligations of the Trust to the Owner Trustee
individually or as Owner Trustee for the Trust shall be recourse to the Trust
Property only and specifically shall not be recourse to the assets of any
Certificateholder.
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ARTICLE IX
TERMINATION
SECTION 9.1. Termination of the Trust.
(a) The respective obligations and responsibilities of the Depositor, the
General Partner and the Owner Trustee created by this Agreement and the Trust
created by this Agreement shall terminate upon the later of (i) the maturity or
other liquidation of the last Contract (including the purchase as of any Payment
Date by the Class C Certificateholder at its option of the corpus of the Trust
as described in Section 8.01 of the Sale and Servicing Agreement) and the
subsequent distribution of amounts in respect of such Contracts as provided in
the Related Documents, or (ii) the payment to Certificateholders of all amounts
required to be paid to them pursuant to this Agreement. In any case, there shall
be delivered to the Owner Trustee, the Indenture Trustee and the Rating Agencies
an Opinion of Counsel that all applicable preference periods under federal,
state and local bankruptcy, insolvency and similar laws have expired with
respect to the payments pursuant to clause (ii); provided, however, that in no
event shall the trust created by this Agreement continue beyond the expiration
of 21 years from the death of the last survivor of the descendants living on the
date of this Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and
provided, further, that the rights to indemnification under Section 8.2 shall
survive the termination of the Trust. The Servicer shall promptly notify the
Owner Trustee of any prospective termination pursuant to this Section 9.1. The
bankruptcy, liquidation, dissolution, termination, resignation, expulsion,
withdrawal, death or incapacity of any Certificateholder, shall not (x) operate
to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Trust Property nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.1(a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Within five Business Days of receipt of notice of final distribution on
the Certificates given pursuant to Section 8.01(b) of the Sale and Servicing
Agreement, the Owner Trustee shall mail written notice to each Certificateholder
specifying (i) the Payment Date upon which final payment of the Certificates
shall be made upon presentation and surrender of Certificates at the office of
the Paying Agent therein specified, (ii) the amount of any such final payment,
and (iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Paying Agent therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar at the time such
notice is given to Certificateholders. In the event such notice is given, (i)
the Indenture Trustee shall make deposits into the Certificate Distribution
Account in accordance with Section 6.06 of the Sale and Servicing Agreement, or,
(ii) in the case of an optional purchase of Contracts pursuant to Section 8.01
of the Sale and Servicing Agreement, the Indenture Trustee shall deposit the
amount specified in Section 8.01 of the Sale and Servicing Agreement. Upon
presentation and surrender of the Certificates, the Paying Agent
9-1
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shall cause to be distributed to Certificateholders amounts distributable on
such Payment Date pursuant to Section 5.2.
(d) In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that remain
subject to this Agreement. Any funds which are payable to Certificateholders
remaining in the Trust after exhaustion of such remedies shall be distributed by
the Owner Trustee to The United Way (but only upon termination of this
Agreement), and the Certificateholders, by acceptance of their Certificates,
hereby waive any rights with respect to such funds.
(e) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
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<PAGE>
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1. Eligibility Requirements for Owner Trustee.
The Owner Trustee shall at all times be a corporation (i) satisfying the
provisions of Section 3807(a) of the Business Trust Statute; (ii) authorized to
exercise corporate trust powers; (iii) having a combined capital and surplus of
at least $___________ and subject to supervision or examination by Federal or
State authorities; (iv) having (or having a parent which has) a long-term debt
rating of at least P-1 by Moody's or AA- by S&P and a short-term debt rating of
A-1+ from S&P or otherwise acceptable to the Rating Agencies; and (v) shall not
be an Affiliate of the Seller. If such corporation shall publish reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Owner Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Owner Trustee
shall resign immediately in the manner and with the effect specified in Section
10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee.
The Owner Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor at least 30
days before the date specified in such instrument. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor Owner Trustee
meeting the qualifications set forth in Section 10.1 by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner
Trustee shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Depositor or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Owner Trustee. If the Depositor shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Owner Trustee meeting the qualification
requirements of Section 10.1 by written instrument, in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed and
one copy to the successor Owner Trustee and payment of all fees owed to the
outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until all fees
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and expenses, including any indemnity payments, due to the outgoing Owner
Trustee have been paid and until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.3. The Depositor shall provide notice of
such resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee.
Any successor Owner Trustee appointed pursuant to Section 10.2 shall
execute, acknowledge and deliver to the Depositor and to its predecessor Owner
Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective and such successor Owner Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties,
and obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall deliver
to the successor Owner Trustee all documents and statements and monies held by
it under this Agreement; and the predecessor Owner Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Owner Trustee
all such rights, powers, duties, and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice of the successor Owner Trustee
to the Certificateholder, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of appointment by the successor Owner Trustee, the successor
Owner Trustee shall cause such notice to be mailed at the expense of the
Administrator. Any successor Owner Trustee appointed hereunder shall promptly
file an amendment to the Certificate of Trust as required by the Business Trust
Statute.
SECTION 10.4. Merger or Consolidation of Owner Trustee.
Any corporation into which the Owner Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding,
and provided further that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Property or any
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Product may at the time be located, the Administrator and the Owner Trustee
acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee to act
as co-trustee, jointly with the Owner Trustee, or separate trustee or separate
trustees, of all or any part of the Trust Property, and to vest in such Person,
in such capacity, such title to the Trust, or any part thereof, and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Administrator and the Owner Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, the Owner Trustee shall
have the power to make such appointment. No co-trustee or separate trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 10.1 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.1.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties, and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized
to act separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties, and obligations (including the holding of title to the
Trust Property or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article X. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any
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<PAGE>
lawful act under or in respect of this Agreement on its behalf and in its name.
If any separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Owner Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
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<PAGE>
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Amendment.
(a) This Agreement may be amended by the Depositor and the Owner Trustee,
without the consent of any of the Certificateholders or Noteholders, (i) to cure
any ambiguity, or (ii) to correct, supplement or modify any provisions in this
Agreement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder or Noteholder.
(b) This Agreement may also be amended from time to time, by the Depositor
and the Owner Trustee with the consent of a Certificate Majority of the
Certificates and, if such amendment materially and adversely affects the
interests of Noteholders, the consent of a Note Majority (which consent of any
Holder of a Certificate or Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate or Note and of any
Certificate or Note issued upon the transfer thereof or in exchange thereof or
in lieu thereof whether or not notation of such consent is made upon the
Certificate or Note) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates or Notes;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Contracts or distributions that shall be required to be made on any
Certificate or Note or the Class ___ Rate, the Class ___ Rate, the Class ___
Interest Rate, the Class ___ Interest Rate, the Class ___ Interest Rate, the
Class ___ Interest Rate, the Class ___ Interest Rate, the Class ___ Interest
Rate or the Class ___ Interest Rate, or (b) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Certificates and Notes then outstanding.
(c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder and the Indenture Trustee unless
such parties have previously received such notification.
(e) It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to Section 11.1(b) to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Certificateholders and Noteholders provided for in this
Agreement) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe, including the establishment of record dates.
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<PAGE>
(f) Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied. The Owner Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
(g) The Depositor and the Owner Trustee may amend this Agreement in order
to effect a "financial asset securitization investment trust" ("FASIT") election
for all or a portion of the Trust; provided, that (i) the Depositor delivers an
Opinion of Counsel to the Owner Trustee to the effect that such election will
not adversely affect the Federal or applicable state income tax characterization
of any outstanding Notes or Certificates or the taxability of the Trust under
Federal or applicable state income tax laws or otherwise have a material adverse
effect on the Certificates or Notes, and (ii) the requirements of clauses (c),
(d) and (f) above are met.
SECTION 11.2. No Recourse.
Each Certificateholder by accepting a Certificate acknowledges that such
Certificateholder's Certificates represent beneficial interests in the Trust
only and do not represent interests in or obligations of the Seller, the
Depositor, the Servicer, the Owner Trustee, the Indenture Trustee or any
Affiliate of any of the foregoing and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated in
this Agreement, the Certificates or the Related Documents.
SECTION 11.3. No Petition.
The Owner Trustee, by entering into this Trust Agreement, and each
Certificateholder, by accepting a Certificate, hereby covenant and agree that
they will not at any time institute against the Seller, the Issuer or the Class
C Certificateholder, or join in any institution against the Seller, the Issuer
or the Class C Certificateholder, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Certificates, this Trust Agreement or any of the
Related Documents.
SECTION 11.4. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
11-2
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SECTION 11.5. 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 or of the Certificates or the rights of the Holders thereof.
SECTION 11.6. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the
Trust. The fractional undivided interests in the Trust represented by the
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and Certificates upon execution thereof by the Owner
Trustee pursuant to Section 3.3 are and shall be deemed fully paid.
SECTION 11.7. Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. The
parties further agree that the Indenture Trustee, the Noteholders and the
Certificateholders shall be deemed to be third party beneficiaries of this
Agreement. Except as otherwise provided in this Agreement, no other Person shall
have any right or obligation hereunder.
SECTION 11.8. Counterparts.
For the purpose of facilitating its execution and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and all of which
counterparts shall constitute but one and the same instrument.
SECTION 11.9. Notices.
All demands, notices and communications under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Depositor, at the following address: c/o Conseco Finance Corp., 1100
Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota 55102-1639,
Attention: Chief Financial Officer, (b) in the case of the Owner Trustee, at the
Corporate Trust Office, and (c) in the case of each Rating Agency, [55 Water
Street, New York, New York 10041 (for Fitch) and 25 Broadway, New York, New York
10004 (for Standard & Poor's)] Attention: Asset-Backed Surveillance or at such
other address as shall be designated by any such party in a written notice to
the other parties. Notwithstanding the foregoing, any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register, and any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
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<PAGE>
SECTION 11.10 Limitation of Liability
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of Conseco Finance Home
Loan Trust 1999-G, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose for binding only the Issuer, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company, individually, or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any Person claiming by, through or
under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of
the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Issuer under this
Agreement or any other related documents.
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<PAGE>
IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused this
Trust Agreement to be duly executed by their respective officers as of the day
and year first above written.
CONSECO FINANCE SECURITIZATIONS CORP.,
as Depositor
By
-----------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Owner Trustee
By
-----------------------------------
Name:
Title:
Attest:
CONSECO FINANCE CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
11-5
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
CONSECO FINANCE RECREATIONAL ENTHUSIAST &
CONSUMER TRUST 1999-__
THIS Certificate of Trust of CONSECO FINANCE RECREATIONAL ENTHUSIAST
CONSUMER TRUST 1999-___ (the "Trust"), dated as of ____________, 1999, is being
duly executed and filed by the undersigned, a Delaware corporation, as trustee,
to form a business trust under the Delaware Business Trust Act (12 Del. Code,
ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is CONSECO FINANCE
RECREATIONAL ENTHUSIAST CONSUMER TRUST 1999-___.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate
Trust Administration.
3. This Certificate of Trust will be effective _____________, 1999.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Trust in accordance with Section 3811(a) of the Act.
WILMINGTON TRUST COMPANY,
as trustee
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
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<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT
TO THE NOTES TO THE EXTENT DESCRIBED IN THE INDENTURE
REFERRED TO HEREIN.
CONSECO FINANCE RECREATIONAL ENTHUSIAST &
CONSUMER TRUST 1999-___
_____% CLASS B-1 ASSET-BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of retail installment sale contracts and
promissory notes secured by new and used motorcycles; marine products (including
boats, boat trailers and outboard motors); keyboard instruments; horse trailers;
sport vehicles (including snowmobiles, personal watercraft and all-terrain
vehicles); trucks; personal aircraft; and recreational vehicles and sold to the
Trust by Conseco Finance Securitizations Corp.
This Certificate does not represent an obligation of, or an interest in, Conseco
Finance Corp. or any affiliate thereof.
Certificate No. Denomination: $
Initial Cutoff Date: Aggregate Denomination of all
Certificates: $
First Distribution Date: Pass-Through Rate: ____%
Final Scheduled Payment Date:
Servicer:
Conseco Finance Corp.
CUSIP: ______________
This Certificate may not be acquired by (a) a pension, profit sharing or
other employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of
1986, as amended (a "Benefit Plan") or (b) an entity whose underlying assets
include plan assets by reason of such
B-1-1
<PAGE>
Benefit Plan's investment in the entity (including an insurance company acting
on behalf of its general account) (each, a "Benefit Plan Investor"). Prior to
its purchase of this Certificate, the proposed transferee of such Certificate
must certify in writing (in the form of letter attached as Exhibit D to the
Trust Agreement) to the Seller, the Servicer, the Owner Trustee and the
Underwriter that it is not a Benefit Plan Investor. Any transfer of this
Certificate in violation of the foregoing shall be void and of no effect.
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC") to the Trust or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
B-1-2
<PAGE>
THIS CERTIFIES THAT _______________________ is the registered owner of a
nonassessable, fully paid, fractional undivided interest in the Conseco Finance
Recreational Enthusiast Consumer Trust 1999-___ (the "Trust"). The Trust was
created pursuant to a Trust Agreement, dated as of _____________, 1999 (the
"Trust Agreement"), among Conseco Finance Securitizations Corp., as depositor
(the "Depositor") and Wilmington Trust Company, not in its individual capacity
but solely as owner trustee (the "Owner Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Trust Agreement or the Sale and Servicing Agreement, dated as of
_______________, 1999 (the "Sale and Servicing Agreement"), among the Trust, the
Depositor and Conseco Finance, as Originator, Guarantor and Servicer.
This Certificate is one of the duly authorized Certificates designated as
"____% Class ___ Asset-Backed Certificates" (herein called the "Class B-1
Certificates"). The Trust has also issued its Class ___ Asset-Backed
Certificates (together with the Class B-1 Certificates, the "Certificates") and
has issued under the Indenture, dated as of _____________, 1999, between the
Trust and U.S. Bank Trust National Association, as trustee, the Asset-Backed
Notes (the "Notes") designated as the Class ___, Class ___, Class ___, Class
___, Class ___, Class ___ and Class ___ Notes. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Trust Agreement,
to which Trust Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound. The property of the
Trust includes (as more fully described in the Trust Agreement) a pool of retail
installment sale contracts and promissory notes (the "Contracts") for new and
used motorcycles; marine products (including boats, boat trailers and outboard
motors); keyboard instruments; horse trailers; sport vehicles (including
snowmobiles, personal watercraft and all-terrain vehicles); trucks; personal
aircraft; and recreational vehicles (the "Products"), certain monies due
thereunder on or after the Cutoff Date, an assignment of the Seller's security
interests in the Products, certain bank accounts and property (including the
right to receive Liquidation Proceeds) securing the Contracts, and proceeds of
all of the foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next succeeding
Business Day (the "Payment Date"), commencing on _____________, 1999 to the
person in whose name this Certificate is registered at the close of business on
the Business Day immediately preceding such Payment Date (the "Record Date"),
such Certificateholder's fractional undivided interest in the interest and
principal then distributable on the Class B-1 Certificates to the extent of the
funds available therefor.
It is the intent and agreement of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local income
and franchise and any other income taxes, the Trust will be treated as a
partnership and the Certificateholders will be treated as partners in that
partnership. The Certificateholders, by acceptance of a Certificate, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates for such tax purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Certificate, covenants and
agrees that such Certificateholder will not at any time institute against the
Depositor, the Trust or the Class C Certificateholder of any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar
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<PAGE>
law in connection with any obligations relating to the Certificates, the Notes,
the Trust Agreement or any of the Related Documents.
Except as provided in the Trust Agreement, distributions on this
Certificate will be made by the Owner Trustee by check or money order mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Owner Trustee. The Record Date otherwise
applicable to distributions shall not be applicable to such final distribution.
The Certificates do not represent an obligation of, or an interest in, the
Depositor, the Servicer, the Owner Trustee or any Affiliate of any of them. The
Certificates are limited in right of payment to certain collections and
recoveries respecting the Contracts, all as more specifically set forth in the
Trust Agreement. A copy of the Trust Agreement may, upon request, be examined by
any Certificateholder during normal business hours at the principal office of
the Seller and at such other places, if any, designated by the Seller.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Trust
Agreement at any time by the Depositor and the Owner Trustee. In certain limited
circumstances, the Trust Agreement may only be amended with the consent of the
Holders of Class B-1 Certificates evidencing not less than a majority of the
Class B-1 Principal Balance and, in certain circumstances, 100% of the Class B-1
Principal Balance. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate.
As provided in the Trust Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Registrar upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in Wilmington, Delaware accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate fractional undivided interest in the Trust issued
to the designated transferee. The initial Certificate Registrar appointed under
the Trust Agreement is Wilmington Trust Company.
The Certificates are issuable only as registered Certificates without
coupons in denominations of $1,000 and integral multiples thereof. As provided
in the Trust Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
of a like aggregate fractional undivided interest, as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Owner Trustee may require payment of a sum
sufficient to cover any tax or governmental charges payable in connection
therewith.
B-1-4
<PAGE>
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for the purpose of receiving
distributions and for all other purposes, and neither the Owner Trustee, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
disposition of all property held as part of the Trust. The Class C
Certificateholders may at its option purchase the corpus of the Trust at a price
specified in the Sale and Servicing Agreement, and such purchase of the
Contracts and other property of the Trust will effect early retirement of the
Certificates; provided, however, such right of purchase is exercisable only as
of a Record Date as of which the Pool Scheduled Principal Balance is less than
or equal to 20% of the Cutoff Date Pool Principal Balance. In the event that the
Class C Certificateholder does not so purchase the Corpus of the Trust, the
Indenture Trustee shall conduct an auction as provided in Section 8.01(e) of the
Sale and Servicing Agreement.
If such Trust corpus purchase option is not exercised, then bids will be
solicited by the Indenture Trustee for the purchase of the Contracts remaining
in the Trust. If a bid is received and the amount of such bid is at least equal
to the greater of (a) the fair market value of the Contracts or (b) the amount
equal to fees and advances of the Servicer and all unpaid interest and principal
on the Notes and Certificates, the Contracts will be sold and the net sale
proceeds distributed to effect early retirement of the Certificates.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Contract or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the Holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
B-1-5
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in its
individual capacity has caused this Certificate to be duly executed.
Dated: ___________, 1999
CONSECO FINANCE RECREATIONAL
ENTHUSIAST CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely on behalf of the Issuer
as Owner Trustee under the Trust
Agreement
By
------------------------------
Name:
-------------------------
Title:
------------------------
Attest:
------------------------------
Name:
-------------------------
Title:
------------------------
B-1-6
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By
------------------------------------
as Authenticating Agent
B-1-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
_________________________________________________________ (PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
*
Signature Guaranteed:
*
*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatsoever. Such signature must be
guaranteed by a member firm of The New York Stock Exchange, Inc. or a commercial
bank or trust company.
B-1-8
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT
TO THE NOTES TO THE EXTENT DESCRIBED IN THE INDENTURE
REFERRED TO HEREIN, AND TO THE CLASS B-2 CERTIFICATES
REFERRED TO HEREIN.
CONSECO FINANCE RECREATIONAL ENTHUSIAST &
CONSUMER TRUST 1999-__
_____% CLASS B-2 ASSET-BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of retail installment sale contracts and
promissory notes secured by new and used motorcycles; marine products (including
boats, boat trailers and outboard motors); keyboard instruments; horse trailers;
sport vehicles (including snowmobiles, personal watercraft and all-terrain
vehicles); trucks; personal aircraft; and recreational vehicles and sold to the
Trust by Conseco Finances Corp.
Certificate No. Denomination: $
Initial Cutoff Date: Aggregate Denomination of all
Certificates: $
First Distribution Date: Pass-Through Rate: ____%
Final Scheduled Distribution Date:
Servicer:
Conseco Finance Corp.
CUSIP: ______________
This Certificate may not be acquired by (a) a pension, profit sharing or
other employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of
1986, as amended (a "Benefit Plan") or (b) an entity whose underlying assets
include plan assets by reason of such Benefit Plan's investment in the entity
(including an insurance company acting on behalf of its general account) (each,
a "Benefit Plan Investor"). Prior to its purchase of this Certificate, the
proposed transferee of such Certificate must certify in writing (in the form of
letter attached as Exhibit D to the Trust Agreement) to the Seller, the
Servicer, the Owner Trustee and the Underwriter that it is not a Benefit Plan
Investor. Any transfer of this Certificate in violation of the foregoing shall
be void and of no effect.
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC") to the Trust or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the
B-2-1
<PAGE>
name of Cede & Co. or in such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
B-2-2
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered owner of
a nonassessable, fully paid, fractional undivided interest in the Conseco
Finance Recreational Equipment & Consumer Trust 1999-B (the "Trust"). The Trust
was created pursuant to a Trust Agreement, dated as of _____________, 1999 (the
"Trust Agreement"), among Conseco Finance Securitizations Corp., as depositor
(the "Depositor") and Wilmington Trust Company, not in its individual capacity
but solely as owner trustee (the "Owner Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent not otherwise
defined herein, the capitalized terms used herein have the meanings assigned to
them in the Trust Agreement or the Sale and Servicing Agreement, dated as of
______________, 1999 (the "Sale and Servicing Agreement"), among the Depositor
and Conseco Finance Corp..
This Certificate is one of the duly authorized Certificates designated as
"____% Class B-2 Asset-Backed Certificates" (herein called the "Class B-2
Certificates"). The Trust has also issued its Class B-1 Asset-Backed
Certificates (together with the Class B-2 Certificates, the "Certificates") and
has issued under the Indenture, dated as of ___________, 1999, between the Trust
and U.S. Bank Trust National Association, as trustee, the Asset-Backed Notes
(the "Notes") designated as the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class A-7 Notes. This Certificate is issued under and
is subject to the terms, provisions and conditions of the Trust Agreement, to
which Trust Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound. The property of the Trust
includes (as more fully described in the Trust Agreement) a pool of retail
installment sale contracts and promissory notes (the "Contracts") for new and
used motorcycles; marine products (including boats, boat trailers and outboard
motors); keyboard instruments; horse trailers; sport vehicles (including
snowmobiles, personal watercraft and all-terrain vehicles); trucks; personal
aircraft; and recreational vehicles (the "Products"), certain monies due
thereunder on or after the Cutoff Date, an assignment of the Seller's security
interests in the Products, certain bank accounts and property (including the
right to receive Liquidation Proceeds) securing the Contracts, and proceeds of
all of the foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next succeeding
Business Day (the "Payment Date"), commencing on July 15, 1998 to the person in
whose name this Certificate is registered at the close of business on the
Business Day immediately preceding such Payment Date (the "Record Date"), such
Certificateholder's fractional undivided interest in the Class B-2 Distributable
Amount to the extent of the funds available therefor. Such distributions shall
be made only after distributions due on such date on the Class B-1 Certificates
have been made in full.
It is the intent and agreement of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local income
and franchise and any other income taxes, the Trust will be treated as a
partnership and the Certificateholders will be treated as partners in that
partnership. The Certificateholders, by acceptance of a Certificate, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates for such tax purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Certificate, covenants and
agrees that such Certificateholder will not at any time institute against the
Depositor, the Trust or the Class C Certificateholder of any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar
B-2-3
<PAGE>
law in connection with any obligations relating to the Certificates, the Notes,
the Trust Agreement or any of the Related Documents.
Except as provided in the Trust Agreement, distributions on this
Certificate will be made by the Owner Trustee by check or money order mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Owner Trustee. The Record Date otherwise
applicable to distributions shall not be applicable to such final distribution.
Except as provided in the Trust Agreement, distributions on this
Certificate will be made by the Owner Trustee by check or money order mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Owner Trustee. The Record Date otherwise
applicable to distributions shall not be applicable to such final distribution.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Trust
Agreement at any time by the Depositor and the Owner Trustee. In certain limited
circumstances, the Trust Agreement may only be amended with the consent of the
Holders of Certificates evidencing not less than a majority of the Class B-2
Principal Balance and, in certain circumstances, 100% of the Class B-2 Principal
Balance. Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and on all future Holders of this Certificate and of
any Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent is made upon this
Certificate.
As provided in the Trust Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Registrar upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in Wilmington, Delaware accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate fractional undivided interest in the Trust issued
to the designated transferee. The initial Certificate Registrar appointed under
the Trust Agreement is Wilmington Trust Company.
The Certificates are issuable only as registered Certificates without
coupons in denominations of $1,000 and integral multiples thereof. As provided
in the Trust Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
of a like aggregate fractional undivided interest, as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of
B-2-4
<PAGE>
transfer or exchange, but the Owner Trustee may require payment of a sum
sufficient to cover any tax or governmental charges payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for the purpose of receiving
distributions and for all other purposes, and neither the Owner Trustee, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
disposition of all property held as part of the Trust. The Class C
Certificateholders may at its option purchase the corpus of the Trust at a price
specified in the Sale and Servicing Agreement, and such purchase of the
Contracts and other property of the Trust will effect early retirement of the
Certificates; provided, however, such right of purchase is exercisable only as
of a Record Date as of which the Pool Scheduled Principal Balance is less than
or equal to 20% of the Cutoff Date Pool Principal Balance. In the event that the
Class C Certificateholder does not so purchase the Corpus of the Trust, the
Indenture Trustee shall conduct an auction as provided in Section 8.01(e) of the
Sale and Servicing Agreement.
If such Trust corpus purchase option is not exercised, then bids will be
solicited by the Indenture Trustee for the purchase of the Contracts remaining
in the Trust. If a bid is received and the amount of such bid is at least equal
to the greater of (a) the fair market value of the Contracts or (b) the amount
equal to fees and advances of the Servicer and all unpaid interest and principal
on the Notes and Certificates, the Contracts will be sold and the net sale
proceeds distributed to effect early retirement of the Certificates.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Contract or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the Holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
B-2-5
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in its
individual capacity has caused this Certificate to be duly executed.
Dated: ____________, 1999
CONSECO FINANCE RECREATIONAL
ENTHUSIAST CONSUMER TRUST 1999-__
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on
behalf of the Issuer as Owner Trustee
under the Trust Agreement
By:
------------------------------
Name:
-------------------------
Title:
------------------------
Attest:
------------------------------
Name:
-------------------------
Title:
------------------------
B-2-6
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By
----------------------------------------
as Authenticating Agent
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
________________________________________________ (PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
*
Signature Guaranteed:
*
*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatsoever. Such signature must be
guaranteed by a member firm of The New York Stock Exchange, Inc. or a commercial
bank or trust company.
B-2-8
<PAGE>
EXHIBIT C
FORM OF CLASS C CERTIFICATE
THIS CLASS C CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT
TO THE NOTES AND THE CLASS B CERTIFICATES TO THE EXTENT
DESCRIBED IN THE SALE AND SERVICING AGREEMENT, THE
INDENTURE AND THE TRUST AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3.4 OF THE TRUST AGREEMENT REFERRED TO
HEREIN.
CONSECO FINANCE RECREATIONAL
ENTHUSIAST CONSUMER TRUST 1999-__
evidencing a beneficial interest in the Trust, as defined below, the property of
which includes a pool of retail installment sale contracts and promissory notes
secured by new and used motorcycles; marine products (including boats, boat
trailers and outboard motors); keyboard instruments; horse trailers; sport
vehicles (including snowmobiles, personal watercraft and all-terrain vehicles);
trucks; personal aircraft; and recreational vehicles and sold to the Trust by
Conseco Finance Securitizations Corp.
This Certificate does not represent an obligation of, or an interest in, Conseco
Finance Corp. or any affiliate thereof.
Certificate No. Percentage Interest: ____%
First Payment Date:
December 15, 1999
Servicer:
Conseco Finance Corp.
This Certificate may not be acquired by (a) a pension, profit sharing or
other employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code of
1986, as amended (a "Benefit Plan") or (b) an entity whose underlying assets
include plan assets by reason of such Benefit Plan's investment in the entity
(including an insurance company acting on behalf of its general account) (each,
a "Benefit Plan Investor"). Prior to its purchase of this Certificate, the
proposed transferee of such Certificate must certify in writing (in the form of
letter attached as Exhibit D to the Trust
C-1
<PAGE>
Agreement) to the Seller, the Servicer, the Owner Trustee and the Underwriter
that it is not a Benefit Plan Investor. Any transfer of this Certificate in
violation of the foregoing shall be void and of no effect.
THIS CERTIFIES THAT _______________________________________________ is the
registered owner of a nonassessable, fully paid, fractional undivided interest
in the Conseco Recreational Enthusiast Consumer Trust 1999-__ (the "Trust"). The
Trust was created pursuant to a Trust Agreement, dated as of ___________, 1999
(the "Trust Agreement"), between Conseco Finance Securitizations Corp., as
depositor (the "Depositor"), and Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee (the "Owner Trustee"), a summary of certain
of the pertinent provisions of which is set forth below. To the extent not
otherwise defined herein, the capitalized terms used herein have the meanings
assigned to them in the Trust Agreement or the Sale and Servicing Agreement,
dated as of September 1, 1999 (the "Sale and Servicing Agreement"), between the
Trust, the Depositor and Conseco Finance Corp., as Originator, Guarantor and
Servicer.
This Certificate is the duly authorized Class C Certificate issued under
the Trust Agreement (herein called the "Class C Certificate"). The Trust has
also issued under the Trust Agreement the Class B-1 and Class B-2 Certificates.
The Trust has also issued under the Indenture, dated as of ______________, 1999,
between the Trust and U.S. Bank Trust National Association, as trustee, the
Asset-Backed Notes (the "Notes") designated as the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class M-1 and Class M-2 Notes. This Class
C Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such Holder
is bound. The property of the Trust includes (as more fully described in the
Trust Agreement) a pool of retail installment sale contracts and promissory
notes (the "Contracts") for new and used motorcycles; marine products (including
boats, boat trailers and outboard motors); keyboard instruments; horse trailers;
sport vehicles (including snowmobiles, personal watercraft and all-terrain
vehicles); trucks; personal aircraft; and recreational vehicles (the
"Products"), certain monies due thereunder on or after the Cutoff Date, an
assignment of the Seller's security interests in the Products, certain bank
accounts and property (including the right to receive Liquidation Proceeds)
securing the Contracts, and proceeds of all of the foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next succeeding
Business Day (the "Payment Date"), commencing on ______________, 1999, to the
person in whose name this Certificate is registered at the close of business on
the Business Day immediately preceding such Payment Date (the "Record Date"),
such Certificateholder's fractional undivided interest in the amounts then
distributable on the C Class Certificate to the extent of the funds available
therefor.
It is the intent and agreement of the Depositor, the Servicer and the
Certificateholders that, for purposes of Federal income, state and local income
and franchise and any other income taxes, the Trust will be treated as a
partnership and the Certificateholders will be treated as partners in that
partnership. The Certificateholders, by acceptance of a Certificate, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates for such tax purposes as partnership interests in the Trust.
C-2
<PAGE>
The Certificateholder, by its acceptance of a Class C Certificate,
covenants and agrees that it will not at any time institute against or join in
any institution against the Depositor or the Trust of any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates, the Notes, the
Trust Agreement or any of the Related Documents.
Except as provided in the Trust Agreement, distributions on this Class C
Certificate will be made by the Paying Agent by check or money order mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Paying Agent of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for that purpose by the Owner Trustee. The Record Date otherwise
applicable to distributions shall not be applicable to such final distribution.
The Class C Certificates do not represent an obligation of, or an interest
in, the Depositor, the Servicer, the Owner Trustee or any Affiliate of any of
them. The Class C Certificates are limited in right of payment to certain
collections and recoveries respecting the Loans, all as more specifically set
forth in the Trust Agreement. A copy of the Trust Agreement may, upon request,
be examined by any Certificateholder during normal business hours at the
principal office of the Depositor and at such other places, if any, designated
by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Trust
Agreement at any time by the Depositor and the Owner Trustee. In certain limited
circumstances, the Trust Agreement may only be amended with the consent of the
Holders of Certificates evidencing not less than a Certificate Majority. Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and on all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
As provided in the Trust Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Registrar upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in Wilmington, Delaware accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate fractional undivided interest in the Trust issued
to the designated transferee. The initial Certificate Registrar appointed under
the Trust Agreement is Wilmington Trust Company.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, Class C Certificates are exchangeable for new Class C
Certificates of a like interest, as requested by the Holder surrendering the
same. No service charge will be made for any such registration of
C-3
<PAGE>
transfer or exchange, but the Owner Trustee may require payment of a sum
sufficient to cover any tax or governmental charges payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Class C Certificate is registered as the owner hereof for the purpose of
receiving distributions and for all other purposes, and neither the Owner
Trustee, the Certificate Registrar nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Class C
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the disposition of all property held as part of the Trust.
The Class C Certificateholder may at its option purchase the corpus of the Trust
at a price specified in the Sale and Servicing Agreement, and such purchase of
the Loans and other property of the Trust will effect early retirement of the
Certificates; provided, however, such right of purchase is exercisable only as
of a Record Date as of which the Pool Scheduled Principal Balance is less than
or equal to 20% of the Cutoff Date Pool Principal Balance.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Class C Certificate or
of any Loan or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Certificate shall not entitle the Holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
C-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in its
individual capacity has caused this Certificate to be duly executed.
Dated: _______________, 1999
CONSECO FINANCE RECREATIONAL
ENTHUSIAST CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on
behalf of the Issuer as Owner Trustee
under the Trust Agreement
By:
--------------------------------------
Name:
--------------------------------
Title:
--------------------------------
C-5
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By:
----------------------------------------
as Authenticating Agent
C-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
_________________________________________________________________ (PLEASE INSERT
SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated: *
Signature Guaranteed:
*
*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatsoever. Such signature must be
guaranteed by a member firm of The New York Stock Exchange, Inc. or a commercial
bank or trust company.
C-7
<PAGE>
EXHIBIT D
FORM OF REPRESENTATION LETTER AND CERTIFICATION
___________, 199__
Conseco Finance Corp. [Underwriter]
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102
Attention: Chief Financial Officer
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Re: Conseco Finance Recreational Enthusiast Consumer Trust 1999-__
Ladies and Gentlemen:
This is to notify you as to the transfer of Conseco Finance Recreational
Enthusiast Consumer Trust 1999-__ Class C Certificate, No ____.
The undersigned is the holder of the Class C Certificate and with this
notice hereby deposits with the Trustee a certificate representing the
Certificate and requests that Class C Certificates in the same percentage
interest be issued and executed on behalf of the Trust and authenticated by the
Trustee, as specified in the Trust Agreement, and registered to the purchaser on
________,____, as follows:
Name:
Denominations:
Address:
Taxpayer I.D. No.:
D-1
<PAGE>
In connection with the proposed purchase, the undersigned hereby confirms
that:
1. The undersigned is not (a) a pension, profit sharing or other employee
benefit plan, or an individual retirement account or Keogh Plan, subject to
Title I of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (a "Benefit Plan") or (b) an entity whose underlying assets include plan
assets by reason of such Benefit Plan's investment in the entity (including an
insurance company acting on behalf of its general account) (each, a "Benefit
Plan Investor").
2. The undersigned understands that the Class C Certificate has not been
and will not be registered under the Securities Act of 1933 (the "1933 Act") and
may be resold (which resale is not currently contemplated) only if registered
pursuant to the provisions of the 1933 Act or if an exemption from registration
is available, that Conseco Finance Securitizations Corp. is not required to
register the Class C Certificate and that any transfer must comply with Section
3.4 of the Trust Agreement relating to the Certificates.
3. The undersigned will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Class C
Certificate.
4. The undersigned is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of its investment in the Class C Certificate and
is able to bear the economic risk of such investment.
5. The undersigned is acquiring the Class C Certificate as principal for
its own account (or for the account of one or more other institutional investors
for which it is acting as duly authorized fiduciary or agent) for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the undersigned's property shall at all times be and remain
within its control.
6. The undersigned understands that such Class C Certificate will bear a
legend substantially as set forth in the form of Class C Certificate included in
the Trust Agreement.
7. The undersigned agrees that it will obtain from any undersigned of the
Class C Certificate from it the same representations, warranties and agreements
contained in the foregoing paragraphs 1 through 6 and in this paragraph 7.
8. The undersigned understands that any purported transfer of any Class C
Certificate in contravention of the restrictions and conditions set forth in
paragraphs 1 through 7 above (including any violation of the representation in
paragraph 1 by an investor who continues to hold a Class C Certificate occurring
any time after the transfer in which it acquired such Class C Certificate) shall
be null and void, and the purported transferee shall not be recognized by the
Trust or any other person as a Certificateholder for any purpose.
9. The person signing this letter on behalf of the ultimate beneficial
purchaser of the Class C Certificate has been duly authorized by such beneficial
purchaser of the Class C Certificate to do so.
D-2
<PAGE>
10. The Class C Certificate purchased by the undersigned should be
registered in the name set forth on Schedule 1 hereto. All payments on the Class
C Certificates held by the undersigned should be wired in accordance with the
instructions set forth on Schedule 1 hereto unless the undersigned otherwise
notifies the Owner Trustee in writing.
You are entitled to rely upon this letter, and the undersigned understands
that, in granting their respective consents to the purchase of Class C
Certificate, the Depositor, the Servicer, the Trustee and the Underwriter will
rely on the undersigned's representations and warranties in this letter and on
the undersigned's certifications in the documents delivered by the undersigned
to the Depositor, the Servicer, the Owner Trustee or the Underwriter in
conjunction with the purchase of Class C Certificate by the undersigned. You are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[NAME OF HOLDER OF CERTIFICATE]
By:
-----------------------------------
Name, Chief Financial or other
Executive Officer
D-3
<PAGE>
SCHEDULE 1
----------
Registration and Payment Instructions
-------------------------------------
Registration Instructions:
- --------------------------
Full Legal Name of Purchaser:_________________________________________________
Name in Which Certificates Should be Registered:______________________________
Number and Denomination of Certificates:______________________________________
______________________________________________________________________________
Payment Instructions:
- ---------------------
Name of Bank:______________________________________________________
Address of Bank:___________________________________________________
Account Name:______________________________________________________
Account Number:____________________________________________________
ABA Number:________________________________________________________
Reference:_________________________________________________________
Notice Information:
- -------------------
Address: _________________________________________________
_________________________________________________
_________________________________________________
Attention: _________________________________________________
Telephone: _________________________________________________
Telefax: _________________________________________________
D-4
<PAGE>
EXHIBIT E
FORM OF CERTIFICATE DEPOSITORY AGREEMENT
E-1
<PAGE>
EXHIBIT 4.4
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
--------------------
INDENTURE
Dated as of _________ l , 1999
--------------------
[INDENTURE TRUSTEE]
Trustee
<PAGE>
CROSS REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1)......................................................... 6.11
(a)(2)....................................................... 6.11
(a)(3)....................................................... 6.10
(a)(4)....................................................... N.A.
(a)(5)....................................................... 6.11
(b).......................................................... 6.08; 6.11
(c).......................................................... N.A.
311(a)............................................................ 6.12
(b).......................................................... 6.12
(c).......................................................... N.A.
312(a)............................................................ 7.01
(b).......................................................... 7.02
(c).......................................................... 7.02
313(a)............................................................ 7.04
(b)(1)....................................................... 7.04
(b)(2)....................................................... 7.04
(c).......................................................... 11.05
(d).......................................................... 7.04
314(a)............................................................ 7.03
(b).......................................................... 3.06 11.15
(c)(1)....................................................... 11.01
(c)(2)....................................................... 11.01
(c)(3)....................................................... 11.01
(d).......................................................... 11.01
(e).......................................................... 11.01
(f).......................................................... 11.01
315(a)............................................................ 6.01
(b).......................................................... 6.05 11.05
(c).......................................................... 6.01
(d).......................................................... 6.01
(e).......................................................... 5.14
316(a)(last sentence)............................................. 1.01
(a)(1)(A).................................................... 5.12
(a)(1)(B).................................................... 5.13
(a)(2)....................................................... N.A.
(b).......................................................... 5.08
(c).......................................................... N.A.
317(a)(1)......................................................... 5.03
(a)(2)....................................................... 5.03
(b).......................................................... 3.03
318(a)............................................................ 11.07
- ---------------
Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
ARTICLE I -- DEFINITIONS AND INCORPORATION BY REFERENCE.....................1-1
SECTION 1.01. Definitions.............................................1-1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.......1-8
SECTION 1.03. Rules of Construction...................................1-9
ARTICLE II -- THE NOTES ....................................................2-1
SECTION 2.01. Form ...................................................2-1
SECTION 2.02. Execution, Authentication and Delivery..................2-1
SECTION 2.03. Temporary Notes.........................................2-2
SECTION 2.04. Registration; Registration of Transfer and Exchange.....2-2
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes..............2-3
SECTION 2.06. Person Deemed Owner.....................................2-4
SECTION 2.07. Payment of Principal and Interest; Defaulted
Interest................................................2-4
SECTION 2.08. Cancellation............................................2-5
SECTION 2.09. Book-Entry Notes........................................2-5
SECTION 2.10. Notices to Depository...................................2-6
SECTION 2.11. Definitive Notes........................................2-6
ARTICLE III -- COVENANTS ...................................................3-1
SECTION 3.01. Payment of Principal, Interest and Premium..............3-1
SECTION 3.02. Maintenance of Office or Agency.........................3-1
SECTION 3.03. Money for Payments To Be Held in Trust..................3-1
SECTION 3.04. Existence...............................................3-2
SECTION 3.05. Protection of Trust Estate..............................3-3
SECTION 3.06. Opinions as to Trust Estate.............................3-3
SECTION 3.07. Performance of Obligations; Servicing of Contracts......3-4
SECTION 3.08. Negative Covenants......................................3-5
SECTION 3.09. Annual Statement as to Compliance.......................3-5
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms......3-6
SECTION 3.11. Successor or Transferee.................................3-8
SECTION 3.12. No Other Business.......................................3-8
SECTION 3.13. No Borrowing............................................3-8
SECTION 3.14. Servicer's Obligations..................................3-8
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.......3-8
SECTION 3.16. Capital Expenditures....................................3-8
SECTION 3.17. Restricted Payments.....................................3-8
SECTION 3.18. Notice of Events of Default.............................3-9
SECTION 3.19. Further Instruments and Acts............................3-9
SECTION 3.20. Compliance with Laws....................................3-9
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement...............................................3-9
SECTION 3.22. Removal of Administrator................................3-9
SECTION 3.23. Income Tax Characterization.............................3-9
SECTION 3.24. Investment Company Act..................................3-9
-i-
<PAGE>
ARTICLE IV -- SATISFACTION AND DISCHARGE....................................4-1
SECTION 4.01. Satisfaction and Discharge of Indenture.................4-1
SECTION 4.02. Application of Trust Money..............................4-2
SECTION 4.03. Repayment of Moneys Held by Paying Agent................4-2
SECTION 4.04. Release of Trust Estate.................................4-2
ARTICLE V -- REMEDIES ......................................................5-1
SECTION 5.01. Events of Default.......................................5-1
SECTION 5.02. Rights upon Event of Default............................5-2
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee; Authority of Trustee........................5-2
SECTION 5.04. Remedies................................................5-4
SECTION 5.05. Optional Preservation of the Contracts..................5-5
SECTION 5.06. Priorities..............................................5-5
SECTION 5.07. Limitation of Suits.....................................5-5
SECTION 5.08. Unconditional Rights of Noteholders To Receive Principal
and Interest............................................5-6
SECTION 5.09. Restoration of Rights and Remedies......................5-6
SECTION 5.10. Rights and Remedies Cumulative..........................5-7
SECTION 5.11. Delay or Omission Not a Waiver..........................5-7
SECTION 5.12. Control by Noteholders..................................5-7
SECTION 5.13. Waiver of Past Defaults.................................5-7
SECTION 5.14. Undertaking for Costs...................................5-8
SECTION 5.15. Waiver of Stay or Extension Laws........................5-8
SECTION 5.16. Action on Notes.........................................5-8
SECTION 5.17. Performance and Enforcement of Certain Obligations......5-8
ARTICLE VI -- THE TRUSTEE ..................................................6-1
SECTION 6.01. Duties of Trustee.......................................6-1
SECTION 6.02. Rights of Trustee.......................................6-2
SECTION 6.03. Individual Rights of Trustee............................6-3
SECTION 6.04. Trustee's Disclaimer....................................6-3
SECTION 6.05. Notice of Defaults......................................6-4
SECTION 6.06. Reports by Trustee to Holders...........................6-4
SECTION 6.07. Compensation and Indemnity..............................6-4
SECTION 6.08. Replacement of Trustee..................................6-4
SECTION 6.09. Successor Trustee by Merger.............................6-6
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee...........6-6
SECTION 6.11. Eligibility; Disqualification...........................6-7
SECTION 6.12. Preferential Collection of Claims Against Issuer........6-7
SECTION 6.13. Trustee to Cooperate....................................6-7
SECTION 6.14. Sale and Servicing Agreement............................6-8
SECTION 6.15. Trustee Advances........................................6-8
-ii-
<PAGE>
ARTICLE VII -- NOTEHOLDERS' LISTS AND REPORTS................................7-1
SECTION 7.01. Issuer To Furnish Trustee Names and Addresses
to Noteholders...........................................7-1
SECTION 7.02. Preservation of Information; Communications
to Noteholders...........................................7-1
SECTION 7.03. Reports by Issuer........................................7-1
SECTION 7.04. Reports by Trustee.......................................7-2
ARTICLE VIII -- ACCOUNTS, DISBURSEMENTS AND RELEASES.........................8-1
SECTION 8.01. Collection of Money......................................8-1
SECTION 8.02. Trust Accounts...........................................8-1
SECTION 8.03. General Provisions Regarding Accounts....................8-3
ARTICLE IX -- SUPPLEMENTAL INDENTURES........................................9-1
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders..............................................9-1
SECTION 9.02. Supplemental Indentures With Consent of Noteholders......9-2
SECTION 9.03. Execution of Supplemental Indentures.....................9-3
SECTION 9.04. Effect of Supplemental Indenture.........................9-3
SECTION 9.05. Conformity With Trust Indenture Act......................9-4
SECTION 9.06. Reference in Notes to Supplemental Indentures............9-4
ARTICLE X -- REDEMPTION OF NOTES............................................10-1
SECTION 10.01. Redemption.............................................10-1
SECTION 10.02. Form of Redemption Notice..............................10-1
SECTION 10.03. Notes Payable on Redemption Date.......................10-2
SECTION 10.04. Contract Pool Auction..................................10-2
ARTICLE XI -- MISCELLANEOUS.................................................11-1
SECTION 11.01. Compliance Certificates and Opinions, etc..............11-1
SECTION 11.02. Form of Documents Delivered to Trustee.................11-2
SECTION 11.03. Acts of Noteholders....................................11-3
SECTION 11.04. Notices, etc., to Trustee, Issuer and Rating Agencies..11.4
SECTION 11.05. Notices to Noteholders; Waiver.........................11-4
SECTION 11.06. Alternate Payment and Notice Provisions................11-5
SECTION 11.07. Conflict with Trust Indenture Act......................11-5
SECTION 11.08. Effect of Headings and Table of Contents...............11-5
SECTION 11.09. Successors and Assigns.................................11-5
SECTION 11.10. Severability...........................................11-5
SECTION 11.11. Benefits of Indenture..................................11-5
SECTION 11.12. Legal Holidays.........................................11-6
SECTION 11.13. Governing Law..........................................11-6
SECTION 11.14. Counterparts...........................................11-6
SECTION 11.15. Recording of Indenture.................................11-6
SECTION 11.16. Trust Obligation.......................................11-6
SECTION 11.17. No Petition............................................11-6
SECTION 11.18. Inspection.............................................11-7
SECTION 11.19. Limitation of Liability................................11-7
-iii-
<PAGE>
Exhibit A -- Schedule of Contracts
Exhibit B -- Form of Depository Agreement
Exhibit C-1 -- Form of Class A-1 Note
Exhibit C-2 -- Form of Class A-2 Note
Exhibit C-3 -- Form of Class A-3 Note
Exhibit C-4 -- Form of Class A-4 Note
Exhibit C-5 -- Form of Class A-5 Note
Exhibit C-6 -- Form of Class A-6 Note
Exhibit C-7 -- Form of Class A-7 Note
-iv-
<PAGE>
INDENTURE, dated as of __________ l, 1999, between Conseco Finance
Recreational, Equipment & Consumer Trust 1999-__, a Delaware business trust (the
"Issuer"), and [Trustee], a national banking association organized and existing
under the laws of the United States of America, in its capacity as trustee (the
"Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's Class A-1
Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 Asset-Backed Notes (the
"Class A-2 Notes"), Class A-3 Asset-Backed Notes (the "Class A-3 Notes"), Class
A-4 Asset-Backed Notes (the "Class A-4 Notes"), Class A-5 Asset-Backed Notes
(the "Class A-5 Notes"), Class A-6 Asset-Backed Notes (the "Class A-6 Notes")
and Class A-7 Asset-Backed Notes (the "Class A-7 Notes"), (the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class A-5
Notes are referred to collectively as the "Senior Notes," and the Class A-6
Notes and the Class A-7 Notes are referred to collectively as "Subordinated
Notes" and the Senior Notes and Subordinated Notes are referred to collectively
as the "Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Indenture Collateral (as defined below) as collateral for the benefit of the
Trustee on behalf of the Noteholders.
GRANTING CLAUSE
The Issuer hereby Grants, transfers and assigns to the Trustee at the
Closing Date, on behalf of and for the benefit of the Noteholders, without
recourse, all of the Issuer's right, title and interest in and to: (a) the
Contracts (including but not limited to the Collateral Security), and all moneys
payable thereon or in respect to the Contracts, including any liquidation
proceeds therefrom but excluding payments due on the Contracts prior to the
Cutoff Date; (b) the Insurance Policies on any Products securing a Contract for
the benefit of the creditor of such Contract and all blanket insurance policies
to the extent they relate to the Contracts; (c) the Errors and Omissions
Protection Policy as such policy relates to the Contracts; (d) all items
contained in the Contract Files; (e) the Trust Accounts (other than the
Certificate Distribution Account) and all funds on deposit therein from time to
time, and all investments and proceeds thereof (including all income thereon);
(f) the Sale and Servicing Agreement; and (g) all present and future claims,
demands, causes and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds and products of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms of
obligations and Contracts, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Indenture Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
<PAGE>
The Trustee, for the benefit of the Holders of the Notes acknowledges
such Grant. The Trustee on behalf of the Holders of the Notes accepts the trusts
under this Indenture in accordance with the provisions of this Indenture and
agrees to perform its duties required in this Indenture to the best of its
ability to the end that the interests of the Holders of the Notes may be
adequately and effectively protected.
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture. Except as otherwise
defined herein, all terms defined in the Sale and Servicing Agreement or the
Trust Agreement have the meanings given them in such Related Document.
"Act" has the meaning specified in Section 11.03(a).
"Administration Agreement" means the Administration Agreement, dated as
of ________ 1, 1999, among the Administrator, the Issuer and the Trustee, as the
same may be amended and supplemented from time to time.
"Administrator" means Conseco Finance Servicing Corporation, a Delaware
corporation, or any successor Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter).
"Book-Entry Note" means any Note registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"Business Day" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in Minneapolis,
Minnesota, New York, New York, Wilmington, Delaware or any other location of any
successor Servicer, successor Owner Trustee or successor Trustee are authorized
or obligated by law, executive order or governmental decree to remain closed.
"Certificate of Trust" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit A to the Trust Agreement.
1-1
<PAGE>
"Certificates" means the 6.90% Class B-1 and 7.65% Class B-2
Asset-Backed Certificates issued under the Trust Agreement.
"Class A-1 Notes" means the Class A-1 Asset-Backed Notes substantially
in the form of Exhibit C-1.
"Class A-2 Notes" means the Class A-2 Asset-Backed Notes substantially
in the form of Exhibit C-2.
"Class A-3 Notes" means the Class A-3 Asset-Backed Notes substantially
in the form of Exhibit C-3.
"Class A-4 Notes" means the Class A-4 Asset-Backed Notes substantially
in the form of Exhibit C-4.
"Class A-5 Notes" means the Class A-5 Asset-Backed Notes substantially
in the form of Exhibit C-5.
"Class A-6 Notes" means the Class A-6 Asset-Backed Notes substantially
in the form of Exhibit C-6.
"Class A-7 Notes" means the Class A-7 Asset-Backed Notes substantially
in the form of Exhibit C-7.
"Closing Date" means _____________, 1999.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collection Account" means the account established and maintained
pursuant to Section 6.01 of the Sale and Servicing Agreement.
"Company" means Green Tree Financial Corporation.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at date of the execution of this Indenture is located at 180 East
Fifth Street, St. Paul, Minnesota 55101, Attention: Corporate Trust
Administration, Structured Finance; or at such other address as the Trustee may
designate from time to time by notice to the Noteholders and the Issuer, or the
principal corporate trust office of any successor Trustee (and such successor
Trustee will notify the Noteholders and the Issuer of its address).
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.09.
1-2
<PAGE>
"Depository" means the initial Depository, The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of
$__________ in aggregate principal amount of the Class A-1 Notes, $__________ in
aggregate principal amount of the Class A-2 Notes, $__________ in aggregate
principal amount of the Class A-3 Notes, $__________ in aggregate principal
amount of the Class A-4 Notes, $__________ in aggregate principal amount of the
Class A-5 Notes, $__________ in aggregate principal amount of the Class A-6
Notes and $__________ in aggregate principal amount of the Class A-7 Notes, as
of the Closing Date, and any permitted successor depository. The Depository
shall at all times be a "clearing corporation" as defined in the Uniform
Commercial Code of the State of New York.
"Depository Agreement" means the agreement among the Issuer, the
Trustee, the Administrator, and The Depository Trust Company, as the initial
Depository, dated as of the Closing Date, relating to the Notes, substantially
in the form of Exhibit B.
"Depository Participant" means a broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Distribution Date" means the fifteenth day of each calendar month
during the term of this Indenture or if such day is not a Business Day, the next
succeeding Business Day, commencing in July 1998.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, any Responsible Officer, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"Final Scheduled Distribution Date" means with respect to each Class of
Notes, the Distribution Date occurring in the month and year indicated: Class
A-1-- ____________; Class A-2 -- ____________; Class A-3 -- ____________; Class
A-4 -- _____________; Class A-5 -- ____________; Class A-6 -- December 2013; and
Class A-7 -- ____________.
"General Partner" means each Certificateholder obligated to pay the
expenses of the Issuer pursuant to Section 2.7 of the Trust Agreement.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Indenture Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Indenture Collateral and all
other moneys payable thereunder, to give and receive notices and
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other communications, to make waivers or other agreements, to exercise all
rights and options, to bring Proceedings in the name of the Granting party or
otherwise and generally to do and receive anything that the Granting party is or
may be entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Indenture Collateral" has the meaning specified in the Granting Clause
of this Indenture.
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Depositor, the Servicer, the Seller and any Affiliate of any of
the foregoing Persons, (b) does not have any direct financial interest or any
material indirect financial interest in the Issuer, any such other obligor, the
Depositor, the Servicer, the Seller or any Affiliate of any of the foregoing
Persons and (c) is not connected with the Issuer, any such other obligor, the
Depositor, the Servicer, the Seller or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2
Interest Rate, the Class A-3 Interest Rate, the Class A-4 Interest Rate, the
Class A-5 Interest Rate, the Class A-6 Interest Rate or the Class A-7 Interest
Rate, as applicable.
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"Issuer" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note, a
Class A-4 Note, a Class A-5 Note, a Class A-6 Note or a Class A-7 Note.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 6.01 of the Sale and Servicing
Agreement.
"Note Owner" means, with respect to a Book-Entry Note, the Person who
is the owner of such Book-Entry Note, as reflected on the books of the
Depository, or on the books of a Person maintaining an account with such
Depository (directly as a Depository participant or as an indirect participant,
in each case in accordance with the rules of such Depository) and with respect
to any Definitive Notes, the Holder.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Officers' Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Trustee. Unless otherwise specified, any reference in this Indenture to an
Officers' Certificate shall be to an Officers' Certificate of any Authorized
Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Trustee and which
shall comply with any applicable requirements of Section 11.01, and shall be in
form and substance satisfactory to the Trustee.
"Original Class A-1 Principal Balance" means $__________.
"Original Class A-2 Principal Balance" means $__________.
"Original Class A-3 Principal Balance" means $__________.
"Original Class A-4 Principal Balance" means __________.
"Original Class A-5 Principal Balance" means $__________.
"Original Class A-6 Principal Balance" means $__________.
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"Original Class A-7 Principal Balance" means $__________.
"Original Note Principal Balance" means the sum of the Original Class
A-1 Principal Balance, Original Class A-2 Principal Balance, Original Class A-3
Principal Balance, Original Class A-4 Principal Balance, Original Class A-5
Principal Balance, Original Class A-6 Principal Balance and Original Class A-7
Principal Balance.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor, satisfactory to the Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Related Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Depositor, the
Servicer, the Seller or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the Trustee
knows to be so owned shall be so disregarded. Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Depositor, the Servicer, the Seller or any Affiliate of any of the
foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
or class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
owner trustee under the Trust Agreement.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the distributions from the Note Distribution
Account, including payment of principal of or interest on the Notes on behalf of
the Issuer.
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"Person" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency" means each of Standard & Poor's and Fitch, so long as
such Persons maintain a rating on the Notes; and if either Standard & Poor's or
Fitch no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Seller.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Company, the Servicer, the Trustee, the
Owner Trustee and the Issuer in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Notes.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the last Business Day immediately preceding such
Distribution Date or Redemption Date.
"Redemption Date" means in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.01(a) or 10.01(b), as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a), an amount equal to the principal amount of the
Notes redeemed plus accrued and unpaid interest on the principal amount of each
class of Notes at the respective Interest Rate for each such class of Notes
being so redeemed to but excluding the Redemption Date, or (b) in the case of a
payment made to Noteholders pursuant to Section 10.01(b), the amount on deposit
in the Note Distribution Account, but not in excess of the amount specified in
clause (a) above.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Related Documents" means the Transfer Agreement, the Trust Agreement,
the Certificates, the Notes, the Sale and Servicing Agreement, the
Administration Agreement, the Depository Agreement and the Underwriting
Agreement and related Terms Agreement, between
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the Company and the Underwriters of the Certificates and the Notes. The Related
Documents executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
"Responsible Officer" means, with respect to the Trustee, any officer
of the Trustee assigned by the Trustee to administer its corporate trust affairs
relating to the Trust Estate.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of __________ 1, 1999, among the Issuer, the Company and the Servicer.
"Schedule of Contracts" means the listing of the Contracts set forth in
Exhibit A.
"Secured Obligations" means all amounts and obligations which the
Issuer may at any time owe to or on behalf of the Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"Senior Notes" means the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Termination Date" means the date on which the Trustee shall have
received payment and performance of all Secured Obligations.
"Trust Estate" means all money, instruments, rights and other property
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including, without
limitation, the Indenture Collateral Granted to the Trustee), including all
proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"Trustee" means U.S. Bank Trust National Association, a national
banking association organized under the laws of the United States, as Trustee
under this Indenture, or any successor Trustee under this Indenture.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
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"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless otherwise specified:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) references to Sections, Subsections, Schedules and
Exhibits shall refer to such portions of this Indenture.
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ARTICLE II
THE NOTES
SECTION 2.01. Form. The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes, the Class A-5 Notes, the Class A-6 Notes and the
Class A-7 Notes, in each case together with the Trustee's certificate of
authentication, shall be in substantially the forms set forth in Exhibits C-1,
C-2, C-3, C-4, C-5, C-6 and C-7, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods all as determined by the officers
executing such Notes, as evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits C-1, C-2, C-3, C-4, C-5, C-6 and C-7 are part of
the terms of this Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall, upon receipt of an Issuer Order, authenticate and
deliver Class A-1 Notes in an aggregate principal amount of $__________, Class
A-2 Notes in an aggregate principal amount of $__________, Class A-3 Notes in an
aggregate principal amount of $__________, Class A-4 Notes in an aggregate
principal amount of $__________, Class A-5 Notes in an aggregate principal
amount of $__________, Class A-6 Notes in an aggregate principal amount of
$__________ and Class A-7 Notes in an aggregate principal amount of $__________.
The aggregate principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class A-5 Notes, Class A-6 Notes and Class A-7 Notes
outstanding at any time may not exceed that amount except as provided in Section
2.05.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
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signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.04. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Trustee shall authenticate and the Noteholder shall
obtain from the Trustee, in the name of the designated transferee or
transferees, one or more new Notes in any authorized denominations, of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations, of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee
shall authenticate and the Noteholder shall obtain from the Trustee, the Notes
which the Noteholder making the exchange is entitled to receive.
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All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in The City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.03 or 9.06 not involving any
transfer.
The preceding provisions of this section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee and such security or indemnity as may be
required by them to hold the Issuer and the Trustee harmless, then, in the
absence of notice to the Issuer, the Note Registrar or the Trustee that such
Note has been acquired by a bona fide purchaser, the Issuer shall execute and
upon its request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note; provided, however, that if any such destroyed, lost or stolen Note, but
not a mutilated Note, shall have become or within seven days shall be due and
payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer or the Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other
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governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee or the Note
Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. Person Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee and any agent of
the Issuer or the Trustee may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall
be affected by notice to the contrary.
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest.
(a) The Notes shall accrue interest as provided in the forms of the
Class A-1 Note, the Class A-2 Note, the Class A-3 Note, the Class A-4 Note, the
Class A-5 Note, the Class A-6 Note and the Class A-7 Note set forth in Exhibits
C-1, C-2, C-3, C-4, C-5, C-6 and C-7, respectively, and such interest shall be
payable on each Distribution Date as specified therein, subject to Section 3.01.
Any installment of interest or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Issuer on the applicable
Distribution Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered on the Record Date, by check mailed
first-class, postage prepaid to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.11, with respect to Notes registered on the Record
Date in the name of the nominee of the Depository, payment will be made by wire
transfer in immediately available funds to the account designated by such
nominee and except for (i) the final installment of principal payable with
respect to such Note on a Distribution Date and (ii) the Redemption Price for
any Note called for redemption pursuant to Section 10.01(a), which shall be
payable as provided below. Notwithstanding the above, any holder of 5% or more
of the Outstanding Amount of a Class of Notes may request payment of interest
and principal by wire transfer in immediately available funds to the account of
such holder subject to the exceptions contained in clauses (i) and (ii) of the
immediately preceding sentence. The funds represented by any such checks
returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Class A-1 Note, the Class A-2
Note, the Class A-3 Note, the Class A-4 Note, the Class A-5 Note, the Class A-6
Note and the Class A-7 Note set forth in
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Exhibits C-1, C-2, C-3, C-4, C-5, C-6 and C-7, respectively. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default shall
have occurred and be continuing and the Trustee or a Note Majority have declared
the Notes to be immediately due and payable in the manner provided in Section
5.02. All principal payments on a Class of Notes shall be made pro rata to the
Noteholders of such Class entitled thereto. The Trustee shall notify the Person
in whose name a Note is registered at the close of business on the Record Date
preceding the Distribution Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such notice
shall be mailed no later than five days prior to such final Distribution Date
and shall specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place where such
Note may be presented and surrendered for payment of such installment. Notices
in connection with redemptions of Notes shall be mailed to Noteholders as
provided in Section 10.02.
SECTION 2.08. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be promptly
canceled by the Trustee. The Issuer may at any time deliver to the Trustee for
cancellation any Notes previously authenticated and delivered hereunder which
the Issuer may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly canceled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
Notes may be held or disposed of by the Trustee in accordance with its standard
retention or disposal policy as in effect at the time unless the Issuer shall
direct by an Issuer Order that they be destroyed or returned to it, provided
that such Issuer Order is timely and the Notes have not been previously disposed
of by the Trustee.
SECTION 2.09. Book-Entry Notes. The Notes, upon original issuance,
will be issued in the form of a typewritten Note or Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company, the initial
Depository, by, or on behalf of, the Issuer. Each such Note shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Depository, and no Note Owner will receive a Definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.11. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to Note Owners pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to
deal with the Depository for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole holder of the Notes,
and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
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(iv) the rights of Note Owners shall be exercised only through
the Depository and shall be limited to those established by law and
agreements between such Note Owners and the Depository and/or the
Depository Participants. Pursuant to the Depository Agreement, unless
and until Definitive Notes are issued pursuant to Section 2.11, the
initial Depository will make book-entry transfers among the Depository
Participants and receive and transmit payments of principal of and
interest on the Notes to such Depository Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Depository shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Note Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes and has delivered such instructions to the Trustee.
SECTION 2.10. Notices to Depository. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.11, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Depository and shall have no
obligation to the Note Owners.
SECTION 2.11. Definitive Notes. If (i) the Administrator advises the
Trustee in writing that the Depository is no longer willing or able properly to
discharge its responsibilities with respect to the Notes, and the Administrator
is unable to locate a qualified successor, (ii) the Administrator at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Default, a
Note Majority advises the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Note Owners, then the Depository shall notify all Note Owners and the
Trustee of the occurrence of any such event and of the availability of
Definitive Notes to Note Owners requesting the same. Upon surrender to the
Trustee of the Note or Notes representing the Book-Entry Notes by the
Depository, accompanied by registration instructions, the Issuer shall execute
and the Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Depository. None of the Issuer, the Note Registrar or the
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Trustee shall recognize the Holders
of the Definitive Notes as Noteholders.
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ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal, Interest and Premium. The Issuer
will duly and punctually pay the principal and interest on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, the Issuer will cause to be distributed all amounts on deposit in the
Note Distribution Account on a Distribution Date in accordance with Section
8.02(c). Amounts properly withheld under the Code by any Person from a payment
to any Noteholder of interest and/or principal shall be considered as having
been paid by the Issuer to such Noteholder for all purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will
maintain in St. Paul, Minnesota, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially appoints the Trustee to serve as its agent
for the foregoing purposes. The Issuer will give prompt written notice to the
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Trustee as its agent to receive all
such surrenders, notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made pursuant to Section 8.02(c) from amounts withdrawn from the
Note Distribution Account shall be made on behalf of the Issuer by the Trustee
or by another Paying Agent, and no amounts so withdrawn from the Note
Distribution Account for payment of Notes shall be paid over to the Issuer.
On or before each Distribution Date or Redemption Date, the Issuer
shall deposit or cause to be deposited in the Note Distribution Account an
aggregate sum sufficient to pay the amounts then becoming due, such sum to be
held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the Trustee) shall promptly notify the Trustee of its action or
failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee (and if the Trustee acts as Paying Agent, it hereby
so agrees), subject to the provisions of this Section, that such Paying Agent
will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
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(ii) give the Trustee notice of any default (of which it has
actual knowledge) by the Issuer (or any other obligor upon the Notes)
in the making of any payment required to be made with respect to the
Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Trustee all sums held in trust by
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which the sums were held by such Paying Agent; and upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust and upon
Issuer Request shall be deposited by the Trustee in the Collection Account; and
the Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Issuer cause to be published once,
in a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to or for the account of the
Issuer. The Trustee may also adopt and employ, at the expense of the Issuer, any
other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in moneys due and payable but not claimed is determinable from the
records of the Trustee or of any Paying Agent, at the last address of record for
each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the
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United States of America, in which case the Issuer will keep in full effect its
existence, rights and franchises under the laws of such other jurisdiction) and
will obtain and preserve its qualification to do business in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Indenture Collateral and each
other instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Trustee to
be prior to all other liens in respect of the Trust Estate, and the Issuer shall
take all actions necessary to obtain and maintain, in favor of the Trustee, for
the benefit of the Noteholders, a first lien on and a first priority, perfected
security interest in the Trust Estate. The Issuer will from time to time execute
and deliver all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance and other
instruments, all as prepared by the Servicer and delivered to the Issuer, and
will take such other action necessary or advisable to:
(i) grant more effectively all or any portion of the Trust
Estate;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Indenture Collateral;
(v) preserve and defend title to the Trust Estate and the
rights of the Trustee in such Trust Estate against the claims of all
persons and parties; or
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
required by the Trustee pursuant to this Section.
SECTION 3.06. Opinions as to Trust Estate.
(a) Promptly after the execution and delivery of this Indenture, the
Issuer shall furnish to the Trustee an Opinion of Counsel to the effect that, in
the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Trustee's first priority perfected security interest in
the collateral for the benefit of the Noteholders, and reciting the details of
such filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) no such action shall be necessary to perfect such security
interest; and
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(b) Within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the Cutoff
Date, the Issuer shall furnish to the Trustee an Opinion of Counsel, dated as of
a date during such 90-day period, to the effect that, in the opinion of such
counsel, either (i) all financing statements and continuation statements have
been executed and filed that are necessary to create and continue the Trustee's
first priority perfected security interest in the collateral for the benefit of
the Noteholders, and reciting the details of such filing or referring to prior
Opinions of Counsel in which such details are given, or (ii) no such action
shall be necessary to perfect such security interest.
SECTION 3.07. Performance of Obligations; Servicing of Contracts.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Trustee in an Officers' Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer and the Administrator to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Related Documents
and in the instruments and agreements included in the Trust Estate, including
but not limited to filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this Indenture
and the Sale and Servicing Agreement in accordance with and within the time
periods provided for herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of an "Event
of Termination" under the Sale and Servicing Agreement, the Issuer shall
promptly notify the Trustee and the Rating Agencies thereof, and shall specify
in such notice the action, if any, the Issuer is taking with respect of such
default. If an "Event of Termination" shall arise from the failure of the
Servicer to perform any of its duties or obligations under the Sale and
Servicing Agreement with respect to the Contracts, the Issuer shall take all
reasonable steps available to it to remedy such failure.
(e) If the Issuer has given notice of termination to the Servicer of
the Servicer's rights and powers pursuant to Section 7.02 of the Sale and
Servicing Agreement, as promptly as possible thereafter, a successor servicer
shall be appointed in accordance with Section 7.03 of the Sale and Servicing
Agreement.
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(f) Upon any termination of the Servicer's rights and powers pursuant
to the Sale and Servicing Agreement, the Issuer shall promptly notify the
Trustee. As soon as a successor Servicer is appointed, the Issuer shall notify
the Trustee of such appointment, specifying in such notice the name and address
of such successor Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer, the Trustee or the Company of their respective
duties under the Related Documents if the effect thereof would adversely affect
the Holders of the Notes.
SECTION 3.08. Negative Covenants. Until the Termination Date, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Sale and Servicing Agreement, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer, including
those included in the Trust Estate, unless directed to do so by the
Trustee;
(ii) claim any credit on, or make any deduction from the
principal, interest or premium payable in respect of, the Notes (other
than amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Noteholder by reason of
the payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Trustee
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien in favor of the Trustee created by this Indenture)
to be created on or extend to or otherwise arise upon or burden the
Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other
liens that arise by operation of law, in each case on a Financed
Product and arising solely as a result of an action or omission of the
related Obligor), (C) permit the lien in favor of the Trustee created
by this Indenture not to constitute a valid first priority (other than
with respect to any such tax, mechanics' or other lien) security
interest in the Trust Estate, or (D) amend, modify or fail to comply
with the provisions of the Related Documents without the prior written
consent of the Trustee.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing with the fiscal year ended December 31, 1999), an Officers'
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
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(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any State
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form and substance
satisfactory to the Trustee, the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture and each
other Related Document on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
which shall be delivered to and shall be satisfactory to the Trustee to
the effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created in favor of the Trustee by this Indenture
shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel (which shall describe
the actions taken as required by clause (a)(v) of this Section 3.10 or
that no such actions will be taken) each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been compiled with (including any
filing required by the Exchange Act); and
(vii) the Issuer or the Person (if other than the Issuer)
formed by or surviving such consolidation or merger has a net worth,
immediately after such consolidation or merger, that is (a) greater
than zero and (b) not less than the net worth of the Issuer immediately
prior to giving effect to such consolidation or merger.
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(b) The Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Trust Estate, to any
Person (except as expressly permitted by the Indenture or the Sale and Servicing
Agreement), unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer shall (A) be a United States
citizen or a Person organized and existing under the laws of the United
States of America or any State, (B) expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form and
substance satisfactory to the Trustee, the due and punctual payment of
the principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture and each
Related Document on the part of the Issuer to be performed or observed,
all as provided herein, (C) expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed
or transferred shall be subject and subordinate to the rights of
Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agree to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agree by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
which shall be delivered to and shall be satisfactory to the Trustee to
the effect that such transaction will not have any material adverse tax
consequence to the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created in favor of the Trustee by this Indenture
shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel (which shall describe
the actions taken as required by clause (b)(v) of this Section 3.10 or
that no such actions will be taken) each stating that such conveyance
or transfer and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to
such transaction have been complied with (including any filing required
by the Exchange Act); and
(vii) the Person acquiring by conveyance or transfer the
properties or assets of the Issuer has a net worth, immediately after
such conveyance or transfer, that is (a) greater than zero and (b) not
less than the net worth of the Issuer immediately prior to giving
effect to such conveyance or transfer.
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SECTION 3.11. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Trustee stating that the Issuer is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the Related Documents
and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted
by or arising under the Related Documents. The proceeds of the Notes and the
Certificates shall be used exclusively to fund the Issuer's purchase of the
Contracts and the other assets specified in the Sale and Servicing Agreement,
and to pay the Issuer's organizational, transactional and start-up expenses.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the
Servicer to fulfill its obligations under the Sale and Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuming another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Restricted Payments. Except as expressly permitted by
this Indenture or the Sale and Servicing Agreement, the Issuer shall not,
directly or indirectly, (i) make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii) set
aside or otherwise segregate any amounts for any such
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purpose. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Related Documents.
SECTION 3.18. Notice of Events of Default. The Issuer agrees to give
the Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Servicer or the Company of
its obligations under the Sale and Servicing Agreement.
SECTION 3.19. Further Instruments and Acts. Upon request of the
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 3.20. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the noncompliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Related Document.
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 10.03 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22. Removal of Administrator. So long as any Notes are issued
and Outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection with
such removal.
SECTION 3.23. Income Tax Characterization. For purposes of federal
income, state and local income and franchise and any other income taxes, the
Issuer will treat the Notes as indebtedness of the Issuer. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of its Note
(and each Note Owner by its acceptance of an interest in the applicable
Book-Entry Note), agree to treat the Notes for federal, state and local income,
single business and franchise tax purposes as indebtedness of the Issuer.
SECTION 3.24. Investment Company Act. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.24
if it shall have obtained an order exemption it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.
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ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal, interest and premium, if any, thereon, (iv) Sections 3.03, 3.04,
3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20, 3.21 and 3.23, (v) the rights,
obligations and immunities of the Trustee hereunder (including the rights of the
Trustee under Section 6.07 and the obligations of the Trustee under Section
4.02) and (vi) the rights of Noteholders as beneficiaries hereof with respect to
the property so deposited with the Trustee payable to all or any of them, and
the Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section
2.05 and (ii) Notes for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.03) have been delivered
to the Trustee for cancellation; or
(2) all Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
applicable Final Scheduled Distribution Date within
one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Trustee as part of the Trust Estate cash or direct
obligations of or obligations guaranteed by the United States
of America (which will mature prior to the date such amounts
are payable), in trust in an Eligible Account in the name of
the Trustee for such purpose, in an amount sufficient to pay
and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation when due
to the applicable Final Scheduled Distribution Date or
Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.01(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all Secured
Obligations; and
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(C) the Issuer has delivered to the Trustee an Officers'
Certificate, an Opinion of Counsel and (if required by the TIA
or the Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable
requirements of Section 11.01(a) and each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been
complied with and the Rating Agency Condition has been
satisfied.
SECTION 4.02. Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied according to Section
3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
SECTION 4.04. Release of Trust Estate. The Trustee shall, on or after
the Termination Date, release any remaining portion of the Trust Estate from the
lien created by this Indenture and deposit in the Collection Account any funds
then on deposit in any other Trust Account. The Trustee shall release property
from the lien created by this Indenture pursuant to this Section 4.04 only upon
receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion
of Counsel and (if required by the TIA) Independent Certificates in accordance
with TIA ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of
Section 11.01.
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ARTICLE V
REMEDIES
SECTION 5.01. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Senior Note
when the same becomes due and payable, and such default shall continue
for a period of five days; or if all interest and principal due on the
Senior Notes has been paid in full, default in the payment of any
interest on any Class A-6 Note when the same becomes due and payable,
and such default shall continue for a period of five days; or if all
interest and principal due on the Senior Notes and the Class A-6 Notes
has been paid in full, default in the payment of any interest on any
Class A-7 Note when the same becomes due, and such default shall
continue for a period of five days; or
(ii) default in the payment of the principal of any Note on
the Final Scheduled Distribution Date for the Notes of such Class; or
(iii) default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Trustee or to the Issuer and the
Trustee by the Holders of at least 25% of the Outstanding Amount of the
Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(iv) the commencement of an involuntary case against the
Issuer under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, and such case is not
dismissed within 60 days; or
(v) the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, the entry of an order for relief in an
involuntary case against the Issuer under any such law, the consent by
the Issuer to the entry of any such order for relief, the consent by
the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Trust
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Estate, the making by the Issuer of any general assignment for the
benefit of creditors, the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by the Issuer
in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee, within five days after
obtaining knowledge of the occurrence thereof, written notice in the form of an
Officers' Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. Rights upon Event of Default. If an Event of Default
shall have occurred and be continuing, the Trustee in its discretion may, or if
so requested in writing by Holders holding Notes representing (i) at least
66-2/3% of the Outstanding Amount of each Class of Senior Notes if any Senior
Notes are then Outstanding, or (ii) if no Senior Notes are Outstanding, at least
66-2/3% of the Outstanding Amount of the Class A-6 Notes, or (iii) if no Class
A-6 Notes are then Outstanding, at least 66-2/3% of the Outstanding Amount of
the Class A-7 Notes, shall, upon prior written notice to the Rating Agencies,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon. For the avoidance of doubt, an Event of Default in Section 5.01(iii)
shall be deemed to relate to and affect each class of Notes. Notwithstanding
anything to the contrary in this Section, if an Event of Default specified in
Section 5.01(iv) or (v) shall occur and be continuing the Notes shall become
immediately due and payable at par, together with accrued interest thereon. If
an Event of Default shall have occurred and be continuing, the Trustee may
exercise any of the remedies specified in Section 5.04(a).
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee; Authority of Trustee.
(a) The Issuer covenants that if any Notes are accelerated following
the occurrence of an Event of Default, the Issuer will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Notes, the whole
amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest, at
the applicable Interest Rate and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee and
its agents and counsel.
(b) If an Event of Default occurs and is continuing, the Trustee may,
in its discretion, proceed to protect and enforce its rights and the rights of
the Noteholders, by such appropriate Proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
(c) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy,
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insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Issuer or its property or
such other obligor or Person, or in case of any other comparable judicial
Proceedings relative to the Issuer or other obligor upon the Notes, or to the
creditors or property of the Issuer or such other obligor, the Trustee,
irrespective of whether the principal of any Notes shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand pursuant to the provisions of this
Section, shall be entitled and empowered, by intervention in such Proceedings or
otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal, interest and premium, if any, owing and unpaid in respect
of the Notes and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(d) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
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(e) All rights of action and of asserting claims under this Indenture
or under any of the Notes, may be enforced by the Trustee without the possession
of any of the Notes or the production thereof in any trial or other Proceedings
relative thereto, and any such action or Proceedings instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of the
Notes.
(f) In any Proceedings brought by the Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
the Trustee shall be held to represent all the Holders of the Notes, and it
shall not be necessary to make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies.
(a) If an Event of Default shall have occurred and be continuing, the
Trustee may (subject to Section 5.05):
(i) institute Proceedings in its own name and as or on behalf
of a trustee of an express trust for the collection of all amounts then
payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, enforce any judgment obtained, and
collect from the Issuer and any other obligor upon such Notes moneys
adjudged due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC
and any other remedy available to the Trustee and take any other
appropriate action to protect and enforce the rights and remedies of
the Trustee on behalf of the Noteholders; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law; provided, however, that the
Trustee may not sell or otherwise liquidate the Trust Estate following
an Event of Default unless (A) such Event of Default is of the type
described in Section 5.01(i) or (ii), or (B) either (I) the Holders of
100% of the Outstanding Amount of the Notes consent thereto, (II) the
proceeds of such sale or liquidation distributable to the Noteholders
will be sufficient to discharge in full all amounts then due and unpaid
upon such Notes for principal and interest, or (III) the Trustee
determines that the Trust Estate will not continue to provide
sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared
due and payable, and in each case the Trustee provides prior written
notice to the Rating Agencies and obtains the consent of Holders of
66-2/3% of the Outstanding Amount of each Class of Notes. In
determining such sufficiency or insufficiency with respect to clause
(II) or (III), the Trustee may, but need not, obtain and rely upon an
opinion of an Independent
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investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.05. Optional Preservation of the Contracts. If any Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Trustee may, but need not, elect to maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate, the Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such purpose.
SECTION 5.06. Priorities.
If the Trustee collects any money or property pursuant to this Article
V, including any money or property in respect of liquidation of the Trust Estate
pursuant to Section 5.04(a)(iv), the Trustee shall pay out the money or property
as promptly as practicable in the following order:
(i) amounts due and owing and required to be distributed to
the Servicer, pursuant to priorities (i) and (ii) of Section 6.06(a) of
the Sale and Servicing Agreement and not previously distributed, in the
order of such priorities and without preference or priority of any kind
within such priorities;
(ii) interest due and principal outstanding under the Senior
Notes, to the Holders thereof, ratably, without preference or priority
of any kind, according to such respective amounts of interest and
principal;
(iii) for interest due and principal outstanding under the
Class A-6 Notes, to the Holders thereof, ratably, without preference or
priority of any kind, according to such respective amounts of interest
and principal;
(iv) for interest due and principal outstanding under the
Class A-7 Notes, to the Holders thereof, ratably, without preference or
priority of any kind, according to such respective amounts of interest
and principal;
(v) amounts due and unpaid on the Certificates for interest
and principal, to the Owner Trustee for distribution to
Certificateholders in accordance with Section 5.2(a) of the Trust
Agreement;
and the excess shall be paid to the General Partner.
SECTION 5.07. Limitation of Suits. No Holder of any Class A-6 Note or
any Class A-7 Note shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, if
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any Senior Notes are then outstanding and unpaid. No Holder of any Class A-7
Note shall have any right to institute such remedial actions if any Class A-6
Notes remain Outstanding and unpaid. No Holder of any Note shall have any right
to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Trustee to
institute such Proceeding in respect of such Event of Default in its
own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
SECTION 5.08. Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture and such Proceeding has been discontinued or abandoned for any
reason or has been determined adversely to the Trustee or to such Noteholder,
then and in every such case the Issuer, the Trustee and the
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Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Trustee or to the Noteholders is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.11. Delay or Omission Not a Waiver. No delay or omission of
the Trustee or any Holder of any Note to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Noteholders, as the case may be.
SECTION 5.12. Control by Noteholders. The Holders of a majority of the
Outstanding Amount of (i) the Senior Notes, or (ii) the Class A-6 Notes if all
Senior Notes have been paid in full, or (iii) the Class A-7 Notes if all Senior
Notes and Class A-6 Notes have been paid in full, shall have the right to direct
the time, method and place of conducting any Proceeding for any remedy available
to the Trustee with respect to the Notes or exercising any trust or power
conferred on the Trustee; provided that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of Section 5.04, any
direction to the Trustee to sell or liquidate all or any portion of the
Trust Estate shall be by the Holders of Notes representing not less
than 100% of the Outstanding Amount of the Notes;
(iii) the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction; provided,
however, that, subject to Section 6.01, the Trustee need not take any
action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not
consenting to such action.
SECTION 5.13. Waiver of Past Defaults. The Holders of Notes of not less
than a majority of the Outstanding Amount of (i) the Senior Notes, or (ii) the
Class A-6 Notes if all Senior Notes have been paid in full, or (iii) the Class
A-7 Notes if all Senior Notes and Class A-6 Notes have been paid in full, may
waive any past Default or Event of Default and its consequences except a Default
(a) in payment of principal of or interest on any of the Notes or (b) in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of the Holder of each Note. In the case of any such waiver, the
Issuer, the Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder,
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respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereto. Upon any such waiver, such Default shall
cease to exist and be deemed to have been cured and not to have occurred, and
any Event of Default arising therefrom shall be deemed to have been cured and
not to have occurred, for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereto.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
any suit instituted by the Trustee, (b) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantages of any such law, and covenants that
it will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 5.16. Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer.
SECTION 5.17. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Trustee to do so and at the
Administrator's expense, the Issuer agrees to take all such lawful action as the
Trustee may request to compel or secure the performance and observance by the
Company or the Servicer, as applicable, of each of their obligations to the
Issuer under or in connection with the Sale and Servicing Agreement in
accordance with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Sale and Servicing Agreement to the extent and in the manner directed
by the Trustee, including the transmission of
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notices of default on the part of the Seller, the Originator or the Servicer
thereunder and the institution of legal or administrative actions or proceedings
to compel or secure performance by the Seller, the Originator or the Servicer of
each of their obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Trustee
may, and at the direction (which direction shall be in writing, including
facsimile) of the Holders of 66-2/3% of the Outstanding Amount of (i) each Class
of Senior Notes or (ii) the Class A-6 Notes if all Senior Notes have been paid
in full, or (iii) the Class A-7 Notes if all Senior Notes and Class A-6 Notes
have been paid in full, shall exercise all rights, remedies, powers, privileges
and claims of the Issuer against the Seller, the Originator or the Servicer
under or in connection with the Sale and Servicing Agreement, including the
right or power to take any action to compel or secure performance or observance
by the Seller, the Originator or the Servicer of each of their obligations to
the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale and Servicing Agreement, and any
right of the Issuer to take such action shall be suspended.
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ARTICLE VI
THE TRUSTEE
SECTION 6.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture with the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; however, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture and, if applicable, the Trustee's other Related
Documents.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Indenture
or the Sale and Servicing Agreement.
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(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayments of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer, or any other party, under the Sale and Servicing Agreement unless and
until appointed successor Servicer in accordance with Section 7.03 thereof.
(j) The Trustee shall, and hereby agrees that it will, perform all of
the obligations and duties required of it under the Sale and Servicing
Agreement.
(k) Without limiting the generality of this Section 6.01, the Trustee
shall have no duty (i) to see to any recording, filing or depositing of this
Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Products, or to see to the maintenance of
any such recording or filing or depositing or to any recording, refiling or
redepositing of any thereof, (ii) to see to any insurance of the Products or
Obligors or to effect or maintain any such insurance, (iii) to see to the
payment or discharge of any tax, assessment or other governmental charge or any
lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust, (iv) to confirm or verify the contents of any
reports or certificates delivered to the Trustee pursuant to this Indenture or
the Sale and Servicing Agreement believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties, or (v) to inspect
the Products at any time or ascertain or inquire as to the performance of
observance of any of the Issuer's, the Originator's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Contract Files under the Sale
and Servicing Agreement.
SECTION 6.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate (with respect to factual matters) or an Opinion of
Counsel, as applicable. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel, as applicable, or as directed by the requisite amount of
Note Owners as provided herein.
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(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Holders of Notes, pursuant to the
provisions of this Indenture, unless such Holders of Notes shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided, however, that the
Trustee shall, upon the occurrence of an Event of Default (that has not been
cured), exercise the rights and powers vested in it by this Indenture with
reasonable care and skill.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount thereof; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to so proceeding; the
reasonable expense of every such examination shall be paid by the Person making
such request, or, if paid by the Trustee, shall be reimbursed by the Person
making such request upon demand.
SECTION 6.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee is required to comply with Sections 6.11 and 6.12.
SECTION 6.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture, the Trust Estate or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuer in the Indenture or in any document issued in
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connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Trustee, the Trustee shall
mail to each Noteholder notice of the Default within 90 days after it occurs.
Except in the case of a Default in payment of principal of or interest on any
Note (including payments pursuant to the mandatory redemption provisions of such
Note), the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
SECTION 6.06. Reports by Trustee to Holders. The Trustee shall deliver
to each Noteholder such information as may be required to enable such holder to
prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall or shall
cause the Servicer to pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Issuer shall or
shall cause the Servicer to reimburse the Trustee for all reasonable
out-of-pocket expenses incurred or made by it, including the costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Issuer
shall or shall cause the Servicer to indemnify the Trustee against any and all
loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder. The Trustee shall notify the Issuer and the Servicer promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Issuer and the Servicer shall not relieve the Issuer or the Servicer
of its obligations hereunder. The Issuer shall or shall cause the Servicer to
defend any such claim, and the Trustee may have separate counsel and the Issuer
shall or shall cause the Servicer to pay the fees and expenses of such counsel.
Neither the Issuer not the Servicer need reimburse any expense or indemnify
against any loss, liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 5.01(iv) or (v)
with respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Issuer. The Issuer may remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or state
banking or bankruptcy laws, as now
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or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, shall have entered a
decree or order granting relief or appointing a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or similar
official) for the Trustee or for any substantial part of the Trustee's
property, or ordering the winding-up or liquidation of the Trustee's
affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Trustee and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal
or state banking or bankruptcy laws, as now or hereafter constituted,
or any other applicable federal or state bankruptcy, insolvency or
other similar law, or consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) for the Trustee
or for any substantial part of the Trustee's property, or makes any
assignment for the benefit of creditors or fails generally to pay its
debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing; or
(v) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in Outstanding Amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to this Section and payment of all fees and expenses owed to the
outgoing Trustee. Notwithstanding the replacement of the Trustee
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pursuant to this Section, the retiring Trustee shall be entitled to payment or
reimbursement of such amounts as such Person is entitled pursuant to Section
6.07.
SECTION 6.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee; provided that such corporation or
banking association shall be otherwise qualified and eligible under Section
6.11. The Trustee shall provide the Rating Agencies prompt notice of any such
transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or
Persons, in such capacity and for the benefit of the Noteholders, such title to
the Trust Estate, or any part hereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor Trustee under
Section 6.11 and no notice to Noteholders of the appointment of any co-trustee
or separate trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be
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exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. Notwithstanding anything to the contrary in this Indenture,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties under this Indenture.
SECTION 6.11. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and shall not be an Affiliate of the
Company. The Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
SECTION 6.13. Trustee to Cooperate.
(a) Upon payment in full on any Loan, the Servicer will notify the
Trustee and the Originator (if the Originator is not the Servicer) on the next
succeeding Distribution Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that
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all amounts received in connection with such payments which are required to be
deposited in the Collection Account pursuant to Section 5.05 of the Sale and
Servicing Agreement have been so deposited) and shall request delivery of the
Loan and Loan File to the Servicer. Upon receipt of such delivery and request,
the Trustee shall promptly release or cause to be released such Loan and Loan
File to the Servicer. Upon receipt of such Loan and Loan File, each of the
Originator (if different from the Servicer) and the Servicer is authorized to
execute an instrument in satisfaction of such Loan and to do such other acts and
execute such other documents as the Servicer deems necessary to discharge the
Obligor thereunder and eliminate any lien on the related real estate. The
Servicer shall determine when a Loan has been paid in full; provided that, to
the extent that insufficient payments are received on a Loan credited by the
Servicer as prepaid or paid in full and satisfied, the shortfall shall be paid
by the Servicer out of its own funds, without any right of reimbursement
therefor (except from additional amounts recovered from the related Obligor or
otherwise in respect of such Loan), and deposited in the Collection Account.
(b) The Servicer's receipt of a Loan and/or Loan File shall obligate
the Servicer to return the original Loan and the related Loan File to the
Trustee when its need by the Servicer has ceased unless the Loan shall be
liquidated or repurchased as described in Section 3.05 or 8.02 of the Sale and
Servicing Agreement.
SECTION 6.14. Sale and Servicing Agreement. Insofar as such provisions
describe rights or duties of the Trustee, the Trustee acknowledges and agrees to
the terms of Sections 3.05, 4.01, 5.17, and 10.03 and Articles VI, VII and VIII
of the Sale and Servicing Agreement. Such provisions are incorporated herein by
reference. U.S. Bank Trust National Association hereby accepts its appointment
as Paying Agent for the Certificates as set forth in Section 3.9 of the Trust
Agreement and agrees to the provisions contained in Section 5.2(f) of the Trust
Agreement.
SECTION 6.15. Trustee Advances.
(a) If the Servicer fails to deposit into the Collection Account
Advances as required by Section 6.04 of the Sale and Servicing Agreement, then
the Trustee shall, subject to the provisions of paragraph (b) below, from its
own funds, deposit into the Collection Account the amount not so deposited by
the Servicer on or before the Business Day preceding the related Payment Date
(an "Trustee Advance").
(b) The Trustee shall not be required to make any Trustee Advance if
and to the extent that it determines in good faith that the funds, if advanced,
would not be recoverable by it from subsequent amounts available in the
Collection Account in accordance with Section 6.06(a) of the Sale and Servicing
Agreement.
(c) The Trustee shall be entitled to reimbursement of an Trustee
Advance from funds subsequently available therefor in the Collection Account in
accordance with Section 6.06(a) of the Sale and Servicing Agreement.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. Issuer To Furnish Trustee Names and Addresses to
Noteholders. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Notes as of
such Record Date, (b) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that so long as the Trustee is the
Note Registrar, no such list shall be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and the
names and addresses of Holders of Notes received by the Trustee in its capacity
as Note Registrar. The Trustee may destroy any list furnished to it as provided
in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
SECTION 7.03. Reports by Issuer.
(a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Securities and Exchange Commission
(the "Commission"), copies of the annual reports and of the
information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules
and regulations prescribe) which the Issuer may be required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act;
(ii) file with the Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA ss. 313(c)) such summaries of
any information, documents
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and reports required to be filed by the Issuer pursuant to clauses (i)
and (ii) of this Section 7.03(a) as may be required by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. Reports by Trustee. If required by TIA ss. 313(a), within
60 days after each March 31 beginning with March 31, 2000, the Trustee shall
mail to each Noteholder as required by TIA ss. 313(c) a brief report dated as of
such date that complies with TIA ss. 313(a).
The Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed. The Issuer shall notify the Trustee if and when the
Notes are listed on any stock exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trustee pursuant to this Indenture. The Trustee shall apply
all such money received by it as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of this
Indenture or the Notes, the Trustee may take such action as may be appropriate
to enforce such payment or performance, including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Trustee, for the benefit
of the Noteholders and the Certificateholders, the Trust Accounts as provided in
Section 6.01 of the Sale and Servicing Agreement.
(b) All collections in respect of the Contracts will be deposited in
the Collection Account as provided in Section 6.02 of the Sale and Servicing
Agreement.
(c) On each Payment Date, the Trustee shall distribute all amounts on
deposit in the Note Distribution Account to Noteholders in respect of the Notes
to the extent of amounts due and unpaid on the Notes for principal and interest,
in accordance with the instructions of the Servicer in the following order of
priority:
1. To pay the Holders of the Senior Notes pro rata in
accordance with the amount of interest payable to each Class:
(i) the Senior Interest Amount; and
(ii) any Unpaid Senior Interest Shortfall.
2. To pay to that Class of Notes then entitled to principal,
any First Priority Principal Distribution Amount.
3. To pay the Holders of Class A-6 Notes pro rata in
accordance with the amount of interest payable to that Class:
(i) the Class A-6 Interest Amount; and
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(ii) any Unpaid Class A-6 Interest Shortfall.
4. To pay to that Class of Notes then entitled to principal,
any Second Priority Principal Distribution Amount.
5. To pay the Holders of Class A-7 Notes pro rata in
accordance with the amount of interest payable to that Class:
(i) the Class A-7 Interest Amount; and
(ii) any Unpaid Class A-7 Interest Shortfall.
6. To pay to that Class of Notes then entitled to principal,
any Third Priority Principal Distribution Amount.
7. To pay to that Class of Notes then entitled to principal,
the Total Principal Distribution Amount.
Notwithstanding the foregoing, upon the occurrence and during the
continuance of an Event of Default that has resulted in the Notes becoming
immediately due and payable, or upon the occurrence of an Insolvency Event with
respect to, or the dissolution of, the General Partner, no distribution of
principal or interest on any Class A-6 Note shall be made until full payment of
all principal and interest on the Senior Notes, and no distributions of
principal or interest on any Class A-7 Note shall be made until full payment of
all principal and interest on the Senior Notes and the Class A-6 Notes.
(d) If the Trustee shall not have received the applicable Monthly
Report by any Distribution Date, the Trustee shall distribute all funds then in
the Note Distribution Account to Noteholders in accordance with Section 8.02(c),
to the extent of such funds, on such Distribution Date.
(e) The Trustee agrees, to the extent required by the Code, to withhold
from each payment due hereunder or under any Note, United States withholding
taxes at the appropriate rate, and, on a timely basis, to deposit such amounts
with an authorized depository and make such returns, filings and other reports
in connection therewith as are required of it under the Code. Any Noteholder
which is eligible for an exemption from or reduction of withholding of United
States federal income taxes shall, from time to time, provide to the Trustee in
a timely manner all appropriate and properly completed forms indicating such
eligibility, as may be necessary to permit the Trustee not to withhold taxes
from payments due to such Noteholder. In connection with the foregoing, the
Trustee shall promptly furnish to each Noteholder in a timely fashion such U.S.
Treasury forms as are required by the Code to be furnished to such Noteholder
indicating payment of any taxes withheld from any payments by the Trustee to
such Noteholder. The Trustee shall be fully protected in relying upon, and each
Noteholder by its acceptance of a Note hereunder agrees to indemnify and hold
the Trustee harmless against all claims or liability of any kind arising in
connection with or related to the Trustee's reliance upon any documents, forms
or information provided by any Noteholder to the Trustee. In addition, if the
Trustee has
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not withheld taxes on any payment made to any Noteholder, and the Trustee is
subsequently required to remit to any taxing authority any such amount not
withheld, such Noteholder shall return such amount to the Trustee upon written
demand by the Trustee. In no event shall the Trustee be liable for consequential
damages to any Noteholder.
SECTION 8.03. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested and reinvested in Eligible Investments in accordance with the
provisions of Section 6.01(d) of the Sale and Servicing Agreement. All income or
other gain from investments of moneys deposited in such Trust Accounts shall be
deposited by the Trustee in the Collection Account, and any loss resulting from
such investments shall be charged to the related Trust Account. The Issuer will
not direct the Trustee to make any investment of any funds or to sell any
investment held in any of the Trust Accounts unless the security interest
Granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment or sale, if requested by the Trustee, the Issuer shall
deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such
effect.
(b) Subject to Section 6.01(c), the Trustee shall not in any way be
held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Trustee's failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as Trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Trustee by 11:00 a.m., New
York City time (or such other time as may be agreed by the Issuer and Trustee),
on any Business Day or (ii) a Default or Event of Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.02 or (iii) if such Notes shall
have been declared due and payable following an Event of Default, amounts
collected or receivable from the Trust Estate are being applied in accordance
with Section 5.05 as if there had not been such a declaration, then the Trustee
shall, to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies, the Issuer and the Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien created by this Indenture, or to subject to
the lien created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor Trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
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(b) The Issuer and the Trustee, when authorized by an Issuer Order,
may, also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies, and with the consent of the Holders of not less
than a majority of the Outstanding Amount of the Notes, by Act of such Holders
delivered to the Issuer and the Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that, no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Related Documents cannot be
modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
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(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien created by this Indenture with respect to any part
of the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien created by this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of the
security provided by the lien created by this Indenture.
The Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture, and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Trustee, the Issuer and the Holders of the Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
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SECTION 9.05. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
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ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. Redemption.
(a) In the event that (i) the Company or the Servicer pursuant to
Article VIII of the Sale and Servicing Agreement purchases the corpus of the
Trust or (ii) the corpus of the Trust is sold pursuant to Section 10.04 below,
the Notes are subject to redemption in whole, but not in part, on the
Distribution Date on which such repurchase or sale occurs, for a purchase price
equal to the Redemption Price; provided, however, that the Issuer has available
funds sufficient to pay the Redemption Price. The Company, the Servicer or the
Issuer shall furnish the Rating Agencies notice of such redemption. If the Notes
are to be redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer
shall furnish notice of such election to the Trustee not later than 25 days
prior to the Redemption Date, and the Issuer shall deposit with the Trustee in
the Note Distribution Account the Redemption Price of the Notes to be redeemed,
whereupon all such Notes shall be due and payable on the Redemption Date upon
the furnishing of a notice complying with Section 10.02 to each Holder of the
Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, the proceeds of such sale shall be
distributed as provided in Section 5.06. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Trustee not later
than 25 days prior to the Redemption Date whereupon all such amounts shall be
payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice.
(a) Notice of redemption under Section 10.01(a) shall be given by the
Trustee by first-class mail, postage prepaid, mailed not less than five days
prior to the applicable Redemption Date to each Holder of Notes, as of the close
of business on the Record Date with respect to the Distribution Date immediately
preceding the applicable Redemption Date, at such Holder's address appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the
office or agency of the Issuer to be maintained as
provided in Section 3.02).
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Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required
to be given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
SECTION 10.04. Contract Pool Auction.
(a) If neither the Company nor the Servicer has exercised the
repurchase option described in Section 8.01 of the Sale and Servicing Agreement,
then after the third Distribution Date as of which the Pool Scheduled Principal
Balance is 10% or less of the Cutoff Date Pool Principal Balance (the "Auction
Date"), the Trustee shall solicit bids for the purchase of the Contracts
remaining in the Trust. In the event that satisfactory bids are received as
described below, the net sale proceeds will be remitted to the Collection
Account and applied in accordance with Section 6.06(a) of the Sale and Servicing
Agreement, on the second Distribution Date succeeding the Auction Date (the
"Sale Date"). If satisfactory bids are not received, the Trustee shall decline
to sell the Contracts and shall not be under any obligation to solicit any
further bids or otherwise negotiate any further sale of the Contracts.
(b) The Trustee must receive at least two bids from prospective
purchasers that are considered at the time to be competitive participants in the
market for installment purchase contracts similar to the Contracts. Any such
bidder must agree to the continuation of the Company as Servicer of the
Contracts on terms substantially similar to those in the Sale and Servicing
Agreement (if Green Tree is then the Servicer). The Trustee shall accept the
highest bid received, but only if it is at least equal to the greater of (i) the
fair market value of the Contracts remaining in the Trust on the Sale Date and
(ii) the Minimum Purchase Amount. The Trustee may consult, and at the direction
of the Company will be required to consult, with a financial advisor, which may
include one of the Underwriters, to determine if the fair market value of the
Contracts has been offered.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Trustee to
take any action under any provision of this Indenture, the Issuer shall furnish
to the Trustee (i) an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Indenture Collateral or other
property or securities with the Trustee that is to be made the basis
for the release of any property subject to the lien created by this
Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the Trustee
an Officers' Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of
such deposit) to the Issuer of the Indenture Collateral or other
property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Trustee
an Officers' Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the
Issuer shall also deliver to the Trustee an Independent
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Certificate as to the same matters, if the fair value to the Issuer of
the property to be so deposited and of all other such property made the
basis of any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes, but such a
certificate need not be furnished with respect to any property so
deposited, if the fair value thereof to the Issuer as set forth in the
related Officers' Certificate is less than $25,000 or less than one
percent of the Outstanding Amount of the Notes.
(iii) Other than with respect to any release described in
clause (A) or (B) of Section 11.01(b)(v), whenever any property or
securities are to be released from the lien created by this Indenture,
the Issuer shall also furnish to the Trustee an Officers' Certificate
certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such release) of
the property or securities proposed to be released and stating that in
the opinion of such person the proposed release will not impair the
security created by this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
an Officers' Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the
Issuer shall also furnish to the Trustee an Independent Certificate as
to the same matters if the fair value of the property or securities and
of all other property or securities (other than property described in
clauses (A) or (B) of Section 11.01(b)(v)) released from the lien
created by this Indenture since the commencement of the then current
fiscal year, as set forth in the certificates required by clause (iii)
above and this clause (iv), equals 10% or more of the Outstanding
Amount of the Notes, but such certificate need not be furnished in the
case of any release of property or securities if the fair value thereof
as set forth in the related Officers' Certificate is less than $25,000
or less than one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the
Issuer may, without compliance with the other provisions of this
Section, (A) collect, liquidate, sell or otherwise dispose of Contracts
as and to the extent permitted or required by the Related Documents
(including as provided in Section 5.06 of the Sale and Servicing
Agreement) and (B) make cash payments out of the Trust Accounts as and
to the extent permitted or required by the Related Documents.
SECTION 11.02. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless
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such officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Company or the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Company or the Issuer, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
SECTION 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted
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or suffered to be done by the Trustee or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Note.
SECTION 11.04. Notices, etc., to Trustee, Issuer and Rating Agencies.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(a) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
(b) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if made in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Conseco
Finance Recreational, Equipment & Consumer Trust 1999-__, in care of
Wilmington Trust Company, as Owner Trustee, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration or at any other address previously
furnished in writing to the Trustee by Issuer. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Trustee, or
(c) the Rating Agencies by the Issuer, the Trustee or the
Owner Trustee shall be sufficient for every purpose hereunder if made
in writing, personally delivered or mailed by certified mail, return
receipt requested to (i) in the case of Fitch IBCA, Inc., at the
following address: One State Street Plaza, New York, New York 10004,
Attention: ABS Surveillance Group and (ii) in the case of Standard &
Poor's, at the following address: Standard & Poor's Ratings Service, 55
Wall Street, New York, New York 10041; or as to each of the foregoing,
at such other address as shall be designated by written notice to the
other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
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In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event of Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices. The Issuer will furnish to the Trustee a copy of each such agreement
and the Trustee will cause payments to be made and notices to be given in
accordance with such agreements.
SECTION 11.07. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not.
All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.10. Severability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
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SECTION 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee,) to the effect that such recording is necessary either for the
protection of the Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Trustee on the Notes or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Trustee or of any successor or assign of the Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Articles VI, VII and VIII of the
Trust Agreement.
SECTION 11.17. No Petition. The Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Company, the Issuer or any
General Partner, or join in any institution against the Company, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States federal
or state bankruptcy or similar law in connection with any obligations relating
to the Notes, this Indenture or any of the Related Documents.
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SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee, during the Issuer's
normal business hours, to examine all the books of account, records, reports,
and other papers of the Issuer, to make copies and extracts therefrom, to cause
such books to be audited by independent certified public accountants, and to
discuss the Issuer's affairs, finances and accounts with the Issuer's officers,
employees, and independent certified public accountants, all at such reasonable
times and as often as may be reasonably requested. The Trustee shall and shall
cause its representatives to hold in confidence all such information except to
the extent disclosure may be required by law (and all reasonable applications
for confidential treatment are unavailing) and except to the extent that the
Trustee may reasonably determine that such disclosure is consistent with its
obligations hereunder.
SECTION 11.19. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by [Owner Trustee], not individually or personally but solely as Owner Trustee
of Conseco Finance Recreational Equipment & Consumer Trust 1999-__, in the
exercise of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the purpose
for binding only the Issuer, (c) nothing herein contained shall be construed as
creating any liability on [Owner Trustee], individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall [Owner Trustee] be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Agreement or any other related documents.
11-7
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not
in its individual capacity but solely
on behalf of the Issuer as Owner
Trustee under the Trust Agreement
By __________________________________
Name:
Title:
[TRUSTEE], not in its individual capacity but
solely as Trustee
By __________________________________
Name:
Title:
11-8
<PAGE>
EXHIBIT A
A-1
<PAGE>
EXHIBIT B
Form of Depository Agreement
B-1
<PAGE>
EXHIBIT C-1
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-1 ____% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__, a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $__________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-1 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
________ 1999 Distribution Date (the "Class A-1 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-1 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from _________, 1999. Interest will be computed on the basis of
actual days elapsed and a year of 360 days. Such principal of and interest on
this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and
C-1-1
<PAGE>
private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee under the
Trust Agreement
By ______________________________________
Name:
Title:
C-1-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in
its individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-1-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 ____% Asset-Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture) to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-1 Notes. The Class A-1 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes (collectively, the "Senior Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
prior and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-1 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-1 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-1 Notes
shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-1-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer on any Distribution Date on or after the date on
which the Pool Scheduled Principal Balance is less than or equal to 10% of the
Cutoff Date Pool Principal Balance. If such redemption option is not exercised,
then bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Trustee or of any
successor or assign of the Seller, the Servicer, the Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid
C-1-6
<PAGE>
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
C-1-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- -------------------------
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-1-9
<PAGE>
EXHIBIT C-2
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-2 ___% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__, a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $__________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-2 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
__________ 2004 Distribution Date (the "Class A-2 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-2 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from ________, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and
C-2-1
<PAGE>
private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee under the
Trust Agreement
By ______________________________________
Name:
Title:
C-2-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its
individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-2-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 ____% Asset-Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture) to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-2 Notes. The Class A-2 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes (collectively, the "Senior Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
priority and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-2 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-2 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-2 Notes
shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-2-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer on any Distribution Date on or after the date on
which the Pool Scheduled Principal Balance is less than or equal to 10% of the
Cutoff Date Pool Principal Balance. If such redemption option is not exercised,
then bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Servicer, the Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Trustee or of any successor or assign of the Trustee or the Owner Trustee
in its individual capacity, except as any such Person may have expressly agreed
and except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid
C-2-6
<PAGE>
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
C-2-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-2-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-2-9
<PAGE>
EXHIBIT C-3
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-3 ____% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__, a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $__________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-3 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
________ 2010 Distribution Date (the "Class A-3 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-3 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from _________, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and
C-3-1
<PAGE>
private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-3-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf of
the Issuer as Owner Trustee under the
Trust Agreement
By ______________________________________
Name:
Title:
C-3-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its
individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-3-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 ___% Asset-Backed Notes (herein called the "Class
A-3 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-3 Notes. The Class A-3 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes (collectively, the "Senior Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
priority and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-3 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-3 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-3 Notes
shall be made pro rata to the Class A-3 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-3-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer on any Distribution Date on or after the date on
which the Pool Scheduled Principal Balance is less than or equal to 10% of the
Cutoff Date Pool Principal Balance. If such redemption option is not exercised,
then bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Servicer, the Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Trustee or of any successor or assign of the Trustee or the Owner Trustee
in its individual capacity, except as any such Person may have expressly agreed
and except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid
C-3-6
<PAGE>
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
C-3-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-3-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- -------------------------
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-3-9
<PAGE>
EXHIBIT C-4
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-4 ____% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__ a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $__________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-4 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
__________ 2013 Distribution Date (the "Class A-4 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-4 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from ____________, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and
C-4-1
<PAGE>
private debts. All payments made by the Issuer with respect to this Note shall
be applied first to interest due and payable on this Note as provided above and
then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-4-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf of
the Issuer as Owner Trustee under the
Trust Agreement
By ______________________________________
Name:
Title:
C-4-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its
individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-4-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 ____% Asset-Backed Notes (herein called the "Class
A-4 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-4 Notes. The Class A-4 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and Class A-5 Notes (collectively, the "Senior Notes") are and
will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
priority and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-4 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-4 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-4 Notes
shall be made pro rata to the Class A-4 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-4-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-4 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer on any Distribution Date on or after the date on
which the Pool Scheduled Principal Balance is less than or equal to 10% of the
cutoff Date Pool Principal Balance. If such redemption option is not exercised,
then bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Servicer, the Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Trustee or of any successor or assign of the Trustee or the Owner Trustee
in its individual capacity, except as any such Person may have expressly agreed
and except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid
C-4-6
<PAGE>
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
C-4-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-4-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- -------------------------
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-4-9
<PAGE>
EXHIBIT C-5
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-5 ____% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__, a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-5 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
____________ 2013 Distribution Date (the "Class A-5 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-5 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from __________, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
C-5-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-5-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee under the
Trust Agreement
By ___________________________________
Name:
Title:
C-5-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its
individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-5-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-5 ____% Asset-Backed Notes (herein called the "Class
A-5 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-5 Notes. The Class A-5 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes (collectively, the "Senior Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
priority and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-5 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-5 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-5 Notes
shall be made pro rata to the Class A-5 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-5-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-5 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer (with the consent of the Security Insurer under
certain circumstances), on any Distribution Date on or after the date on which
the Pool Scheduled Principal Balance is less than or equal to 10% of the Cutoff
Date Pool Principal Balance. If such redemption option is not exercised, then
bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Servicer, the Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Trustee or of any successor or assign of the Trustee or the Owner Trustee
in its individual capacity, except as any such Person may have expressly agreed
and except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid
C-5-6
<PAGE>
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
C-5-7
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-5-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- -------------------------
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-5-9
<PAGE>
EXHIBIT C-6
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-6 ____% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__, a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $__________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-6 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
__________ 2013 Distribution Date (the "Class A-6 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-6 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from _________, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
C-6-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-6-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee under the
Trust Agreement
By ______________________________________
Name:
Title:
C-6-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its
individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-6-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-6 ____% Asset-Backed Notes (herein called the "Class
A-6 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-6 Notes. The Class A-6 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes (collectively, the "Senior Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
priority and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-6 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-6 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-6 Notes
shall be made pro rata to the Class A-6 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-6-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-6 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer (with the consent of the Security Insurer under
certain circumstances), on any Distribution Date on or after the date on which
the Pool Scheduled Principal Balance is less than or equal to 10% of the Cutoff
Date Pool Principal Balance. If such redemption option is not exercised, then
bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
The payment of interest and principal on this Note is subordinated to
the Senior Notes, and the rights of the Holder of this Note to institute legal
remedies or to accelerate repayment of principal due hereunder is restricted, as
provided in the Indenture.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Servicer, the Trustee or the Owner Trustee in its
C-6-6
<PAGE>
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Trustee or of any successor or assign of the Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver
C-6-7
<PAGE>
is made upon this Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-6-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- -------------------------
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-6-9
<PAGE>
EXHIBIT C-7
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CONSECO FINANCE RECREATIONAL, EQUIPMENT & CONSUMER TRUST 1999-__
CLASS A-7 ____% ASSET-BACKED NOTE
REGISTERED $________
NO. R-________ CUSIP NO.________
Conseco Finance Recreational, Equipment & Consumer Trust 1999-__, a
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of [ ] payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $__________ and the denominator of which is
$__________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-7 Notes pursuant to
Section 3.01 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of the
__________ 2018 Distribution Date (the "Class A-7 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01(a) or (b) of
the Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the Class A-7 Interest
Rate on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date). Interest on this Note will accrue for
each Distribution Date from the most recent Distribution Date on which interest
has been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from ___________, 1999. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse hereof.
C-7-1
<PAGE>
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture and Related Documents, none of Wilmington Trust
Company in its individual capacity, U.S. Bank Trust National Association in its
individual capacity, any owner of a beneficial interest in the Issuer, the
Seller, the Servicer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on this Note or performance of, or omission to
perform, any of the covenants, obligations or indemnifications contained in the
Indenture. Each Noteholder or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, agrees that, except as
expressly provided in the Indenture and Related Documents, in the case of an
Event of Default under the Indenture, it shall have no claim against any of the
foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
C-7-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ________
CONSECO FINANCE RECREATIONAL,
EQUIPMENT & CONSUMER TRUST 1999-__
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf
of the Issuer as Owner Trustee under the
Trust Agreement
By ______________________________________
Name:
Title:
C-7-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
U.S. BANK TRUST NATIONAL ASSOCIATION, not in its
individual capacity but solely as Trustee
By ______________________________________
Authorized Signatory
C-7-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-7 ____% Asset-Backed Notes (herein called the "Class
A-7 Notes"), all issued under an Indenture dated as of June 1, 1998 (such
indenture, as supplemented or amended, herein called the "Indenture"), between
the Issuer and U.S. Bank Trust National Association, as trustee (the "Trustee,"
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Class A-7 Notes. The Class A-7 Notes are subject
to all terms of the Indenture. All terms used in this Note that are defined in
the Indenture, as supplemented or amended, shall have the meanings assigned to
them in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes and the Class A-5 Notes (collectively, the "Senior Notes") are
and will be equally and ratably secured by the collateral pledged as security
therefor as provided in the Indenture, and are and will be senior in payment
priority and collateral rights to the Class A-6 Notes and the Class A-7 Notes
(collectively, the "Subordinated Notes," and together with the Senior Notes, the
"Notes").
Principal of the Class A-7 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing July 15, 1998.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-7 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a)
or 10.01(b) of the Indenture. All principal payments on the Class A-7 Notes
shall be made pro rata to the Class A-7 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee; provided further, that any holder of 5% or
more of a Class of a Note may request payment of interest and principal by wire
transfer in immediately available funds to the account of such holder. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) affected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Trustee, in the
C-7-5
<PAGE>
name of and on behalf of the Issuer, will notify the Person who was the
Registered Holder hereof as of the Record Date with respect to the Distribution
Date immediately preceding such Redemption Date by notice mailed within five
days of such Redemption Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-7 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Company or the Servicer (with the consent of the Security Insurer under
certain circumstances), on any Distribution Date on or after the date on which
the Pool Scheduled Principal Balance is less than or equal to 10% of the Cutoff
Date Pool Principal Balance. If such redemption option is not exercised, then
bids will be solicited by the Trustee for the purchase of the Contracts
remaining in the Trust. If a bid is received and the amount of such bid is at
least equal to the greater of the fair market value of the Contracts or the
amount equal to all unpaid fees and advances of the Servicer plus all unpaid
interest and principal on the Notes and Certificates, the Contracts will be sold
and the net sale proceeds distributed to effect early retirement of the Notes.
The payment of interest and principal on this Note is subordinated to
the Senior Notes and the Class A-6 Notes, and the rights of the Holder of this
Note to institute legal remedies or to accelerate repayment of principal due
hereunder is restricted, as provided in the Indenture.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in the city in which the Corporate
Trust Office is located, or a member firm of a national securities exchange, and
such other documents as the Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Seller, the Servicer, the Trustee or the Owner Trustee in its
C-7-6
<PAGE>
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Trustee or of any successor or assign of the Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder will be deemed to represent that either (1) it is not
acquiring the note with the assets of a pension, profit sharing or other
employee benefit plan, or an individual retirement account or Keogh Plan,
subject to Title I of ERISA or Section 4975 of the Internal Revenue Code; or (2)
the acquisition and holding of the note will not give rise to a nonexempt
prohibited transaction exemption under Section 406(e) of ERISA or Section 4975
or the Internal Revenue Code.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller, the Issuer or any
General Partner, or join in any institution against the Seller, the Issuer or
any General Partner of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Related Documents.
It is the intent and agreement of the Issuer, the Trustee, the
Noteholders and Note Owners that, for purposes of federal income, state and
local income and franchise and any other income taxes, the Notes will be treated
as indebtedness of the Issuer. Each Noteholder and Note Owner, by acceptance of
this Note or, in the case of a Note Owner, a beneficial interest in this Note,
covenants and agrees to treat this Note as indebtedness for such tax purposes
and to take no action inconsistent with such treatment.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note shall be overdue, and neither
the Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of each Class of Notes. The Indenture also
contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such Holders and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver
C-7-7
<PAGE>
is made upon this Note. The Indenture also permits the Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holder of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Minnesota, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-7-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- -------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ________
**
Signature Guaranteed:
- -------------------------
- ----------
** NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
C-7-9
<PAGE>
EXHIBIT 4.5
TRANSFER AGREEMENT
between
CONSECO FINANCE SECURITIZATIONS CORP.
Purchaser
and
CONSECO FINANCE CORP.
Seller
dated as of
____________, 1999
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS.......................................................1
SECTION 1.1. General....................................................1
SECTION 1.2. Specific Terms.............................................1
SECTION 1.3. Usage of Terms.............................................3
SECTION 1.4. No Recourse................................................3
ARTICLE II. CONVEYANCE OF THE INITIAL CONTRACTS AND THE
INITIAL OTHER CONVEYED PROPERTY..................................4
SECTION 2.1. Conveyance of the Initial Contracts and the Initial
Other Conveyed Property....................................4
SECTION 2.2. Purchase Price of Initial Contracts........................4
SECTION 2.3. Conveyance of Subsequent Contracts and Subsequent
Other Conveyed Property....................................4
ARTICLE III. REPRESENTATIONS AND WARRANTIES..................................6
SECTION 3.1. Representations and Warranties of Seller...................6
SECTION 3.2. Representations and Warranties of CFSC.....................8
ARTICLE IV. COVENANTS OF SELLER.............................................10
SECTION 4.1. Transfer of Loan..........................................10
SECTION 4.2. Costs and Expenses........................................10
SECTION 4.3. Indemnification...........................................11
ARTICLE V. REPURCHASES......................................................11
SECTION 5.1. Repurchase of Contracts Upon Breach of Warranty...........11
SECTION 5.2. Reassignment of Purchased Contracts.......................12
SECTION 5.3. Waivers...................................................12
ARTICLE VI. MISCELLANEOUS...................................................13
SECTION 6.1. Liability of Seller.......................................13
SECTION 6.2. Merger or Consolidation of Seller or CFSC.................13
SECTION 6.3. Limitation on Liability of Seller and Others..............13
SECTION 6.4. Amendment.................................................14
SECTION 6.5. Notices...................................................15
SECTION 6.6. Merger and Integration....................................15
SECTION 6.7. Severability of Provisions................................15
SECTION 6.8. Intention of the Parties..................................15
SECTION 6.9. Governing Law.............................................16
SECTION 6.10. Counterparts..............................................16
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SECTION 6.11. Conveyance of the Initial Contracts and the Initial
Other Conveyed Property to the Trust......................16
SECTION 6.12. Nonpetition Covenant......................................16
SCHEDULES
Schedule A -- Schedule of Initial Contracts
EXHIBITS
Exhibit A -- Form of Subsequent Transfer Agreement
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TRANSFER AGREEMENT
THIS TRANSFER AGREEMENT, dated as of ____________, 1999, executed between
Conseco Finance Securitizations Corp., a Minnesota corporation, as purchaser
("CFSC"), and Conseco Finance Corp., a Delaware corporation, as seller
("Seller").
W I T N E S S E T H:
WHEREAS, CFSC has agreed to purchase from Seller and Seller, pursuant to
this Agreement, is transferring to CFSC the certain retail installment sales
contracts and promissory notes for the purchase of a variety of consumer
products, including, but not limited to, 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; and recreational vehicles (collectively,
the "Products") specified in the Schedule of Initial Contracts attached hereto
as Schedule A (the "Initial Contracts") and the Initial Other Conveyed Property;
and
WHEREAS, CFSC has agreed to purchase from Seller and Seller has agreed to
transfer to CFSC the Subsequent Contracts and Subsequent Other Conveyed Property
in an amount set forth herein, prior to ____________, 2000.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter contained, and for other good and valuable consideration, the
receipt of which is acknowledged, CFSC and Seller, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. General. The specific terms defined in this Article include
the plural as well as the singular. The words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision, and Article, Section,
Schedule and Exhibit references, unless otherwise specified, refer to Articles
and Sections of and Schedules and Exhibits to this Agreement. Capitalized terms
used herein without definition shall have the respective meanings assigned to
such terms in the Sale and Servicing Agreement, dated as of ____________ 1,
1999, by and among Conseco Finance Securitizations Corp. (as Seller), Conseco
Finance Corp. (in its individual capacity and as Originator, Servicer and
Guarantor), and Conseco Finance Recreational, Equipment & Consumer Trust 1999-__
(as Issuer) (the "Trust").
SECTION 1.2. Specific Terms. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
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"Agreement" shall mean this Transfer Agreement and all amendments hereof
and supplements hereto.
"Closing Date" means ____________, 1999.
"Indenture Trustee" means [Indenture Trustee], a national banking
association organized under the laws of the United States, as Indenture Trustee
under the Indenture and not in its individual capacity, or any successor
Indenture Trustee under the Indenture.
"Initial Other Conveyed Property" means all monies at any time paid or
payable on the Initial Contracts or in respect thereof after the Initial Cutoff
Date (including amounts due on or before the Initial Cutoff Date but received by
Seller after the Initial Cutoff Date), an assignment of security interests in
the related real estate, the Collection Account (including all Eligible
Investments therein and all proceeds therefrom), all items contained in the Loan
Files relating to the Initial Contracts, any and all other documents or
electronic records that Seller keeps on file in accordance with its customary
procedures relating to the Initial Contracts, the Obligors or the related real
estate, property (including the right to receive future Liquidation Proceeds)
that secures an Initial Loan and that has been acquired by or on behalf of the
Trust pursuant to liquidation of such Initial Loan, and all proceeds of the
foregoing.
"Initial Contracts" means the Contracts listed on the Schedule of Initial
Contracts attached hereto as Schedule A.
"Other Conveyed Property" means the Initial Other Conveyed Property
conveyed by Seller to CFSC pursuant to this Agreement together with any and all
Subsequent Other Conveyed Property conveyed by Seller to CFSC pursuant to each
Subsequent Transfer Agreement.
"Owner Trustee" means [Owner Trustee], a [State] banking corporation, not
in its individual capacity but solely as trustee of the Trust, and any successor
trustee appointed and acting pursuant to the Trust Agreement.
"Related Documents" means the Notes, the Certificates, the Sale and
Servicing Agreement, the Trust Agreement, the Indenture, each Subsequent
Purchase Agreement and the Underwriting Agreement among Seller, CFSC and the
underwriter of the Notes and the Certificates. The Related Documents to be
executed by any party are referred to herein as "such party's Related
Documents," "its Related Documents" or by a similar expression.
"Repurchase Event" means the occurrence of a breach of any of Seller's
representations and warranties hereunder or under any Subsequent Purchase
Agreement or any other event which requires the repurchase of a Loan by Seller
under the Sale and Servicing Agreement.
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"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of ____________ 1, 1999, executed and delivered by Conseco Finance
Corp., as Originator, Servicer and Guarantor, Conseco Finance Securitizations
Corp., as Seller, and the Trust.
"Schedule of Initial Contracts" means the schedule of all Contracts sold
and transferred pursuant to this Agreement which is attached hereto as Schedule
A.
"Schedule of Contracts" means the Schedule of Initial Contracts attached
hereto as Schedule A as supplemented by each Schedule of Subsequent Contracts
attached to each Subsequent Purchase Agreement as Schedule A.
"Schedule of Subsequent Contracts" means the schedule of all Contracts sold
and transferred pursuant to a Subsequent Purchase Agreement which is attached to
such Subsequent Purchase Agreement as Schedule A, which Schedule of Subsequent
Contracts shall supplement the Schedule of Initial Contracts.
"Subsequent Contracts" means the Contracts specified in the Schedule of
Subsequent Contracts attached as Schedule A to each Subsequent Purchase
Agreement.
"Subsequent Other Conveyed Property" means the Subsequent Other Conveyed
Property conveyed by Seller to CFSC pursuant to each Subsequent Purchase
Agreement.
"Subsequent Transfer Agreement" has the meaning assigned in Section
2.3(b)(iii).
"Trust" means the trust created by the Trust Agreement, the estate of which
consists of the Trust Property.
"Trust Property" means the property and proceeds of every description
conveyed by CFSC to the Trust pursuant to the Sale and Servicing Agreement and
pursuant to any Subsequent Transfer Agreement, together with the Trust Accounts
(including all Eligible Investments therein and all proceeds therefrom).
SECTION 1.3. Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement, or the Sale and
Servicing Agreement, the Trust Agreement or the Indenture; references to Persons
include their permitted successors and assigns; and the terms "include" or
"including" mean "include without limitation" or "including without limitation."
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SECTION 1.4. No Recourse. Without limiting the obligations of Seller
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of Seller,
or of any predecessor or successor of Seller.
ARTICLE II
CONVEYANCE OF THE INITIAL CONTRACTS
AND THE INITIAL OTHER CONVEYED PROPERTY
SECTION 2.1. Conveyance of the Initial Contracts and the Initial Other
Conveyed Property. Subject to the terms and conditions of this Agreement, Seller
hereby sells, transfers, assigns, and otherwise conveys to CFSC without recourse
(but without limitation of its obligations in this Agreement or in the Sale and
Servicing Agreement), and CFSC hereby purchases, all right, title and interest
of Seller in and to the Initial Contracts and the Initial Other Conveyed
Property. It is the intention of Seller and CFSC that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the Initial
Contracts and the Initial Other Conveyed Property from Seller to CFSC, conveying
good title thereto free and clear of any Liens, and the Initial Contracts and
the Initial Other Conveyed Property shall not be part of Seller's estate in the
event of the filing of a bankruptcy petition by or against Seller under any
bankruptcy or similar law.
SECTION 2.2. Purchase Price of Initial Contracts. Simultaneously with the
conveyance of the Initial Contracts and the Initial Other Conveyed Property to
CFSC, CFSC has paid or caused to be paid to or upon the order of Seller
approximately $______________ by wire transfer of immediately available funds
(representing the proceeds to CFSC from the sale of the Initial Contracts after
(i) deducting expenses of $725,000 incurred by CFSC in connection with such sale
and (ii) depositing the Pre-Funded Amount in the Pre-Funding Account.
SECTION 2.3. Conveyance of Subsequent Contracts and Subsequent Other
Conveyed Property.
(a) Subject to the conditions set forth in paragraph (b) below and the
terms and conditions in the related Subsequent Purchase Agreement, in
consideration of CFSC's delivery on the related Subsequent Transfer Date to or
upon the order of Seller of an amount equal to the purchase price of the
Subsequent Contracts (as set forth in the related Subsequent Purchase
Agreement), Seller hereby agrees to sell, transfer, assign, and otherwise convey
to CFSC without recourse (but without limitation of its obligations in this
Agreement and the related Subsequent Purchase Agreement), and CFSC hereby agrees
to purchase all right, title and interest of Seller in and to the Subsequent
Contracts and the Subsequent Other Conveyed Property described in the related
Subsequent Purchase Agreement.
(b) the Seller shall transfer to CFSC, and CFSC shall acquire, the
Subsequent Contracts and the Subsequent Other Conveyed Property to be
transferred on any Subsequent
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Transfer Date only upon the satisfaction of each of the following conditions on
or prior to such Subsequent Transfer Date:
(i) the Seller shall have provided the Owner Trustee and the Indenture
Trustee with an Addition Notice at least five Business Days prior to the
Subsequent Transfer Date and shall have provided any information reasonably
requested by the Indenture Trustee or the Owner Trustee with respect to the
Subsequent Contracts;
(ii) the Seller shall have delivered the related Loan File for each
Subsequent Loan to the Indenture Trustee or its custodian at least two
Business Days prior to the Subsequent Transfer Date;
(iii) the Seller shall have delivered to CFSC a duly executed
Subsequent Transfer substantially in the form of Exhibit A hereto (the
"Subsequent Transfer Agreement"), which shall include a List of Contracts
identifying the related Subsequent Contracts;
(iv) as of each Subsequent Transfer Date, as evidenced by delivery of
the Subsequent Transfer Agreement, neither the Seller nor CFSC shall be
insolvent nor shall they have been made insolvent by such transfer nor
shall they be aware of any pending insolvency;
(v) such transfer shall not result in a material adverse tax
consequence to the Trust, the Noteholders or the Certificateholders;
(vi) the Pre-Funding Period shall not have ended;
(vii) the Seller shall have delivered to CFSC an Officer's
Certificate, substantially in the form attached to the Sale and Servicing
Agreement as Exhibit P, confirming the satisfaction of each condition
precedent and the representations specified in this Section 2.3 and in
Sections 3.01, 3.02, 3.03 and 3.06 of the Sale and Servicing Agreement;
(viii) the Seller and CFSC shall have delivered to the Trustee
Opinions of Counsel addressed to S&P, Moody's, the Owner Trustee and the
Indenture Trustee with respect to the transfer of the Subsequent Contracts
substantially in the form of the Opinions of Counsel delivered on the
Closing Date regarding certain bankruptcy, corporate and tax matters;
(ix) Seller shall have delivered assignments in recordable form to
CFSC of the mortgages, deeds of trust and security deeds relating to the
Subsequent Contracts; and
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(x) each of the representations and warranties contained in Section
3.03 of the Sale and Servicing Agreement shall be true and correct.
(c) Seller covenants to transfer to CFSC pursuant to paragraph (a) above
Subsequent Contracts with an aggregate Principal Balance approximately equal to
$_____________; provided, however, that the sole remedy of CFSC with respect to
a failure of such covenant shall be to enforce the provisions of Section 8.08 of
the Sale and Servicing Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Seller. Seller makes the
following representations and warranties, on which CFSC relies in purchasing the
Initial Contracts and the Initial Other Conveyed Property and in transferring
the Initial Contracts and the Initial Other Conveyed Property to the Trust under
the Sale and Servicing Agreement. Such representations are made as of the
execution and delivery of this Agreement, but shall survive the sale, transfer
and assignment of the Initial Contracts and the Initial Other Conveyed Property
hereunder and the sale, transfer and assignment thereof by CFSC to the Trust
under the Sale and Servicing Agreement and the pledge thereof by the Trust to
the Indenture Trustee under the Indenture. Seller and CFSC agree that CFSC will
assign to the Trust all of CFSC's rights under this Agreement and that the Trust
will thereafter be entitled to enforce this Agreement against Seller in the
Trust's own name.
(a) Representations Regarding Contracts. The representations and
warranties set forth in Sections 3.02, 3.03, 3.04 and 3.06 of the Sale and
Servicing Agreement are true and correct.
(b) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority to own its properties and
to conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the Initial
Contracts and the Initial Other Conveyed Property transferred to CFSC.
(c) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and its Related Documents and to carry
out its terms and their terms, respectively; Seller has full power and
authority to sell and assign the Initial
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Contracts and the Initial Other Conveyed Property to be sold and assigned
to and deposited with CFSC hereunder and has duly authorized such sale and
assignment to CFSC by all necessary corporate action; and the execution,
delivery and performance of this Agreement and Seller's Related Documents
have been duly authorized by Seller by all necessary corporate action.
(e) Valid Sale; Binding Obligations. This Agreement and Seller's
Related Documents have been duly executed and delivered, shall effect a
valid sale, transfer and assignment of the Initial Contracts and the
Initial Other Conveyed Property, enforceable against Seller and creditors
of and purchasers from Seller; and this Agreement and Seller's Related
Documents constitute legal, valid and binding obligations of Seller
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(f) No Violation. The consummation of the transactions contemplated by
this Agreement and the Related Documents and the fulfillment of the terms
of this Agreement and the Related Documents shall not conflict with, result
in any breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under, the certificate of
incorporation or bylaws of Seller, or any indenture, agreement, mortgage,
deed of trust or other instrument to which Seller is a party or by which it
is bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement and
the Sale and Servicing Agreement and the Indenture, or violate any law,
order, rule or regulation applicable to Seller of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Seller or any of its
properties.
(g) No Proceedings. There are no proceedings or investigations pending
or, to Seller's knowledge, threatened against Seller, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over Seller or its properties (i)
asserting the invalidity of this Agreement or any of the Related Documents,
(ii) seeking to prevent the issuance of the Notes or the Certificates or
the consummation of any of the transactions contemplated by this Agreement
or any of the Related Documents, (iii) seeking any determination or ruling
that might materially and adversely affect the performance by Seller of its
obligations under, or the validity or enforceability of, this Agreement or
any of the Related Documents or (iv) seeking to affect adversely the
federal income tax or other federal, state or local tax attributes of, or
seeking to impose any excise, franchise, transfer or similar tax upon, the
transfer and acquisition of the Initial Contracts and the Initial Other
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Conveyed Property hereunder or under the Sale and Servicing Agreement or
pledged under the Indenture.
(h) Chief Executive Office. The chief executive office of Seller is
located at 1100 Landmark Towers, 345 St. Peter Street, Saint Paul, MN
55102-1639.
SECTION 3.2. Representations and Warranties of CFSC. CFSC makes the
following representations and warranties, on which Seller relies in selling,
assigning, transferring and conveying the Initial Contracts and the Initial
Other Conveyed Property to CFSC hereunder. Such representations are made as of
the execution and delivery of this Agreement, but shall survive the sale,
transfer and assignment of the Initial Contracts and the Initial Other Conveyed
Property hereunder and the sale, transfer and assignment thereof by CFSC to the
Trust under the Sale and Servicing Agreement and the pledge thereof under the
Indenture.
(a) Organization and Good Standing. CFSC has been duly organized and
is validly existing and in good standing as a corporation under the laws of
the State of Minnesota, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and has,
full power, authority and legal right to acquire and own the Initial
Contracts and the Initial Other Conveyed Property and to transfer the
Initial Contracts and the Initial Other Conveyed Property to the Trust
pursuant to the Sale and Servicing Agreement.
(b) Due Qualification. CFSC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect (i) CFSC's ability to acquire the
Initial Contracts or the Initial Other Conveyed Property, (ii) the validity
or enforceability of the Initial Contracts and the Initial Other Conveyed
Property or (iii) CFSC's ability to perform its obligations hereunder and
under the Related Documents.
(c) Power and Authority. CFSC has the power, authority and legal right
to execute and deliver this Agreement and its Related Documents and to
carry out the terms hereof and thereof and to acquire the Initial Contracts
and the Initial Other Conveyed Property hereunder; and the execution,
delivery and performance of this Agreement and its Related Documents and
all of the documents required pursuant hereto or thereto have been duly
authorized by CFSC by all necessary action.
(d) No Consent Required. CFSC is not required to obtain the consent of
any other Person, or any consent, license, approval or authorization or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery or performance of this
Agreement and the Related Documents, except for such as have been obtained,
effected or made.
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(e) Binding Obligation. This Agreement and each of its Related
Documents constitutes a legal, valid and binding obligation of CFSC,
enforceable against CFSC in accordance with its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, reorganization,
conservatorship, receivership, liquidation and other similar laws and to
general equitable principles.
(f) No Violation. The execution, delivery and performance by CFSC of
this Agreement, the consummation of the transactions contemplated by this
Agreement and the Related Documents and the fulfillment of the terms of
this Agreement and the Related Documents do not and will not conflict with,
result in any breach of any of the terms and provisions of or constitute
(with or without notice or lapse of time) a default under the articles of
incorporation or bylaws of CFSC, or conflict with or breach any of the
terms or provisions of, or constitute (with or without notice or lapse of
time) a default under, any indenture, agreement, mortgage, deed of trust or
other instrument to which CFSC is a party or by which CFSC is bound or to
which any of its properties are subject, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other instrument
(other than the Sale and Servicing Agreement and the Indenture), or violate
any law, order, rule or regulation, applicable to CFSC or its properties,
of any federal or state regulatory body or any court, administrative
agency, or other governmental instrumentality having jurisdiction over CFSC
or any of its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of CFSC, threatened against CFSC, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality having jurisdiction over CFSC or its
properties: (i) asserting the invalidity of this Agreement or any of the
Related Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the Related
Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by CFSC of its obligations under, or
the validity or enforceability of, this Agreement or any of the Related
Documents or (iv) that may adversely affect the federal or state income tax
attributes of, or seeking to impose any excise, franchise, transfer or
similar tax upon, the transfer and acquisition of the Initial Contracts and
the Initial Other Conveyed Property hereunder or the transfer of the
Initial Contracts and the Initial Other Conveyed Property to the Trust
pursuant to the Sale and Servicing Agreement or pledged under the
Indenture.
In the event of any breach of a representation and warranty made by CFSC
hereunder, Seller covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all Notes,
Certificates or other similar securities issued by the Trust, or a trust or
similar vehicle formed by CFSC, have been paid in full. Seller and CFSC agree
that damages will not be
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an adequate remedy for such breach and that this covenant may be specifically
enforced by CFSC or by the Owner Trustee on behalf of the Trust.
ARTICLE IV
COVENANTS OF THE SELLER
SECTION 4.1 Transfer of Contracts.
(a) On or prior to the Closing Date, or the Subsequent Transfer Date in the
case of Subsequent Contracts, Seller shall deliver the Loan Files to CFSC as its
custodian. Seller has filed a form UCC-1 financing statement regarding the sale
of the Contracts to CFSC, and shall file continuation statements in respect of
such UCC-1 financing statement as if such financing statement were necessary to
perfect such sale. Seller shall take any other actions necessary to maintain the
perfection of the sale of the Contracts to CFSC.
(b) If at any time during the term of this Agreement Seller does not have a
long-term senior debt rating of A- or higher from S&P and A3 or higher from
Moody's, (i) Seller shall within 30 days execute and deliver to CFSC (if it has
not previously done so) endorsements of each Loan and assignments in recordable
form of each mortgage, deed of trust or security deed securing a Loan, and (ii)
CFSC, at Seller's expense, shall within 60 days file in the appropriate
recording offices the assignments to CFSC of each mortgage, deed of trust or
security deed securing a Loan; provided, however, that such execution and filing
of the assignments with respect to the Contracts shall not be required if CFSC
receives written confirmation from both S&P and Moody's that the ratings of the
Notes and Certificates would not be reduced or withdrawn by the failure to
execute and file such assignments; provided, however, that such execution and
filing shall not be required if Seller delivers an Opinion of Counsel to the
effect that such assignment and recordation is not necessary to effect the
assignment to CFSC of Seller's lien on the real property securing each Loan.
(c) If, as of the Post-Funding Payment Date, the aggregate Scheduled
Principal Balance of Contracts secured by real property located in Maryland
("Maryland Contracts") exceeds 10% of the Pool Scheduled Principal Balance, the
Seller shall, within sixty (60) days, submit to the appropriate recording
offices the assignments to CFSC on behalf of the Trust of the number of
mortgages, deeds of trust or security deeds required to reduce to less than 10%
of the Pool Scheduled Principal Balance the aggregate Scheduled Principal
Balance of Maryland Contracts as to which such assignments are not recorded. In
the event that the Seller does not comply with the requirements of the preceding
sentence, the Seller shall repurchase enough of such Maryland Contracts until
the aggregate Scheduled Principal Balance of the Maryland Contracts is less than
10% of the Pool Scheduled Principal Balance.
SECTION 4.2. Costs and Expenses. The Seller shall pay all reasonable costs
and disbursements in connection with the performance of its obligations
hereunder and under each Subsequent Purchase Agreement and its Related
Documents.
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SECTION 4.3. Indemnification.
(a) Seller will defend and indemnify CFSC against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation arising out of or resulting from
the use or ownership of any real estate related to a Loan by Seller or the
Servicer or any Affiliate of either. Notwithstanding any other provision of this
Agreement, the obligation of Seller under this Section shall not terminate upon
a Service Transfer pursuant to Article VII of the Sale and Servicing Agreement,
except that the obligation of Seller under this Section 4.3 shall not relate to
the actions of any subsequent Servicer after a Service Transfer.
(b) No obligation or liability to any Obligor under any of the Contracts is
intended to be assumed by CFSC under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted and valid
under mandatory provisions of law, CFSC expressly disclaims such assumption.
(c) Seller agrees to pay, and to indemnify, defend and hold harmless CFSC
from, any taxes which may at any time be asserted with respect to, and as of the
date of, the transfer of the Contracts to CFSC, including, without limitation,
any sales, gross receipts, general corporation, personal property, privilege or
license taxes and costs, expenses and reasonable counsel fees in defending
against the same, whether arising by reason of the acts to be performed by
Seller under this Agreement or imposed against CFSC.
(d) Indemnification under this Section 4.3 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Originator has made any indemnity payments to CFSC pursuant to this
Section 4.3 and CFSC thereafter collects any of such amounts from others, CFSC
will repay such amounts collected to Seller, as the case may be, without
interest.
ARTICLE V
REPURCHASES
SECTION 5.1. Repurchase of Contracts Upon Breach of Warranty.
(a) Upon the occurrence of a Repurchase Event Seller shall, unless such
breach shall have been cured in all material respects, repurchase such Loan from
the Trust pursuant to Section 3.05 of the Sale and Servicing Agreement. It is
understood and agreed that the obligation of Seller to repurchase any Loan as to
which a breach has occurred and is continuing and the indemnity obligations
relating thereto shall, if such obligation is fulfilled, constitute the only
remedies against Seller for such breach available to CFSC, the Noteholders, the
Indenture Trustee on behalf of the Noteholders, the Certificateholders or the
Owner Trustee on behalf of the Certificateholders. The provisions of this
Section 5.1 are intended to grant the Owner Trustee and the Indenture Trustee a
direct right against Seller to demand performance
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hereunder, and in connection therewith, Seller waives any requirement of prior
demand against CFSC with respect to such repurchase obligation. Any such
purchase shall take place in the manner specified in Section 3.06 of the Sale
and Servicing Agreement. Notwithstanding any other provision of this Agreement,
any Subsequent Purchase Agreement or the Sale and Servicing Agreement or any
Subsequent Transfer Agreement to the contrary, the obligation of Seller under
this Section shall not terminate upon a termination of Seller as Servicer under
the Sale and Servicing Agreement and shall be performed in accordance with the
terms hereof notwithstanding the failure of the Servicer or CFSC to perform any
of their respective obligations with respect to such Loan under the Sale and
Servicing Agreement.
(b) In addition to the foregoing and notwithstanding whether the related
Loan shall have been purchased by Seller, Seller shall indemnify the Owner
Trustee, the Trust, the Indenture Trustee, the Noteholders and the
Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such Repurchase Events.
SECTION 5.2. Reassignment of Purchased Contracts. Upon deposit of the
Repurchase Price of any Loan repurchased or replaced by Seller under Section
5.1, CFSC shall cause the Owner Trustee and the Indenture Trustee to take such
steps as may be reasonably requested by Seller in order to assign to Seller all
of CFSC's and the Trust's right, title and interest in and to such Loan and all
security and documents and all Other Conveyed Property conveyed to CFSC and the
Trust directly relating thereto, without recourse, representation or warranty,
except as to the absence of liens, charges or encumbrances created by or arising
as a result of actions of CFSC, the Owner Trustee or the Indenture Trustee. Such
assignment shall be a sale and assignment outright, and not for security. If,
following the reassignment of a Loan, in any enforcement suit or legal
proceeding, it is held that Seller may not enforce any such Loan on the ground
that it shall not be a real party in interest or a holder entitled to enforce
the Loan, CFSC and the Owner Trustee shall, at the expense of Seller, take such
steps as Seller deems reasonably necessary to enforce the Loan, including
bringing suit in CFSC's or the Owner Trustee's name.
SECTION 5.3. Waivers. No failure or delay on the part of CFSC, or the Owner
Trustee as assignee of CFSC, in exercising any power, right or remedy under this
Agreement or under any Subsequent Purchase Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other or future exercise thereof or the exercise of any
other power, right or remedy.
-12-
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Liability of Seller. Seller shall be liable in accordance
herewith only to the extent of the obligations in this Agreement or in any
Subsequent Purchase Agreement specifically undertaken by Seller and the
representations and warranties of Seller.
SECTION 6.2. Merger or Consolidation of Seller or CFSC. Any corporation or
other entity (i) into which Seller or CFSC may be merged or consolidated, (ii)
resulting from any merger or consolidation to which Seller or CFSC is a party or
(iii) succeeding to the business of Seller or CFSC, in the case of CFSC, which
corporation has a certificate of incorporation containing provisions relating to
limitations on business and other matters substantively identical to those
contained in CFSC's certificate of incorporation, provided that in any of the
foregoing cases such corporation shall execute an agreement of assumption to
perform every obligation of Seller or CFSC, as the case may be, under this
Agreement and each Subsequent Purchase Agreement and, whether or not such
assumption agreement is executed, shall be the successor to Seller or CFSC, as
the case may be, hereunder and under each such Subsequent Purchase Agreement
(without relieving Seller or CFSC of its responsibilities hereunder, if it
survives such merger or consolidation) without the execution or filing of any
document or any further act by any of the parties to this Agreement or each
Subsequent Purchase Agreement. Seller or CFSC shall promptly inform the other
party and the Owner Trustee and the Indenture Trustee of such merger,
consolidation or purchase and assumption. Notwithstanding the foregoing, as a
condition to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above, (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Sections 3.1 and 3.2 and this
Agreement, or similar representation or warranty made in any Subsequent Purchase
Agreement, shall have been breached (for purposes hereof, such representations
and warranties shall speak as of the date of the consummation of such
transaction), (y) Seller or CFSC, as applicable, shall have delivered written
notice of such consolidation, merger or purchase and assumption to the Rating
Agencies prior to the consummation of such transaction and shall have delivered
to the Owner Trustee and the Indenture Trustee an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section 6.3 and that all
conditions precedent, if any, provided for in this Agreement, or in each
Subsequent Purchase Agreement, relating to such transaction have been complied
with, and (z) Seller or CFSC, as applicable, shall have delivered to the Owner
Trustee and the Indenture Trustee an Opinion of Counsel, stating that, in the
opinion of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary to preserve and protect the interest of the Owner Trustee and the
Indenture Trustee in the Trust Property and reciting the details of the filings
or (B) no such action shall be necessary to preserve and protect such interest.
SECTION 6.3. Limitation on Liability of Seller and Others. Seller shall not
be under any obligation to appear in, prosecute or defend any legal action that
is not incidental to its
-13-
<PAGE>
obligations under this Agreement, any Subsequent Purchase Agreement or its
Related Documents and that in its opinion may involve it in any expense or
liability.
SECTION 6.4. Amendment.
(a) This Agreement and any Subsequent Purchase Agreement may be amended by
Seller and CFSC and without the consent of the Owner Trustee, the Indenture
Trustee, or any of the Noteholders or Certificateholders (A) to cure any
ambiguity or (B) to correct any provisions in this Agreement or any such
Subsequent Purchase Agreement; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel delivered to the Owner Trustee and the
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by Seller and
CFSC, with the prior written consent of the Owner Trustee, the Indenture Trustee
and the Holders of Securities representing, in the aggregate, 66 2/3% or more of
the Aggregate Securities Principal Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Noteholders or
Certificateholders; provided, however, that no such amendment shall (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the Contracts or, distributions that are required to
be made on any Note or Certificate or (ii) reduce the aforesaid percentage
required to consent to any such amendment or any waiver hereunder, without the
consent of the Holders of all Notes and Certificates then outstanding.
(c) Concurrently with the solicitation of any consent pursuant to this
Section 6.4, CFSC shall furnish written notification to S&P and Moody's.
Promptly after the execution of any amendment or consent pursuant to this
Section 6.4, CFSC shall furnish written notification of the substance of such
amendment to S&P, Moody's, each Noteholder and Certificateholder.
(d) It shall not be necessary for the consent of Noteholders and
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Noteholders and
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee or Indenture Trustee, as applicable, may prescribe, including the
establishment of record dates. The consent of any Holder of a Note or a
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Note or Certificate and of any Note or Certificate issued upon
the transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made upon the Note or Certificate.
-14-
<PAGE>
SECTION 6.5. Notices. All demands, notices and communications to the Seller
or CFSC hereunder shall be in writing, personally delivered, or sent by
telecopier (subsequently confirmed in writing), reputable overnight courier or
mailed by certified mail, return receipt requested, and shall be deemed to have
been given upon receipt (a) in the case of Seller, to Conseco Finance Corp.,
1100 Landmark Towers, 345 St. Peter Street, Saint Paul, Minnesota 55102-1639,
Attention: Chief Financial Officer, or such other address as shall be designated
by Seller in a written notice delivered to the other party or to the Owner
Trustee or Indenture Trustee, as applicable, or (b) in case of CFSC, to Conseco
Finance Securitizations Corp., 1100 Landmark Towers, 345 St. Peter Street, Saint
Paul, Minnesota 55102-1639, Attention: Chief Financial Officer.
SECTION 6.6. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement and the Related Documents set forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement and the
Related Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 6.7. Severability of Provisions. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
SECTION 6.8. Intention of the Parties. The execution and delivery of this
Agreement and of each Subsequent Purchase Agreement shall constitute an
acknowledgment by Seller and CFSC that they intend that each assignment and
transfer herein and therein contemplated constitute a sale and assignment
outright, and not for security, of the Initial Contracts and the Initial Other
Conveyed Property and the Subsequent Contracts and Subsequent Other Conveyed
Property, as the case may be, conveying good title thereto free and clear of any
Liens, from Seller to CFSC, and that the Initial Contracts and the Initial Other
Conveyed Property and the Subsequent Contracts and Subsequent Other Conveyed
Property shall not be a part of Seller's estate in the event of the bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or similar law, or the
occurrence of another similar event, of, or with respect to, Seller. In the
event that such conveyance is determined to be made as security for a loan made
by CFSC, the Trust or the Certificateholders to Seller, the parties intend that
Seller shall have granted to CFSC a security interest in all of Seller's right,
title and interest in and to the Initial Contracts and the Initial Other
Conveyed Property and the Subsequent Contracts and Subsequent Other Conveyed
Property, as the case may be, conveyed pursuant to Section 2.1 hereof or
pursuant to any Subsequent Purchase Agreement, and that this Agreement and each
Subsequent Purchase Agreement shall constitute a security agreement under
applicable law.
-15-
<PAGE>
SECTION 6.9. Governing Law. This Agreement shall be construed in accordance
with, the laws of the State of Minnesota without regard to the principles of
conflicts of laws thereof, and the obligations, rights and remedies of the
parties under this Agreement shall be determined in accordance with such laws.
SECTION 6.10. Counterparts. For the purpose of facilitating the execution
of this Agreement and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
SECTION 6.11. Conveyance of the Initial Contracts and the Initial Other
Conveyed Property to the Trust. Seller acknowledges that CFSC intends, pursuant
to the Sale and Servicing Agreement, to convey the Initial Contracts and the
Initial Other Conveyed Property, together with its rights under this Agreement,
to the Trust on the date hereof. Seller acknowledges and consents to such
conveyance and waives any further notice thereof and covenants and agrees that
the representations and warranties of Seller contained in this Agreement and the
rights of CFSC hereunder are intended to benefit the Owner Trustee, the Trust,
the Indenture Trustee and the Noteholders and Certificateholders. In furtherance
of the foregoing, Seller covenants and agrees to perform its duties and
obligations hereunder, in accordance with the terms hereof for the benefit of
the Owner Trustee, the Trust, the Indenture Trustee and the Noteholders and
Certificateholders and that, notwithstanding anything to the contrary in this
Agreement, Seller shall be directly liable to the Indenture Trustee, Owner
Trustee and the Trust (notwithstanding any failure by the Servicer or CFSC to
perform its duties and obligations hereunder or under the Sale and Servicing
Agreement) and that the Owner Trustee or the Indenture Trustee may enforce the
duties and obligations of Seller under this Agreement against Seller for the
benefit of the Trust, the Noteholders and the Certificateholders.
SECTION 6.12. Nonpetition Covenant. Neither CFSC nor Seller shall petition
or otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Trust (or, in the case of
Seller, against CFSC) under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust (or CFSC) or any substantial
part of its property, or ordering the winding up or liquidation of the affairs
of the Trust (or CFSC).
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Transfer Agreement to be
duly executed by their respective officers as of the day and year first above
written.
CONSECO FINANCE SECURITIZATIONS CORP.,
as Purchaser
By
------------------------------------------
Name: Phyllis A. Knight
Title: Senior Vice President and Treasurer
CONSECO FINANCE CORP., as Seller
By
-------------------------------------------
Name: Phyllis A. Knight
Title: Senior Vice President and Treasurer
-17-
<PAGE>
SCHEDULE A
SCHEDULE OF INITIAL CONTRACTS
[Included as Exhibit L-1 to Sale and Servicing Agreement]
A-1
<PAGE>
EXHIBIT A
FORM OF
SUBSEQUENT TRANSFER AGREEMENT
between
CONSECO FINANCE SECURITIZATIONS CORP.
Purchaser
and
CONSECO FINANCE CORP.
Seller
dated as of
________, 1999
<PAGE>
SUBSEQUENT TRANSFER AGREEMENT, dated as of ________, 1999, between Conseco
Finance Securitizations Corp., a Minnesota corporation, as purchaser ("CFSC"),
and Conseco Finance Corp., a Delaware corporation, as seller ("Seller").
W I T N E S S E T H:
WHEREAS, Seller and CFSC are parties to a Transfer Agreement, dated as of
____________ 1, 1999 (as amended or supplemented, the "Transfer Agreement");
WHEREAS, pursuant to the Transfer Agreement and this Agreement, CFSC has
agreed to purchase from Seller and Seller is transferring to CFSC the Subsequent
Contracts and the Subsequent Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter contained, and for other good and valuable consideration, the
receipt of which is acknowledged, CFSC and Seller, intending to be legally
bound, hereby agree as follows:
1. Defined Terms. Capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned to such terms in the Transfer
Agreement.
"Schedule of Subsequent Contracts" means the schedule of all home
improvement and home equity contracts sold and transferred pursuant to this
Agreement attached hereto as Schedule A, which Schedule of Subsequent Contracts
shall supplement the Schedule of Initial Contracts attached to the Transfer
Agreement.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Contracts conveyed hereby, _________________, 1999.
"Subsequent Other Conveyed Property" means, for the purposes of this
Agreement, all monies at any time paid or payable on the Subsequent Contracts
conveyed hereby or in respect thereof after the Subsequent Cutoff Date
(including amounts due on or before the Subsequent Cutoff Date but received by
Seller after the Subsequent Cutoff Date), an assignment of security interests in
the related real estate and any and all other documents or electronic records
that Seller keeps on file in accordance with its customary procedures relating
to the Subsequent Contracts, the Obligors or the related real estate, property
(including the right to receive future Liquidation Proceeds) that secures a
Subsequent Loan and that has been acquired by or on behalf of the Trust pursuant
to liquidation of such Subsequent Loan, and all proceeds of the foregoing.
"Subsequent Contracts" means, for purposes of this Agreement, the Contracts
listed in the Schedule of Subsequent Contracts.
Ex. A-1
<PAGE>
2. Conveyance of the Subsequent Contracts and the Subsequent Other Conveyed
Property. Subject to the terms and conditions of this Agreement and the Transfer
Agreement, Seller hereby sells, transfer, assigns, and otherwise conveys to CFSC
without recourse (but without limitation of its repurchase, indemnity and other
obligations in this Agreement and the Transfer Agreement), and CFSC hereby
purchases, all right, title and interest of Seller in and to the Subsequent
Contracts and the Subsequent Other Conveyed Property. It is the intention of
Seller and CFSC that the transfer and assignment contemplated by this Agreement
shall constitute a sale of the Subsequent Contracts and the Subsequent Other
Conveyed Property from Seller to CFSC, conveying good title thereto free and
clear of any Liens, and the Subsequent Contracts and the Subsequent Other
Conveyed Property shall not be part of Seller's estate in the event of the
filing of a bankruptcy petition by or against Seller under any bankruptcy or
similar law.
3. Purchase Price. Simultaneously with the conveyance of the Subsequent
Contracts and the Subsequent Other Conveyed Property to CFSC, CFSC has paid or
caused to be paid to or upon the order of Seller, by wire transfer of
immediately available funds (representing certain proceeds to CFSC from the sale
of the Securities on deposit in the Pre-Funding Account), the amount of funds as
specified below:
(i) Principal Balance of Subsequent Contracts: $__________
(i) Proceeds to Seller: $_____________
4. Representations of Warranties of Seller. Seller makes the following
representations and warranties, on which CFSC relies in purchasing the
Subsequent Contracts and the Subsequent Other Conveyed Property and in
transferring the Subsequent Contracts and the Subsequent Other Conveyed Property
to the Trust under the Subsequent Transfer Agreement. Such representations are
made as of the execution and delivery of this Agreement, but shall survive the
sale, transfer and assignment of the Subsequent Contracts and the Subsequent
Other Conveyed Property hereunder, and the sale, transfer and assignment thereof
by CFSC to the Trust under the Subsequent Transfer Agreement and the pledge
thereof pursuant to the Indenture. Seller and CFSC agree that CFSC will assign
to the Trust all of CFSC's rights under this Agreement and the Transfer
Agreements, and that the Trust will thereafter be entitled to enforce this
Agreement and the Transfer Agreements against Seller in the Trust's own name.
(a) Schedule of Representations. The representations and warranties
set forth in Sections 3.02, 3.03 and 3.04 of the Sale and Servicing
Agreement are true and correct.
(b) Organization and Good Standing. Seller has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted, and had at all
Ex. A-2
<PAGE>
relevant times, and now has, power, authority and legal right to acquire,
own and sell the Subsequent Contracts and the Subsequent Other Conveyed
Property transferred to CFSC.
(c) Due Qualification. Seller is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) Power and Authority. Seller has the power and authority to execute
and deliver this Agreement and the Transfer Agreement and to carry out its
terms and their terms, respectively; Seller has full power and authority to
sell and assign the Subsequent Contracts and the Subsequent Other Conveyed
Property to be sold and assigned to and deposited with CFSC hereunder and
has duly authorized such sale and assignment to CFSC by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and the Transfer Agreement have been duly authorized by Seller by
all necessary corporate action.
(e) Valid Sale; Binding Obligations. This Agreement and the Transfer
Agreement have been duly executed and delivered, shall effect a valid sale,
transfer and assignment of the Subsequent Contracts and the Subsequent
Other Conveyed Property, enforceable against Seller and creditors of and
purchasers from Seller; and this Agreement and the Transfer Agreement
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(f) No Violation. The consummation of the transactions contemplated by
this Agreement and the Transfer Agreement and the fulfillment of the terms
of this Agreement and the Transfer Agreement shall not conflict with,
result in any breach of any of the terms and provisions of or constitute
(with or without notice, lapse of time or both) a default under, the
certificate of incorporation or bylaws of Seller, or any indenture,
agreement, mortgage, deed of trust or other instrument to which Seller is a
party or by which it is bound, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement and the Transfer Agreement, or violate any law, order,
rule or regulation applicable to Seller of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Seller or any of its properties.
(g) No Proceedings. There are no proceedings or investigations pending
or, to Seller's knowledge, threatened against Seller, before any court,
regulatory body,
Ex. A-3
<PAGE>
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over Seller or its properties (i) asserting the
invalidity of this Agreement or the Transfer Agreement, (ii) seeking to
prevent or the consummation of any of the transactions contemplated by this
Agreement or the Transfer Agreement, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by Seller
of its obligations under, or the validity or enforceability of, this
Agreement or the Subsequent Transfer Agreement, or (iv) seeking to affect
adversely the federal income tax or other federal, state or local tax
attributes of, or seeking to impose any excise, franchise, transfer or
similar tax upon, the transfer and acquisition of the Subsequent Contracts
and the Subsequent Other Conveyed Property hereunder or under the Transfer
Agreement.
(h) Insolvency. As of the Subsequent Cutoff Date and the Subsequent
Transfer Date, neither Seller nor CFSC is insolvent nor will either of them
have been made insolvent after giving effect to the conveyance set forth in
Section 2 of this Agreement, nor are any of them aware of any pending
insolvency.
(i) Chief Executive Office. The chief executive office of Seller is
located at 1100 Landmark Towers, 345 St. Peter Street, Saint Paul,
Minnesota 55102-1639.
5. Representations and Warranties of CFSC. CFSC makes the following
representations and warranties, on which Seller relies in selling, assigning,
transferring and conveying the Subsequent Contracts and the Subsequent Other
Conveyed Property to CFSC hereunder. Such representations are made as of the
execution and delivery of this Agreement, but shall survive the sale, transfer
and assignment of the Subsequent Contracts and the Subsequent Other Conveyed
Property hereunder and the sale, transfer and assignment thereof by CFSC to the
Trust under the Subsequent Transfer Agreement and the pledge thereof under the
Indenture.
(a) Organization and Good Standing. CFSC has been duly organized and
is validly existing and in good standing as a corporation under the laws of
the State of Minnesota, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and has,
full power, authority and legal right to acquire and own the Subsequent
Contracts and the Subsequent Other Conveyed Property, and to transfer the
Subsequent Contracts and the Subsequent Other Conveyed Property to the
Trust pursuant to this Transfer Agreement and the pledge thereof under the
Indenture.
(b) Due Qualification. CFSC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect CFSC's ability to acquire the
Subsequent Contracts or the Subsequent Other Conveyed Property or the
validity or enforceability of the Subsequent Contracts and the Subsequent
Other
Ex. A-4
<PAGE>
Conveyed Property or to perform CFSC's obligations hereunder and under the
Transfer Agreement.
(c) Power and Authority. CFSC has the power, authority and legal right
to execute and deliver this Agreement and to carry out the terms hereof and
to acquire the Subsequent Contracts and the Subsequent Other Conveyed
Property hereunder; and the execution, delivery and performance of this
Agreement and all of the documents required pursuant hereto have been duly
authorized by CFSC by all necessary action.
(d) No Consent Required. CFSC is not required to obtain the consent of
any other Person, or any consent, license, approval or authorization or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery or performance of this
Agreement and the Transfer Agreement, except for such as have been
obtained, effected or made.
(e) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of CFSC, enforceable against CFSC in accordance with its
terms, subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, liquidation and other
similar laws and to general equitable principles.
(f) No Violation. The execution, delivery and performance by CFSC of
this Agreement, the consummation of the transactions contemplated by this
Agreement and the Transfer Agreement and the fulfillment of the terms of
this Agreement and the Transfer Agreement do not and will not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of CFSC, or conflict with or breach any
of the terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement, mortgage, deed of
trust or other instrument to which CFSC is a party or by which CFSC is
bound or to which any of its properties are subject, or result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or
other instrument (other than the Sale and Servicing Agreement, this
Agreement, the Transfer Agreement and the Indenture), or violate any law,
order, rule or regulation, applicable to CFSC or its properties, of any
federal or state regulatory body, any court, administrative agency, or
other governmental instrumentality having jurisdiction over CFSC or any of
its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of CFSC, threatened against CFSC, before any
court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality having jurisdiction over CFSC or its
properties: (i) asserting the invalidity of this Agreement or the Transfer
Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Transfer Agreement,
(iii) seeking any
Ex. A-5
<PAGE>
determination or ruling that might materially and adversely affect the
performance by CFSC of its obligations under, or the validity or
enforceability of, this Agreement or the Transfer Agreement, or (iv) that
may adversely affect the federal or state income tax attributes of, or
seeking to impose any excise, franchise, transfer or similar tax upon, the
transfer and acquisition of the Subsequent Contracts and the Subsequent
Other Conveyed Property hereunder or the transfer of the Contracts and the
Subsequent Other Conveyed Property to the Trust pursuant to the Transfer
Agreement.
In the event of any breach of a representation and warranty made by CFSC
hereunder, Seller covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all pass-through
certificates or other similar securities issued by the Trust, or a trust or
similar vehicle formed by CFSC, have been paid in full. Seller and CFSC agree
that damages will not be an adequate remedy for such breach and that this
covenant may be specifically enforced by CFSC or by the Owner Trustee on behalf
of the Trust.
6. Conditions Precedent. The obligation of CFSC to acquire the Subsequent
Contracts and the Subsequent Other Conveyed Property hereunder is subject to the
satisfaction, on or prior to the Subsequent Transfer Date, of the following
conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section
3.1 of the Transfer Agreement shall be true and correct as of the date of
this Agreement and as of the Subsequent Transfer Date.
(b) Transfer Agreement Conditions. Each of the conditions set forth in
Section 2.3(b) of the Transfer Agreement applicable to the conveyance of
Subsequent Contracts and the Subsequent Other Conveyed Property shall have
been satisfied.
(c) Sale and Servicing Agreement Representations and Warranties. Each
of the representations and warranties contained in Section 3.03 of the Sale
and Servicing Agreement shall be true and correct.
(d) Additional Information. Seller shall have delivered to CFSC such
information as was reasonably requested by CFSC to satisfy itself as to (i)
the accuracy of the representations and warranties set forth in Section 4
of this Agreement and in Section 3.1 of the Transfer Agreement and (ii) the
satisfaction of the conditions set forth in this Section 6.
7. Ratification of Transfer Agreement. As supplemented by this Agreement,
the Transfer Agreement is in all respects ratified and confirmed and the
Transfer Agreement as so supplemented by this Agreement shall be read, taken and
construed as one and the same instrument.
Ex. A-6
<PAGE>
8. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Minnesota without regard to the principles of conflicts of
laws thereof, and the obligations, rights and remedies of the parties under this
Agreement shall be determined in accordance with such laws.
9. Counterparts. For the purposes of facilitating the execution of this
Agreement and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
10. Conveyance of the Subsequent Contracts and the Subsequent Other
Conveyed Property to the Trust. Seller acknowledges that CFSC intends, pursuant
to a Subsequent Transfer Agreement, to convey the Subsequent Contracts and the
Subsequent Other Conveyed Property, together with its rights under this
Agreement and under the Transfer Agreement, to the Trust on the date hereof, and
the Owner Trust intends to pledge the same to the Indenture Trustee for the
benefit of the Noteholders pursuant to the Indenture. Seller acknowledges and
consents to such conveyance and waives any further notice thereof and covenants
and agrees that the representations and warranties of Seller contained in this
Agreement and the rights of CFSC hereunder and thereunder are intended to
benefit the Owner Trustee, the Trust, the Indenture Trustee and the Noteholders
and Certificateholders. In furtherance of the foregoing, Seller covenants and
agrees to perform its duties and obligations hereunder and under the Transfer
Agreement, in accordance with the terms hereof and thereof for the benefit of
the Owner Trustee, the Trust, the Indenture Trustee and the Noteholders and
Certificateholders and that, notwithstanding anything to the contrary in this
Agreement or in the Transfer Agreement, Seller shall be directly liable to the
Indenture Trustee, the Owner Trustee and the Trust (notwithstanding any failure
by CFSC to perform its duties and obligations hereunder or under the Sale and
Servicing Agreement or the Subsequent Transfer Agreement) and that the Indenture
Trustee, the or the Owner Trustee may enforce the duties and obligations of
Seller under this Agreement and the Transfer Agreement against Seller for the
benefit of the Trust, the Noteholders and the Certificateholders.
Ex. A-7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.
CONSECO FINANCE SECURITIZATIONS CORP.,
as Purchaser
By
----------------------------------------
Phyllis A. Knight
Senior Vice President and Treasurer
CONSECO FINANCE CORP., as Seller
By
----------------------------------------
Phyllis A. Knight
Senior Vice President and Treasurer
Ex. A-8
<PAGE>
EXHIBIT 5.1
Conseco Finance Corp.
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Conseco Finance Securitizations Corp.
1100 Landmark Towers
345 St. Peter Street
St. Paul, Minnesota 55102-1639
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Conseco Finance Corp., a Delaware corporation
(the "Company") and Conseco Finance Securitizations Corp., a Minnesota
corporation ("CFSC"), in connection with the preparation of a Registration
Statement on Form S-3 filed by the Company and CFSC with the Securities and
Exchange Commission (the "Commission") on November 23, 1999 (the "Registration
Statement"), relating to the registration by the Company of $100,000,000 of
Asset-Backed Securities (the "Securities") to be issued by Conseco Finance
Recreational Enthusiast Consumer Trusts to be formed by CFSC from time to time.
The Securities will be issued from time to time in series,
(i) with respect to securities issued by a Trust characterized for tax
purposes as a grantor trust, under a separate Pooling and Servicing
Agreement in substantially the form incorporated by reference as Exhibit
4.1 to the Registration Statement (each such agreement, a "Pooling and
Servicing Agreement"), among CFSC, as seller, the Company, as originator,
guarantor and servicer, and a bank or trust company, as trustee (the
"Trustee"); or
(ii) with respect to Securities issued by a Trust characterized as an
owner trust treated as a partnership for tax purposes, under a combination
of (a) a separate Trust Agreement in substantially the form incorporated by
reference as Exhibit 4.3 to the Registration Statement (each such
Agreement, a "Trust Agreement"), (b) a separate Sale and Servicing
Agreement in substantially the form incorporated by reference as Exhibit
4.2 to the Registration Statement (each such Agreement, a "Sale and
Servicing Agreement"), and, if such Trust issues Notes, a separate
Indenture in substantially the form incorporated by reference as Exhibit
4.4 to the Registration Statement (each such Indenture, an "Indenture").
The Company may provide a Limited Guaranty (the "Limited Guaranty") with respect
to one or more classes of any series of Securities.
<PAGE>
Conseco Finance Corp.
December 6, 1999
Page 2
We have examined the Registration Statement, the forms of such agreements
filed as exhibits thereto, and such other documents, and have reviewed such
questions of law, as we have considered necessary and appropriate for the
purposes of this opinion. Based on the foregoing, we are of the opinion that:
1. Each Pooling and Servicing Agreement, when it has been duly authorized
by the Board of Directors of the Company and the Board of Directors of CFSC and
duly executed and delivered by the Company, CFSC and the Trustee, will
constitute the valid and binding obligation of the Company and CFSC, and the
Limited Guaranty of the Company, if any, provided for therein will constitute
the valid and binding obligation of the Company.
2. Each series of Certificates issued pursuant to a Pooling and Servicing
Agreement, when duly executed and delivered in accordance with the terms of such
Pooling and Servicing Agreement, will be legally and validly issued, and the
holders of such Certificates will be entitled to the benefits of such Pooling
and Servicing Agreement.
3. Each Sale and Servicing Agreement, when it has been duly authorized by
the Board of Directors of the Company and the Board of Directors of CFSC and
duly executed and delivered by the Company, CFSC and the Trustee, will
constitute the valid and binding obligation of the Company and CFSC, and the
Limited Guaranty of the Company, if any, provided for therein will constitute
the valid and binding obligation of the Company. Each Trust Agreement, when it
has been duly authorized by the Board of Directors of the Company and the Board
of Directors of CFSC and duly executed and delivered by the Company, CFSC and
the Trustee, will constitute the valid and binding obligation of the Company and
CFSC. Each Indenture, when it has been duly authorized by the Trust and duly
executed and delivered by the Trust and by the applicable Indenture Trustee,
will constitute the valid and binding obligation of such Trust.
4. Each series of Certificates issued pursuant to a Trust Agreement, when
duly executed and delivered in accordance with the terms of such Trust
Agreement, will be legally and validly issued, fully paid and non-assessable,
and the holders of such Certificates will be entitled to the benefits of such
Trust Agreement and the related Sale and Servicing Agreement.
5. Each Series of Notes issued by a Trust, when duly authorized and
executed by such Trust and duly authenticated by the Indenture Trustee pursuant
to the terms of the related Indenture, will be legally and validly issued and
will constitute the valid and binding obligations of such Trust.
The opinions set forth above are subject to the following qualifications
and exceptions:
(a) In rending the opinions set forth above, we have assumed that, at
the time of the execution of the applicable Agreements and the execution
and delivery of the related series of Securities, there will not have
occurred any change in the law affecting the authorization, execution,
delivery, validity or enforceability of the Securities or any Limited
Guaranty, the Registration Statement will have been declared effective by
the Commission and will continue to be effective, the Securities and the
Limited Guaranty will be issued and sold as described in the Registration
Statement, none of the particular terms of a series of Securities will
violate any applicable law and neither the issuance and sale thereof nor
the compliance by the Company with the terms thereof will
<PAGE>
Conseco Finance Corp.
December 6, 1999
Page 3
result in a violation of any agreement or instrument then binding upon the
Company or any order of any court or governmental body having jurisdiction
over the Company.
(b) Our opinions in paragraphs 1, 3 and 5 above are subject to the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar law of general application affecting creditors' rights.
(c) Our opinion in paragraphs 1, 3 and 5 above are subject to the
effect of general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing, and
other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
(d) Minnesota Statutes ss. 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report does
not have a cause of action upon which it may bring suit under Minnesota law
unless the corporation has filed a Notice of Business Activities Report and
provides that the use of the courts of the State of Minnesota for all
contracts executed and all causes of action that arose before the end of
any period for which a corporation failed to file a required report is
precluded. Insofar as our opinion may relate to the valid, binding and
enforceable character of any agreement under Minnesota law or in a
Minnesota court, we have assumed that any party seeking to enforce such
agreement has at all times been, and will continue at all times to be,
exempt from the requirement of filing a Notice of Business Activities
Report or, if not exempt, has duly filed, and will continue to duly file,
all Notice of Business Activities Reports.
Our opinions expressed above are limited to the laws of the State of
Minnesota and the Delaware General Corporation Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the heading
"Legal Matters" in the Prospectus comprising part of the Registration Statement.
Dated: December 6, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
[Letterhead of Dorsey & Whitney LLP]
EXHIBIT 8.1
Conseco Finance Corp.
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102-1639
Conseco Finance Securitizations Corp.
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102-1639
Re: Federal Income Tax Consequences of Recreational,
Enthusiast Consumer Trust Securities
Ladies and Gentlemen:
We have acted as counsel to Conseco Finance Corp., a Delaware
corporation (the "Company") and Conseco Finance Securitizations Corp., a
Minnesota Corporation ("CFSC"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Company and CFSC with the
Securities and Exchange Commission (the "Commission") on November 23, 1999 (the
"Registration Statement"), relating to the registration by the Company of
$100,000,000 of Asset-Backed Securities (the "Securities") to be issued by
Conseco Finance Recreational Enthusiast Consumer Trusts to be formed by CFSC
from time to time. The Securities are proposed to be issued from time to time in
series,
(i) with respect to Securities issued by a Trust characterized for tax
purposes as a grantor trust, under a separate Pooling and Servicing
Agreement in substantially the form filed as Exhibit 4.1 to the
Registration Statement (each such agreement, a "Pooling and Servicing
Agreement"), between CFSC, as seller, the Company, as originator, guarantor
and servicer, and a bank or trust company, as trustee (the "Trustee"); or
(ii) with respect to Securities issued by a Trust characterized as an
owner trust treated as a partnership for tax purposes, under a combination
of (a) a separate Trust Agreement in substantially the form filed as
Exhibit 4.3 to the Registration Statement (each such Agreement, a "Trust
Agreement"), (b) a separate Sale and Servicing Agreement in substantially
the form filed as Exhibit 4.2 to the Registration Statement (each such
Agreement, a "Sale and Servicing Agreement"), and, if such Trust issues
Notes, a separate Indenture in substantially the form filed as Exhibit 4.4
to the Registration Statement (each such Indenture, an "Indenture").
The Securities are described in the prospectus constituting Part I of
the Registration Statement (the "Prospectus"). Each series of Securities will
be more particularly described in a supplement to the Prospectus (each, a
"Supplement").
<PAGE>
Conseco Finance Corp.
December 6, 1999
Page 2
You have requested our opinion with respect to certain federal income
tax consequences of the purchase, ownership and disposition of the Securities.
For purposes of rendering our opinion we have examined the Registration
Statement. Each Supplement and Pooling and Servicing Agreement or Trust
Agreement pertaining to a specific series is to be completed subsequent to the
date of this opinion. Accordingly, we have not examined any Supplement or
Pooling and Servicing Agreement or Trust Agreement relating to any specific
series to be issued, and our opinion does not address the contents of any such
Supplement or Agreement except as and to the extent that the provisions of same
may be described in the Prospectus. We understand that each Supplement will
contain a discussion of any material federal income tax consequences pertaining
to the series to be offered thereunder which are not addressed in the
Prospectus.
As set forth in the Prospectus, for federal income tax purposes each
series of Securities will be issued by either a grantor trust ("Grantor Trust")
or an owner trust treated as a partnership ("Owner Trust"). Each series' status
as a Grantor Trust or an Owner Trust is to be set forth in the Supplement
related thereto.
Our opinion is based upon existing law and currently applicable
Treasury Department regulations, current published administrative positions of
the Internal Revenue Service contained in revenue rulings and revenue
procedures, and judicial decisions, all of which are subject to change, either
prospectively or retroactively, and to possibly differing interpretations. Our
opinion is also based on the representations and warranties set forth in the
applicable Pooling and Servicing Agreement or Trust Agreement and the
assumptions that the Company and the Trustee will at all times comply with the
requirements of the applicable Agreement. Based upon the foregoing, as of the
date hereof it is our opinion that:
(1) With respect to each Grantor Trust series of Securities, each pool
of contracts and the arrangement to be administered by the Company under
which the Trustee will hold and the Company will be obligated to service
the contracts and pursuant to which Certificates will be issued to
certificateholders, all as described in the Prospectus, will not be
classified as an association taxable as a corporation, but rather will be
classified as a grantor trust under Subpart E, Part I of Subchapter J of
the Internal Revenue Code of 1986, as amended. Each holder of a Certificate
will be treated as the owner of an undivided interest in the contracts and
other property of the Trust.
(2) With respect to each Owner Trust series of Securities, each pool
of contracts and the arrangement to be administered by the Company under
which the Trustee will hold and the Company will be obligated to service
the contracts and pursuant to which Certificates will be issued to
certificateholders, all as described in the Prospectus, will not be
characterized as an association or a publicly-traded partnership taxable as
a corporation. As a result, the Trust itself will not be subject to federal
income tax but, instead, each holder of a Certificate will be required to
take into account its distributive share of items of income and deduction
of the Trust as though such items had been realized directly by such
holder. If such Trust issues Notes pursuant to an Indenture as described in
the Prospectus, the Notes will be classified as debt for federal income tax
purposes.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Certain
Federal Income Tax Consequences" in the Prospectus,
<PAGE>
Conseco Finance Corp.
December 6, 1999
Page 3
and we hereby confirm that, insofar as they constitute statements of law or
legal conclusions as to the likely outcome of material issues under the federal
income tax laws, the discussion under such heading accurately sets forth our
advice.
Dated: December 6, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Conseco Finance Corp.:
We consent to the incorporation by reference in Amendment No. 1 to the
Registration Statement (No. 333-91557) on Form S-3 of Conseco Finance Corp. of
our report dated January 27, 1998, relating to the consolidated balance sheet of
Conseco Finance Corp. and subsidiaries, formerly known as Green Tree Financial
Corporation, as of December 31, 1997, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period ended December 31, 1997, and to the reference to our firm under
the heading "EXPERTS" in the Registration Statement. Our report refers to the
Company's adoption of the Financial Accounting Standards Board's Statement No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," in 1997.
/s/ KPMG LLP
Minneapolis, Minnesota
December 3, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Conseco Finance Corp. on Form S-3 (Registration No. 333-91557) of our report
dated March 30, 1999, relating to the consolidated financial statements of
Conseco Finance Corp. as of December 31, 1998 and for the year then ended, which
report is included in Conseco Finance Corp.'s Annual Report on Form 10-K for the
year ended December 31, 1998. We also consent to the references to us under the
caption "Experts" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
December 3, 1999
