<PAGE>
As filed with the Securities and Exchange Commission on March 31, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
GREEN TREE FINANCIAL CORPORATION
(Originator of the Trusts Described Herein)
(Exact name of registrant as specified in its charter)
---------------
Delaware 41-1807858
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of 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)
---------------
JOEL H. GOTTESMAN, ESQ.
1100 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. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of Each Class of to be Offering Price Offering Registration
Securities to be Registered Registered Per Unit(1) Price(1) Fee(1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Securities.......... $2,000,000,000 100% $2,000,000,000 $556,000
- --------------------------------------------------------------------------------------------
Limited Guaranty of Green Tree
Financial Corporation........... (2) (2) (2) (2)
- --------------------------------------------------------------------------------------------
</TABLE>
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(1) The amount of Asset-Backed Securities being carried forward from
Registration Statement No. 333-52233 pursuant to Rule 429 is
$1,221,578,710, and the Registrant previously paid a filing fee with
respect to such securities of $360,365.72 (calculated at the rate of $295
per $1,000,000 of the amount of the securities registered, the rate in
effect at the time such Registration Statement was filed).
(2) No additional consideration will be paid for the Limited Guaranty;
accordingly, no additional filing fee is being paid herewith pursuant to
Rule 457(a).
---------------
Pursuant to Rule 429, the Prospectus contained in this Registration
Statement also relates to and constitutes Post-Effective Amendment No. 4 to
Registration Statement No. 333-52233, which was declared effective on June 16,
1998.
---------------
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>
PROSPECTUS SUPPLEMENT
(To Prospectus dated February , 1999)
$ (Approximate)
GREEN TREE
Seller and Servicer
Green Tree Recreational, Equipment & Consumer Trust 1999-
----------------
The securities will consist of classes, but we are offering only the
following classes now:
<TABLE>
<CAPTION>
Approximate Interest Underwriting Proceeds to
Class Principal Amount(1) Rate Price to Public(2) Discount Company(3)
- ----- ------------------- -------- ------------------ ------------ -----------
<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>
- --------
(1) May vary plus or minus 5%.
(2) Plus any accrued interest beginning on , 1999.
(3) Before deducting expenses, which we estimate to be $500,000.
Investing in the Securities involves certain risks. Prospective investors
should consider carefully the Risk Factors beginning on page S-8 in this
prospectus supplement and on page 12 in the prospectus.
----------------
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 through the Same-Day Funds Settlement
System of the Depository Trust Company on or about , 1999.
The underwriters named below will offer these securities 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-38 in this prospectus supplement and
"Plan of Distribution" on page 51 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 Securities................................... S-4
Risk Factors............................................................. S-8
The Trust................................................................ S-9
The Trust Property....................................................... S-10
The Contract Pool........................................................ S-10
Green Tree Financial Corporation......................................... S-16
Yield and Prepayment Considerations...................................... S-18
Description of the Notes................................................. S-24
Description of the Certificates.......................................... S-30
Description of the Trust Documents and Indenture......................... S-33
Certain Federal and State Income Tax Consequences........................ S-36
ERISA Considerations..................................................... S-36
Underwriting............................................................. S-38
Legal Matters............................................................ S-39
Annex I.................................................................. A-1
Prospectus
Important Notice about Information Presented in this Prospectus and the
Accompanying Prospectus Supplement...................................... 2
Reports to Holders of the Securities..................................... 2
Where You Can Find More Information...................................... 2
Summary of the Terms of the Securities .................................. 3
Risk Factors............................................................. 12
The Trusts............................................................... 14
The Contracts............................................................ 15
Green Tree Financial Corporation......................................... 15
Yield and Prepayment Considerations...................................... 17
Pool Factor.............................................................. 17
Use of Proceeds.......................................................... 18
The Certificates......................................................... 18
The Notes................................................................ 19
Certain Information Regarding the Securities............................. 23
Certain Legal Aspects of the Contracts................................... 35
Certain Federal Income Tax Consequences.................................. 40
Certain State Income Tax Considerations.................................. 50
ERISA Considerations..................................................... 51
Plan of Distribution..................................................... 51
Legal Matters............................................................ 52
Experts.................................................................. 52
</TABLE>
No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained in this prospectus
supplement or the prospectus in connection with the offering covered by this
prospectus supplement and prospectus. If given or made, such information or
representations must not be relied upon as having been authorized by Green Tree
Financial Corporation or the underwriters. This prospectus supplement and
prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, the Securities in any jurisdiction where, or to any person to whom, it
is unlawful to make such offer or solicitation. Neither the delivery of this
prospectus supplement and prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there has not been any change in
the facts set forth in this prospectus supplement and prospectus or in the
affairs of the trust since the date hereof.
S-2
<PAGE>
This document consists of a prospectus supplement and a prospectus. The
prospectus provides general information about Green Tree Financial Corporation
("Green Tree" or the "Company"), about Green Tree's recreational, equipment and
consumer lending business, and about any series of asset-backed securities
secured by a pool of recreational, equipment and consumer loans that Green Tree
may wish to sell. This prospectus supplement contains more detailed information
about this series of securities. Since the terms of this series may differ from
the general information provided in the prospectus, you should rely on the
information in this prospectus supplement rather than any different information
in the prospectus.
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 Green Tree 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 SECURITIES
This summary highlights selected information regarding the 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 Securities,
read this entire prospectus supplement and the accompanying prospectus.
<TABLE>
<CAPTION>
Interest Approximate S&P Fitch
Class Rate Principal Amount(1) 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..............
</TABLE>
- --------
(1) May vary plus or minus 5%.
Seller and Servicer........... Green Tree Financial Corporation ("Green
Tree"), 1100 Landmark Towers, 345 St. Peter
Street, St. Paul, Minnesota 55102, telephone
(651) 293-3400.
Indenture Trustee............. U.S. Bank National Association, St. Paul,
Minnesota, will be the Indenture Trustee. For a
more complete description of the Indenture
Trustee's responsibilities, see "The Notes--The
Indenture Trustee" in the accompanying
prospectus.
Owner Trustee................. Wilmington Trust Company, Wilmington, Delaware,
will be the Owner Trustee. For a more complete
description of the Owner Trustee's
responsibilities, see "Description of the Trust
Documents--The Trustee" in the accompanying
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, 1999.
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 Green Tree, 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
Securities.................... Distributions on the Securities on any
distribution date will be made primarily from
amounts collected on the Contracts during the
prior month (the "Amount Available"). On each
S-4
<PAGE>
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 collectively as the
"Senior Notes");
2. The First Priority Principal
Distribution Amount, if any, to the Senior
Notes;
3. Interest on the Class A-6 Notes;
4. The Second Priority Principal
Distribution Amount, if any, to the Notes;
5. Interest on the Class A-7 Notes;
6. The Third Priority Principal
Distribution Amount, if any, to the Notes;
7. Interest on the Class B-1 Certificates;
8. The Fourth Priority Principal
Distribution Amount, if any, to the Notes
or the Class B-1 Certificates;
9. The formula principal amount (described
below) to the Notes or the Class B-1
Certificates;
10. Interest on the Class B-2 Certificates;
and
11. The formula principal amount to 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.
Subordination of the Class A-
6 Notes, Class A-7 Notes and
the Certificates............. The Class A-6 and Class A-7 Notes will be
subordinated to the Senior Notes in payment of
both interest and principal:
1. The Indenture Trustee will apply the
Amount Available to pay all interest due on
the Senior Notes before paying interest on
the Class A-6 or Class A-7 Notes; and
2. In certain unusual circumstances, the
Indenture Trustee will apply the Amount
Available to make a principal payment on
the Senior Notes before paying interest on
the Class A-6 or Class A-7 Notes.
S-5
<PAGE>
The Class B-1 Certificates will be subordinated
to the Notes in payment of both principal and
interest:
1. The Indenture Trustee will apply the
Amount Available to pay all interest due on
the Notes before paying interest on the
Class B-1 Certificates; and
2. In certain unusual circumstances, the
Indenture Trustee will apply the Amount
Available to make a principal payment on
the Notes before paying interest on the
Class B-1 Certificates.
The Class B-2 Certificates will be subordinated
to the Notes and the Class B-1 Certificates in
payment of both principal and interest, in that
the Indenture Trustee will apply the Amount
Available to pay all interest and principal due
on the Notes and the Class B-1 Certificates
before paying interest or principal on the
Class B-2 Certificates.
Class B-2 Limited Guaranty.... Green Tree 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.
Repurchase Option............. After the aggregate principal balance of the
Contracts is less than 10% of their aggregate
principal balance at the time Green Tree
transferred them to the Trust, Green Tree 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.
The Contracts................. The contracts are retail installment sales
contracts and promissory notes for the purchase
of a variety of consumer products and
equipment. We provide more information about
the contracts and the products they financed in
"The Contract Pool."
Tax Status.................... In the opinion of counsel to Green Tree, for
federal and Minnesota income tax purposes, the
Notes will be characterized as debt, and the
Trust will not be characterized as an
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 "Certain Federal Income
Tax Consequences" herein and "Certain Federal
Income Tax Consequences" and "Certain State
Income Tax Consequences" in the accompanying
prospectus.
Pre-Funding Account........... If the aggregate principal balance of the
Contracts that Green Tree transfers to the
Trust on the Closing Date (the Initial
Contracts and the Additional Contracts) is less
than $ , the Indenture Trustee will
deposit that difference in a pre-funding
account, and the Trust will use those funds to
purchase
S-6
<PAGE>
Contracts from time to time until , 1999.
If those funds are not completely used by ,
1999, the remaining funds will be distributed
as principal on the Class A-1 Notes on the
1999 distribution date.
Money Market Eligibility...... The Class A-1 Notes will have a final maturity
of , 2000. The Class A-1 Notes will have a
final maturity of , 2000. The Class A-1
Notes will be eligible securities for purchase
by money market funds under Rule 2a-7 under the
Investment Company Act of 1940. 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, as amended, may
purchase the Notes. An employee benefit plan
may not purchase any class of Certificates,
unless it satisfies the conditions described
under "ERISA Considerations" herein and in the
prospectus.
Ratings....................... The Securities will not be issued and sold
unless S&P and Fitch have assigned the ratings
specified on page S-3 (or better) to the
Securities.
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 Green Tree's ability to make
payments under the Class B-2 Limited Guaranty.
Although Green Tree has not requested a rating
of the Securities from any rating agencies
other than S&P and Fitch, other rating agencies
may assign a rating to the Securities. These
ratings could be higher or lower than the
ratings initially given by S&P and Fitch to the
Securities.
S-7
<PAGE>
RISK FACTORS
Prospective holders of the Securities should consider, in addition to the
factors described under "Risk Factors" in the Prospectus, the following factors
in connection with the purchase of the Securities:
Subordination of Class A-6 and Class A-7 Notes and Certificates; Limited Assets
Distributions of interest and principal on the Class A-6 and Class A-7 Notes
will be subordinated to the rights of the holders of the Senior Notes to
receive prior payment of interest and principal. Distributions of interest and
principal on the Certificates will be subordinated in priority of payment to
interest and principal due on the Notes.
Holders of the Notes and the Certificates must primarily rely for repayment
upon payments on the Contracts. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Contracts and, for payment of losses absorbed by the Class B-2 Certificates,
the Limited Guaranty of Green Tree.
Delinquency, Loan Loss and Repossession Experience
Green Tree began originating installment sales contracts for recreational
vehicles in 1985 and for motorcycles in 1988, but has less extensive
underwriting and servicing experience with other types of products financed by
the Contracts. Although Green Tree has calculated and presented herein its
delinquency and net loss experience with respect to its servicing portfolio of
consumer product and equipment contracts, you must not assume that the
information presented will reflect actual experience with respect to the
Contracts. In addition, you must not assume that the future delinquency, loan
loss or repossession experience of the trust with respect to the Contracts will
be better or worse than that set forth herein with respect to Green Tree's
servicing portfolio. See "The Contract Pool--Delinquency, Loan Loss and
Repossession Information." 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.
Geographic Concentration of Initial Contracts
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 California and Texas, respectively. See "The Contract
Pool." Accordingly, adverse economic conditions or other factors particularly
affecting these states could adversely affect the delinquency, loan loss or
repossession experience of the trust with respect to the Contracts. 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.
S-8
<PAGE>
THE TRUST
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying
Prospectus. Prospective Securityholders should consider, in addition to the
information below, the information under "The Trusts" in the accompanying
Prospectus.
General
Green Tree Recreational, Equipment & 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 (i)
acquiring, holding and managing the Contracts and the other assets of the
Trust and proceeds therefrom, (ii) issuing the Notes and the Certificates,
(iii) making payments on the Notes and the Certificates and (iv) engaging in
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to $
(approximate) from the sale of the Certificates. The Class B-2 Certificates
will be sold to Green Tree or an affiliate and the Class B-1 Certificates will
be sold to third party investors that are expected to be unaffiliated with
Green Tree or its affiliates. The equity of the Trust, together with the
proceeds of the initial sale of the Notes, will be used by the Trust to
purchase the Contracts from Green Tree pursuant to the Sale and Servicing
Agreement.
The Trust's principal offices are in Wilmington, Delaware, at the address
listed below under "--The Owner Trustee."
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of the
Cutoff Date, as if the issuance and sale of the Notes and Certificates had
taken place on such date:
<TABLE>
<S> <C>
Class A-1 Notes............................................... $
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........................................
-----------
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 Owner Trustee will perform limited
administrative functions under the Trust Agreement, including making
distributions from the Certificate Distribution Account. The Owner Trustee's
liability in connection with the issuance and sale of the Certificates and the
Notes is limited solely to the express obligations of the Owner Trustee as set
forth in the Trust Agreement.
S-9
<PAGE>
THE TRUST PROPERTY
The Trust Property will include, among other things, (i) the Contracts; (ii)
all rights to receive payments due thereon on or after the Cutoff Date
(excluding certain insurance premiums, late fees and other servicing charges);
(iii) such amounts as from time to time may be held in the Collection Account
and certain other accounts established and maintained by the Servicer pursuant
to the Sale and Servicing Agreement, as described below (including all
investments in the Collection Account and such other accounts and all income
from the investment of funds therein and all proceeds thereof); (iv) an
assignment of the security interests of Green Tree in the Products securing the
related Contracts; (v) an assignment of the right to receive proceeds from
claims on certain insurance policies covering the Products and the Obligors;
and (vi) certain other rights under the Trust Documents. See "The Contracts"
and "Description of the Trust Documents--Collections" in the accompanying
Prospectus.
Each Certificate will represent a fractional undivided interest in the Trust
Property. Pursuant to the Indenture the Trust will grant a security interest in
the Trust Property in favor of the Indenture Trustee on behalf of the
Noteholders. Any proceeds of such security interest in the Trust Property would
be distributed according to the Indenture, as described below under
"Description of the Trust Documents and Indenture--Distributions."
Green Tree, as custodian on behalf of the Trust, will hold each original
Contract, as well as copies of documents and instruments relating to such
Contract and evidencing the security interest in the Product securing such
Contract (the "Contract Files"). In order to protect the Trust's ownership
interest in the Contracts, Green Tree will file a UCC-1 financing statement in
Minnesota and Delaware to give notice of the Trust's ownership of the Contracts
and the related Trust Property.
THE CONTRACT POOL
General
This Prospectus Supplement contains information regarding the Initial
Contracts, which were originated through , 1999 and will be transferred to
the Trust on the Closing Date. The information for each Initial Contract is as
of the Cutoff Date for such Initial Contract. The Initial Contracts had an
aggregate principal balance as of the Cutoff Date of $ . The Sale
and Servicing Agreement provides that the Additional Contracts will be
purchased by the Trust on the Closing Date. Green Tree expects that, on the
Closing Date, the Contract Pool, which will consist of Initial Contracts and
Additional Contracts, will have an aggregate principal balance as of the Cutoff
Date of approximately $ . Although the Additional Contracts sold to
the Trust will have characteristics that differ somewhat from the Initial
Contracts described herein, Green Tree does not expect that the characteristics
of the Additional Contracts will vary materially from the Initial Contracts. In
addition, the Additional Contracts will conform to certain criteria set forth
in the Sale and Servicing Agreement.
All of the Contracts were purchased by Green Tree from dealers who regularly
originate and sell such contracts to Green Tree, or were originated by Green
Tree directly.
Certain Other Characteristics
The Initial Contracts (i) had a remaining maturity, as of the Cutoff Date, of
at least months, but not more than months, (ii) had an original maturity
of at least five months, but not more than months, (iii) had an original
principal balance of at least $ and not more than $ , (iv) had a
remaining principal balance as of the Cutoff Date of at least $ and not
more than $ and (v) had a contractual rate of interest ("Contract
Rate") of at least % and not more than %. Neither Green Tree nor the
Servicer may substitute other contracts for the Contracts at any time during
the term of the Sale and Servicing Agreement.
S-10
<PAGE>
Characteristics of Initial Contracts
<TABLE>
<CAPTION>
% of Weighted Weighted Weighted
Cutoff Average Average Weighted Average
% of Scheduled Date Pool Average Remaining Original Average Loan-to-
Number of Contract Principal Principal Principal Term Scheduled Contract Value
Asset Type Contracts Pool Balance Balance Balance (1)(2) Term (2) Rate Ratio
---------- --------- -------- ------------ --------- ---------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aircraft................ % $ % $ % %
Trucks..................
Recreational Vehicles...
Motorcycles.............
Keyboard Instruments....
Marine Products.........
Horsetrailers...........
Sport Vehicles..........
---- --- ------------ ---- ---------- --- --- ----- ---
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-11
<PAGE>
Geographic Concentration of Initial Contracts
<TABLE>
<CAPTION>
% of
Aggregate Contracts
Number of % of Number Principal Balance by Outstanding
Contracts as of of Outstanding Principal Balance
State (1) Cutoff Date Contracts as of Cutoff Date as of Cutoff Date
--------- --------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama................. % $ %
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>
- --------
(1) Based on the billing address of the Obligor set forth in Green Tree's
records.
S-12
<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-13
<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-14
<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-15
<PAGE>
GREEN TREE FINANCIAL CORPORATION
The following information supplements the information in the Prospectus under
the heading "Green Tree Financial Corporation."
Delinquency, Loan Loss and Repossession Information
The following tables set forth information relating to Green Tree's
delinquency, loan loss and repossession experience for each period indicated
with respect to all consumer product and equipment contracts it has purchased
and continues to service, including such contracts which do not meet the
criteria for selection as a Contract. Green Tree began originating installment
sales contracts for recreational vehicles in 1985 and for motorcycles in 1988,
but has less extensive underwriting and servicing experience with other types
of consumer products and equipment financed by the Contracts. Accordingly, the
delinquency, loan loss and repossession experience presented below largely
represents experience only with recreational vehicle and motorcycle contracts.
In addition, because of the rapid growth of Green Tree's portfolio of consumer
product and equipment contracts, the experience shown in more recent periods
may not be indicative of the experience to be expected from a more seasoned
portfolio.
Delinquency Experience
<TABLE>
<CAPTION>
At December 31, At
-------------------------------- September 30,
1994 1995 1996 1997 1998
------ ------ ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Number of Contracts Outstanding
(1)........................... 21,137 49,998 104,698 158,418
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 is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(3) By number of contracts.
Loan Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
------------------------------------------ September 30,
1994 1995 1996 1997 1998
-------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)........... 21,283 50,265 105,369 159,496
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.
S-16
<PAGE>
There can be no assurance that the delinquency, loan loss or repossession
experience of the Trust with respect to the Contracts will be better than,
worse than or comparable to the experience set forth above. See "Risk Factors--
Delinquency, Loan Loss and Repossession Experience" herein.
Recent Developments
On June 30, 1998, Green Tree became a wholly owned subsidiary of Conseco,
Inc., pursuant to a Merger Agreement announced on April 7, 1998. Green Tree
will continue to operate from its existing headquarters in St. Paul, Minnesota,
and its 200 local offices throughout the country. Headquartered in Carmel,
Indiana, Conseco is among the nation's leading providers of supplemental health
insurance, retirement annuities and universal life insurance.
On July 6, 1998, Conseco announced a second-quarter charge of $498 million,
net of income taxes, related to the acquisition of Green Tree. The charges are
directly related to (1) $148 million in merger-related costs, and (2) a $350
million non-cash supplemental reserve against the valuation of Green Tree's
interest-only securities and servicing rights.
Green Tree has been served with various lawsuits in the United States
District Court for the District of Minnesota. These lawsuits were filed by
certain stockholders of Green Tree as purported class actions on behalf of
persons or entities who purchased common stock of Green Tree during the alleged
class periods. In addition to Green Tree, certain current and former officers
and directors of Green Tree are named as defendants in one or more of the
lawsuits. Green Tree and the other defendants intend to seek consolidation of
each of the lawsuits in the United States District Court for the District of
Minnesota. Plaintiffs in the lawsuits assert claims under Sections 10(b) and
20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege
that Green Tree and the other defendants violated federal securities laws by,
among other things, making false and misleading statements about the current
state and future prospects of Green Tree (particularly with respect to
prepayment assumptions and performance of certain of Green Tree's loan
portfolios) which allegedly rendered Green Tree's financial statements false
and misleading. Green Tree believes that the lawsuits are without merit and
intends to defend such lawsuits vigorously.
S-17
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements the information in the Prospectus
under the heading "Yield and Prepayment Considerations."
The Servicer and Green Tree each has the option to purchase from the Trust
all remaining Contracts, and thereby effect early redemption of the Notes and
early retirement of the Certificates, on any Distribution Date when the Pool
Scheduled Principal Balance is 10% or less of the Cutoff Date Pool Principal
Balance. In addition, if neither Green Tree nor the Servicer has exercised
such repurchase option, then on the third Distribution Date as of which the
Pool Scheduled Principal Balance is 10% or less of the Cutoff Date Pool
Principal Balance, the Indenture Trustee (or the Owner Trustee, if the Notes
have been paid in full) shall solicit bids for the purchase of the Contracts
remaining in the Trust. See "Description of the Trust Documents--Termination"
in the Prospectus and "Description of the Trust Documents and Indenture--
Termination" herein.
Weighted Average Life of the Notes and the Class B-1 Certificates
The following information is given solely to illustrate the effect of
prepayments on the Contracts on the weighted average life of the Notes and the
Class B-1 Certificates under the stated assumptions and is not a prediction of
the prepayment rate that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Notes and the
Certificates will be influenced by the rate at which principal on the
Contracts is paid. Principal payments on the Contracts may be in the form of
scheduled amortization or prepayments (including, for this purpose,
liquidations due to default).
The Base Case prepayment model is Green Tree management's best estimate of
the prepayment rates that may be experienced on the Contracts. Because Green
Tree began originating and servicing contracts for many of the Products only
recently, such estimate is based in part on industry experience with similar
contracts rather than Green Tree's experience. There can be no assurance that
the Contracts will experience prepayments at such projected rates or in the
manner assumed by the prepayment model used for that type of Contract, or that
the Contracts in the aggregate will experience prepayments similar to the
overall prepayment rate or in the manner projected in the Base Case.
<TABLE>
<CAPTION>
Base Case
Product Prepayment Rate
------- ---------------
<S> <C>
Horse Trailers, Sport Vehicles, Keyboard Instruments
and Recreational Vehicles............................. % CPR
Marine Products........................................ %(1)
Motorcycles and Aircraft............................... % CPR
Trucks................................................. % ABS
</TABLE>
- --------
(1) As a percentage of the Prepayment Assumption for Contracts secured by
marine products.
The models used in this Prospectus Supplement are the Constant Prepayment
Rate ("CPR"), the Prepayment Assumption for Contracts secured by marine
products, and the Absolute Prepayment Model ("ABS"). The CPR represents an
assumed constant rate of prepayment each month, expressed as a per annum
percentage of the outstanding principal balance of the Contracts secured by
all Products other than marine products and trucks. The ABS represents an
assumed rate of prepayment each month relative to the original number of
Contracts secured by trucks in the Contract pool.
The 100% Prepayment Assumption for Contracts secured by marine products
assumes a constant prepayment of 0% per annum of the then outstanding
principal balance of such loans in the first month of the life of such loans
and an additional 1.27% (precisely, 14/11%) per annum in each month thereafter
until the twelfth month. Beginning in the twelfth month and in each month
thereafter during the life of such loans, the
S-18
<PAGE>
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; Contracts related to motorcycles and aircraft have been assumed to
have a prepayment rate equal to 24% CPR and 36% CPR, respectively; and
Contracts related to trucks have been assumed to have a prepayment rate equal
to 1.12% ABS and 1.68% ABS, respectively. NEITHER CPR NOR ABS PURPORTS TO BE
AN HISTORICAL DESCRIPTION OF PREPAYMENT EXPERIENCE OR A PREDICTION OF THE
ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF CONTRACTS, INCLUDING THE
CONTRACTS.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
percentages of the Base Case prepayment model set forth in the table; (ii)
either Green Tree or the Servicer exercises its right of optional repurchase
described above; (iii) the aggregate principal balance of the Initial
Contracts as of the Cutoff Date is $ and the Initial Contracts
have the characteristics described under "The Contract Pool"; (iv) the
Additional Contracts have the characteristics set forth in the table following
this paragraph and are assumed to have their first payments due in ; (v)
no interest shortfalls will arise in connection with prepayments in full of
the Contracts; (vi) distributions are made on the Notes and the Certificates
on the 15th day of each month commencing in ; and (vii) 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..................
Motorcycles.............
Trucks..................
Aircraft................
Sport Vehicles..........
Keyboard Instruments....
Recreational Vehicles...
------------ ----- --- ---
Total................. $ %
============ ===== === ===
</TABLE>
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each Class of Notes and Class B-1
Certificates and set forth the percentages of the original Principal Balance
of each Class that would be outstanding after each of the dates shown, at the
indicated percentages of the Base Case prepayment model. Investors are urged
to make their investment decisions on a basis that includes their
determination as to anticipated prepayment rates under a variety of the
assumptions discussed herein.
S-19
<PAGE>
Percentage of the Original Principal Balance of the Class A-1
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
Weighted Average Life(1) (Years)....................
- --------
(1) The weighted average life of a Class A-1 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-1 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-1 Note.
Percentage of the Original Principal Balance of the Class A-2
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
Weighted Average Life(1) (Years)....................
- --------
(1) The weighted average life of a Class A-2 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-2 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-2 Note.
Percentage of the Original Principal Balance of the Class A-3
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[Month] 15, 2000....................................
[Month] 15, 2001....................................
[Month] 15, 2002....................................
Weighted Average Life(1) (Years)....................
</TABLE>
- --------
(1) The weighted average life of a Class A-3 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-3 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-3 Note.
S-20
<PAGE>
Percentage of the Original Principal Balance of the Class A-4
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................. 100% 100% 100% 100% 100%
[Month] 15, 2000...................................
[Month] 15, 2001...................................
[Month] 15, 2002...................................
[Month] 15, 2003...................................
Weighted Average Life(1) (Years)...................
- --------
(1) The weighted average life of a Class A-4 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-4 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-4 Note.
Percentage of the Original Principal Balance of the Class A-5
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- ---- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage................................. 100% 100% 100% 100% 100%
[Month] 15, 2000...................................
[Month] 15, 2001...................................
[Month] 15, 2002...................................
[Month] 15, 2003...................................
[Month] 15, 2004...................................
[Month] 15, 2005...................................
Weighted Average Life(1) (Years)...................
</TABLE>
- --------
(1) The weighted average life of a Class A-5 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-5 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-5 Note.
S-21
<PAGE>
Percentage of the Original Principal Balance of the Class A-6
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[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(1) (Years)....................
- --------
(1) The weighted average life of a Class A-6 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-6 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-6 Note.
Percentage of the Original Principal Balance of the Class A-7
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[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(1) (Years)....................
</TABLE>
- --------
(1) The weighted average life of a Class A-7 Note is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Note by the number of years from the date of issuance of
such Class A-7 Note to the stated Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the initial principal balance of
such Class A-7 Note.
S-22
<PAGE>
Percentage of the Original Principal Balance of the
Class B-1 Certificates at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
Date 80% 90% 100% 110% 120%
- ---- --- --- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................. 100% 100% 100% 100% 100%
[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(1) (Years)....................
</TABLE>
- --------
(1) The weighted average life of a Class B-1 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class B-1 Certificate to the stated Distribution Date,
(ii) adding the results, and (iii) dividing the sum by the initial
principal balance of such Class B-1 Certificate.
S-23
<PAGE>
DESCRIPTION OF THE NOTES
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying Prospectus.
Prospective Noteholders should consider, in addition to the information below,
the information in the accompanying Prospectus under "The Notes," "Certain
Information Regarding the Securities," and "Description of the Trust
Documents."
General
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of the
Indenture, as executed, will be filed with the Commission following the
issuance of the Securities. The following summary describes certain terms of
the Notes and the Indenture. The summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Notes and the Indenture. The following summary supplements
the description of the general terms and provisions of the Notes of any given
series and the related Indenture set forth in the accompanying Prospectus, to
which description reference is hereby made. U.S. Bank Trust National
Association, a national banking association headquartered in St. Paul,
Minnesota, will be the Indenture Trustee.
Distributions
Noteholders will be entitled to receive distributions of interest and
principal on each Distribution Date commencing in , to the extent that
funds available are sufficient therefor. Distributions on the Notes generally
will be made from funds available first in respect on interest on the Notes,
then in respect of principal on the Notes, in the manner and order of priority
set forth below.
Interest
Interest on the Principal Balance of each Class of Notes will accrue from
, 1999, or from the most recent Distribution Date on which interest has
been paid, to but excluding the following Distribution Date, at the Interest
Rate for such Class. The "Principal Balance" of any Class of Notes as of any
Distribution Date will be the Original Principal Balance of such Class minus
all amounts previously distributed to the Noteholders of such Class in respect
of principal.
Interest on the Class A-1 and Class A-2 Notes will be calculated on the basis
of the actual number of days elapsed in a 360-day year. Interest on all other
Classes of Notes will be calculated on the basis of a 360-day year of twelve
30-day months.
Interest will be paid on the Senior Notes on each Distribution Date to the
extent of funds available on such Distribution Date. In the event the funds
available are not sufficient to make a full distribution of interest on the
Senior Notes, the funds available will be applied pro rata to each Class of
Senior Notes based on the amount payable to each such Class and the amount of
the shortfall will be carried forward and added to the amount of interest
payable on the next Distribution Date. Any amount so carried forward will bear
interest at the Interest Rate for such Class, to the extent legally
permissible.
Interest will be paid on the Class A-6 Notes on each Distribution Date, to
the extent of the remaining funds available on such Distribution Date after
payment of (i) all interest accrued on the Senior Notes and (ii) the First
Priority Principal Distribution Amount, if any (as described under "--
Principal" below). In the event the remaining funds available are not
sufficient to make a full distribution of interest on the Class A-6 Notes, the
remaining funds available will be applied to the payment of interest on the
Class A-6 Notes and the amount of the shortfall will be added to the amount of
interest payable on the Class A-6 Notes on the next Distribution Date. Any
amount so carried forward will bear interest at the Class A-6 Interest Rate, to
the extent legally permissible.
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Interest will be paid on the Class A-7 Notes on each Distribution Date, to
the extent of the remaining funds available on such Distribution Date after
payment of (i) all interest accrued on the Senior Notes, (ii) the First
Priority Principal Distribution Amount (if any), (iii) all interest accrued on
the Class A-6 Notes, and (iv) the Second Priority Principal Distribution
Amount, if any (as described under "--Principal" below). In the event the
remaining funds available are not sufficient to make a full distribution of
interest on the Class A-7 Notes, the remaining funds available will be applied
to the payment of interest on the Class A-7 Notes and the amount of the
shortfall will be added to the amount of interest payable on the Class A-7
Notes on the next Distribution Date. Any amount so carried forward will bear
interest at the Class A-7 Interest Rate, to the extent legally permissible.
Principal
Noteholders will be entitled to receive on each Distribution Date as payment
of principal, in the manner and order of priority set forth below, an amount
equal to the Total Principal Distribution Amount for such Distribution Date.
Such amount will paid as principal on the Class A-1 Notes until the Class A-1
Notes have been paid in full, then on the Class A-2 Notes until the Class A-2
Notes have been paid in full, and so on for the remaining Classes of Notes
until the Class A-7 Notes have been paid in full.
To the extent not paid in full prior to such date, the outstanding principal
amount of each Class of Notes will be payable on the following "Final Scheduled
Distribution Date" for such Class:
Class A-1:
Class A-2:
Class A-3:
Class A-4:
Class A-5:
Class A-6:
Class A-7:
The "Total Principal Distribution Amount" for any Distribution Date will
equal:
(i) the Formula Principal Distribution Amount for such Distribution Date
(described below), plus
(ii) the aggregate of all Formula Principal Shortfalls, if any, for prior
Distribution Dates (described below), plus
(iii) the First Priority Principal Distribution Amount, if any (described
below), the Second Priority Principal Distribution Amount, if any
(described below), the Third Priority Principal Distribution Amount, if any
(described below), and the Fourth Priority Principal Distribution Amount,
if any (described below), for such Distribution Date, minus
(iv) all amounts actually paid on the Notes and Certificates on prior
Distribution Dates in respect of a First Priority Principal Distribution
Amount, Second Priority Principal Distribution Amount, Third Priority
Principal Distribution Amount, or Fourth Priority Principal Distribution
Amount.
The "Formula Principal Distribution Amount" with respect to any Distribution
Date will be an amount equal to the sum of the following amounts with respect
to the related Monthly Period (as defined below), in each case computed in
accordance with the method specified in each Contract:
(i) all scheduled payments of principal due on each outstanding Contract
during the related Monthly Period (after adjustments for previous Partial
Principal Prepayments and after any adjustments to a Contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related Obligor),
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(ii) the Scheduled Principal Balance (as defined below) of each Contract
which, during the related Monthly Period, was purchased by Green Tree
pursuant to the Sale and Servicing Agreement on account of a breach of a
representation or warranty,
(iii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received on Contracts during the related Monthly
Period,
(iv) the Scheduled Principal Balance of each Contract that became a
Liquidated Contract (as defined below) during the related Monthly Period,
plus the amount of any reduction in the outstanding principal balance of a
Contract during such Monthly Period ordered as a result of a bankruptcy or
similar proceeding involving the related Obligor,
(v) without duplication of the foregoing, all collections in respect of
principal on the Contracts received during the current month up to and
including the third Business Day prior to such Distribution Date (but in no
event later than the 10th day of the month in which such Distribution Date
occurs), minus
(vi) the amount, if any, included in the Formula Principal Distribution
Amount for the preceding Distribution Date by virtue of clause (v) above.
A "Monthly Period" with respect to a Distribution Date is the calendar month
immediately preceding the month in which such Distribution Date occurs;
provided that the Monthly Period with respect to the first Distribution Date is
the two calendar months immediately preceding the month in which such
Distribution Date occurs. The "Scheduled Principal Balance" of a Contract for
any Monthly Period is its principal balance as specified in its amortization
schedule, after giving effect to any previous Partial Principal Prepayments and
to the scheduled payment due on its scheduled payment date (the "Due Date") in
that month, and after giving effect to any adjustments due to bankruptcy or
similar proceedings. A "Liquidated Contract"means any defaulted Contract as to
which the Servicer has determined that all amounts which it expects to recover
from or on account of such Contract through the date of disposition of the
related Product have been recovered or any defaulted Contract in respect of
which the related Product has been realized upon and disposed of and the
proceeds of such disposition have been received.
In the event the remaining funds available for such Distribution Date are not
sufficient to make a full distribution of the Formula Principal Distribution
Amount, the amount of such deficiency (the "Formula Principal Shortfall" for
such Distribution Date) will be added to the Total Principal Distribution
Amount for the next Distribution Date.
In the unlikely event that on any Distribution Date,
(i) the aggregate Principal Balance of the Senior Notes
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "First Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes then entitled to receive the Total Principal Distribution Amount, from
funds available for distribution on such Distribution Date after the payment of
all interest then payable on the Senior Notes but prior to the payment of
interest then payable on the Class A-6 Notes.
The "Pool Scheduled Principal Balance" as of any Distribution Date is the
aggregate Scheduled Principal Balance of all Contracts. A "Defaulted Contract"
is any Contract as to which the Servicer has commenced repossession procedures
or assigned such Contract to a third party for repossession or other
enforcement, but which has not become a Liquidated Contract.
Similarly, in the event that on any Distribution Date,
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(i) the aggregate Principal Balance of the Senior Notes, plus the
Principal Balance of the Class A-6 Notes, minus the amount of any First
Priority Principal Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Second Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes then entitled to receive the Total Principal Distribution Amount, from
funds available for distribution on such Distribution Date after the payment of
all interest then payable on the Senior Notes, the First Priority Principal
Distribution Amount and all interest then payable on the Class A-6 Notes, but
prior to the payment of interest then payable on the Class A-7 Notes.
Similarly, in the event that on any Distribution Date,
(i) the aggregate Principal Balance of the Notes, minus the amount of any
First Priority Principal Distribution Amount paid on such Distribution
Date, and minus the amount of any Second Priority Principal Distribution
Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Third Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes then entitled to receive the Total Principal Distribution Amount, from
funds available for distribution on such Distribution Date after the payment of
all interest then payable on the Senior Notes, the First Priority Principal
Distribution Amount, all interest then payable on the Class A-6 Notes, the
Second Priority Principal Distribution Amount and all interest then payable on
the Class A-7 Notes, but prior to the payment of interest then payable on the
Class B-1 Certificates.
Similarly, in the event that on any Distribution Date,
(i) the aggregate Principal Balance of the Notes, plus the Principal
Balance of the Class B-1 Certificates, minus the amount of any First
Priority Principal Distribution Amount paid on such Distribution Date,
minus the amount of any Second Priority Principal Distribution Amount paid
on such Distribution Date, and minus the amount of any Third Priority
Principal Distribution Amount paid on such Distribution Date,
is greater than
(ii) the Pool Scheduled Principal Balance as of the immediately preceding
Distribution Date, minus the aggregate Scheduled Principal Balance of all
Defaulted Contracts,
the amount of such deficiency (the "Fourth Priority Principal Distribution
Amount") will be payable as an additional payment of principal on the Class of
Notes or Class B-1 Certificates then entitled to receive the Total Principal
Distribution Amount, from funds available for distribution on such Distribution
Date after the payment of all interest then payable on the Senior Notes, the
First Priority Principal Distribution Amount, all interest then payable on the
Class A-6 Notes, the Second Priority Principal Distribution Amount, all
interest then payable on the Class A-7 Notes, the Third Priority Principal
Distribution Amount and all interest then payable on the Class B-1
Certificates, but prior to the payment of the Formula Principal Distribution
Amount.
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Subordination of Class A-6 and Class A-7 Notes
Notwithstanding the Events of Default described in the Prospectus under the
caption "The Notes--The Indenture--Events of Default; Rights Upon Event of
Default," until the Senior Notes have been paid in full, the failure to pay
interest due on the Class A-6 or Class A-7 Notes will not be an Event of
Default. Upon the occurrence and during the continuation of an Event of
Default that has resulted in an acceleration of the Notes or following an
Insolvency Event or dissolution with respect to the General Partner, no
distributions of principal and interest on the Class A-6 or Class A-7 Notes
will be made until payment in full of principal and interest on the Senior
Notes.
Similarly, if the Senior Notes have been paid in full but the Class A-6
Notes have not been paid in full, the failure to pay interest due on the Class
A-7 Notes will not be an Event of Default. Upon the occurrence and during the
continuation of an Event of Default that has resulted in an acceleration of
the Notes or following an Insolvency Event or dissolution with respect to the
General Partner, no distributions of principal and interest on the Class A-7
Notes will be made until payment in full of principal and interest on the
Class A-6 Notes.
Optional Redemption
The Notes will be redeemed in whole, but not in part, on any Distribution
Date on which Green Tree exercises its option to purchase the Contracts. Green
Tree may purchase the Contracts when the Pool Scheduled Principal Balance has
declined to 10% or less of the Cutoff Date Pool Principal Balance, as
described in the accompanying Prospectus under "Description of the Trust
Documents--Termination." The "Pool Scheduled Principal Balance" is the
aggregate Scheduled Principal Balance of all outstanding Contracts during a
Monthly Period. Such redemption would effect early retirement of the Class A-7
Notes. The redemption price will be equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon.
Book-Entry Registration
Holders of the Notes may hold through DTC (in the United States) or CEDEL or
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in such systems.
Cede & Co., as nominee for DTC, will hold the Notes. CEDEL and Euroclear
will hold omnibus positions in the Notes on behalf of the CEDEL Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries"), which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between CEDEL Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. CEDEL Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
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following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
CEDEL Participant or Euroclear Participant on such business day. Cash received
in CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account only as of the business day following settlement in DTC.
For a description of transfers between persons holding directly or indirectly
through DTC, see "Certain Information Regarding the Securities--Book-Entry
Registration" in the Prospectus.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in CEDEL in any of 28 currencies, including United
States dollars. CEDEL provides to its CEDEL Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary
Institute. CEDEL Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriters. Indirect access to CEDEL is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a CEDEL Participant, either directly or
indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in Euroclear in any of 32
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described in Annex I hereto.
The Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, 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
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clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Certain Federal Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Noteholder under the
Indenture on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, CEDEL and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
DESCRIPTION OF THE CERTIFICATES
The following information supplements the information contained in the
accompanying Prospectus. Prospective Certificateholders should consider, in
addition to the information below, the information in the accompanying
Prospectus under "The Certificates," "Certain Information Regarding the
Securities," and "Description of the Trust Documents."
General
The Certificates will be issued pursuant to the terms of the Trust Agreement,
a form of which has been filed as an exhibit to the Registration Statement. A
copy of the Trust Agreement, as executed, will be filed with the Commission
following the issuance of the Securities. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Trust Agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
Distributions
Certificateholders will be entitled to receive on each Distribution Date
commencing in October 1998, to the extent that funds available together with
the Guaranty Payment described below are sufficient therefor, distributions of
interest and principal in the manner and order of priority set forth below.
To the extent not paid in full prior to such date, the outstanding principal
amount of each Class of Certificates will be payable on the following "Final
Scheduled Distribution Date" for such Class:
Class B-1:
Class B-2:
Class B-1 Interest
Interest on the Principal Balance of the Class B-1 Certificates will accrue
from September 28, 1998, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class B-1 Rate. The "Class B-
1 Principal Balance" as of any Distribution Date will be the Original Principal
Balance of such Class minus all amounts previously distributed to the Class B-1
Certificateholders in respect of principal.
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Interest will be paid on the Class B-1 Certificates on each Distribution Date
to the extent of funds available on such Distribution Date, after payment of
(i) interest on the Notes, (ii) the First Priority Principal Distribution
Amount (if any), (iii) the Second Priority Principal Distribution Amount (if
any) and (iv) the Third Priority Principal Distribution Amount (if any).
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class B-1 Certificates, the remaining funds
available will be applied to the payment of interest on such Class and the
amount of the shortfall will be carried forward and added to the amount of
interest payable on the next Distribution Date. Any amount so carried forward
will bear interest at the Class B-1 Rate to the extent legally permissible. See
"Description of the Certificates."
Class B-1 Principal
No distributions of principal on the Class B-1 Certificates will be payable
until all of the Notes have been paid in full. On each Distribution Date
commencing on the Distribution Date on which the Notes are paid in full,
principal will be paid on the Class B-1 Certificates in an amount equal to the
Total Principal Distribution Amount for such Distribution Date, to the extent
of funds available on such Distribution Date after payment of interest on the
Class B-1 Certificates.
Class B-2 Interest
Interest on the Principal Balance of the Class B-2 Certificates will accrue
from September 28, 1998, or from the most recent Distribution Date, to but
excluding the following Distribution Date, at the Class B-2 Rate. The "Class B-
2 Principal Balance" as of any Distribution Date will be the Original Principal
Balance of such Class minus all amounts previously distributed to the Class B-2
Certificateholders in respect of principal.
Interest will be paid on the Class B-2 Certificates on each Distribution Date
to the extent of funds available on such Distribution Date, after payment of
all interest and principal then payable on the Notes and the Class B-1
Certificates.
In the event the remaining funds available are not sufficient to make a full
distribution of interest on the Class B-2 Certificates, the remaining funds
available will be applied to the payment of interest on such Class and the
amount of the shortfall will be carried forward and added to the amount of
interest payable on the next Distribution Date. Any amount so carried forward
will bear interest at the Class B-2 Rate, to the extent legally permissible.
Class B-2 Principal
No distributions of principal on the Class B-2 Certificates will be payable
until all of the Class B-1 Certificates have been paid in full (other than a
Class B-2 Principal Liquidation Loss paid by Green Tree pursuant to the Limited
Guaranty). On each Distribution Date commencing on the Distribution Date on
which the Class B-1 Certificates are paid in full, principal will be paid on
the Class B-2 Certificates in an amount equal to the Total Principal
Distribution Amount for such Distribution Date, to the extent of funds
available on such Distribution Date after payment of interest on the Class B-2
Certificates.
Limited Guaranty
In order to mitigate the effect of the subordination of the Certificates and
the effect of liquidation losses and delinquencies on the Contracts, the Class
B-2 Certificateholders are entitled to receive on each Distribution Date the
amount equal to the Guaranty Payment, if any, under Green Tree's Limited
Guaranty. The Guaranty Payment for any Distribution Date will equal the
difference, if any, between the Class B-2 Distributable Amount and the
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
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which the Notes and the Class B-1 Certificates are paid in full, principal in
an amount equal to the Total Principal Distribution Amount for such
Distribution Date (less, on the Distribution Date on which the Class B-1
Certificates are paid in full, the portion thereof payable on the Class B-1
Certificates), plus any Class B-2 Principal Liquidation Loss for such
Distribution Date (described below under "--Losses on Liquidated Contracts").
The Limited Guaranty will be an unsecured general obligation of Green Tree
and will not be supported by any letter of credit or other enhancement
arrangement. The ratings assigned to the Certificates may be affected by the
ratings of Green Tree's debt securities. Green Tree's senior debt securities
were recently downgraded by S&P to "BBB-" and upgraded by Fitch to "BBB+" which
has been reflected in the ratings assigned to the Class B-2 Certificates. See
"Summary of Terms--Ratings."
The Limited Guaranty will not benefit in any way, or result in any payment
to, the Noteholders or the Class B-1 Certificateholders.
As compensation for servicing the Contracts and providing the Limited
Guaranty, Green Tree will be entitled to receive the Monthly Servicing and
Guaranty Fee on each Distribution Date, which will be equal to the Amount
Available remaining after payment of the Class B-2 Distributable Amount.
Optional Prepayment
If Green Tree exercises its option to purchase the Contracts when the Pool
Scheduled Principal Balance declines to 10% or less of the Cutoff Date Pool
Principal Balance, Certificateholders will receive an amount in respect of the
Certificates equal to the outstanding principal amount together with accrued
interest at the applicable Pass-Through Rate, which distribution will effect
early retirement of the Certificates. See "Description of the Trust Documents--
Termination" in the accompanying Prospectus.
Transfers of Certificates
Certificateholders, other than individuals or entities holding Certificates
through a broker who reports sales of securities on Form 1099-B, are required
under the Trust Agreement to notify the Owner Trustee of any transfer of their
Certificates in a taxable sale or exchange within 30 days of such transfer.
Losses on Liquidated Contracts
As described above, the distribution of principal to the Securities is
intended to equal the Total Principal Distribution Amount. Such amount includes
the Scheduled Principal Balance of each Contract that became a Liquidated
Contract during the Monthly Period preceding such Distribution Date. If the Net
Liquidation Proceeds from such Liquidated Contract are less than the Scheduled
Principal Balance of such Liquidated Contract, the deficiency will, in effect,
be absorbed first by the Monthly Servicing and Guaranty Fee otherwise payable
to Green Tree and then by the Class B-2 Certificateholders (although Green Tree
will be obligated to make a Guaranty Payment equal to any shortfall in the
distribution to the Class B-2 Certificateholders).
If the Pool Scheduled Principal Balance for any Distribution Date is less
than the sum of the aggregate outstanding Principal Balance of the Notes and
the Certificates after giving effect to all distributions of principal on such
Distribution Date, then Green Tree will be obligated to pay the amount of such
deficiency (a "Class B-2 Principal Liquidation Loss") under the Limited
Guaranty. If Green Tree should fail to pay such amount, however, the Class B-2
Principal Balance would not be reduced and interest would continue to accrue on
the full Class B-2 Principal Balance. Securityholders would, however, be
entitled to receive such unpaid amount as part of the Total Principal
Distribution Amount prior to any payment of the Monthly Servicing and Guaranty
Fee to Green Tree on any subsequent Distribution Date.
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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 (together, the "Trust Documents") and the
Indenture. Forms of the Trust Documents and Indenture, as executed, have been
filed as exhibits to the Registration Statement. A copy of each of the Trust
Documents and Indenture will be filed with the Commission following the
issuance of the Securities. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Trust Documents and Indenture. The following summary supplements, the
description of the general terms and provisions of the Trust Documents and
Indenture (as such terms are used in the accompanying Prospectus) set forth in
the accompanying Prospectus, to which description reference is hereby made.
Accounts
The Servicer will establish and maintain one or more accounts, in the name of
the Indenture Trustee on behalf of the Noteholders and the Certificateholders,
into which all payments made on or with respect to the Contracts will be
deposited (the "Collection Account"). The Servicer will establish and maintain
an account, in the name of the Indenture Trustee on behalf of the Noteholders,
in which amounts released from the Collection Account for distribution to
Noteholders will be deposited and from which all distributions to Noteholders
will be made (the "Note Distribution Account"). The Servicer will also
establish and maintain an account, in the name of the Owner Trustee on behalf
of the Certificateholders, in which amounts released from the Collection
Account for distribution to Certificateholders will be deposited and from which
all distributions to Certificateholders will be made (the "Certificate
Distribution Account"). See "Description of the Trust Documents--Collections"
in the accompanying Prospectus.
Distributions
On each Distribution Date, the Servicer shall instruct the Indenture Trustee
to distribute from the Collection Account the Amount Available in the following
order of priority:
1. If Green Tree or an affiliate is no longer the Servicer, then to the
Servicer, the Monthly Servicing Fee for the related Monthly Period.
2. To the Servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior Monthly Period.
3. To the Note Distribution Account, all accrued interest on the Senior
Notes.
4. To the Note Distribution Account, the First Priority Principal
Distribution Amount, if any.
5. To the Note Distribution Account, all accrued interest on the Class A-
6 Notes.
6. To the Note Distribution Account, the Second Priority Principal
Distribution Amount, if any.
7. To the Note Distribution Account, all accrued interest on the Class A-
7 Notes.
8. To the Note Distribution Account, the Third Priority Principal
Distribution Amount, if any.
9. To the Certificate Distribution Account, all accrued interest on the
Class B-1 Certificates;
10. To the Note Distribution Account (or, if all the Notes have been paid
in full, to the Certificate Distribution Account), the Fourth Priority
Principal Distribution Amount, if any.
11. To the Note Distribution Account (or, if all the Notes have been paid
in full, to the Certificate Distribution Account), the remaining Total
Principal Distribution Amount.
12. To the Certificate Distribution Account, all accrued interest on the
Class B-2 Certificates.
13. To the Certificate Distribution Account, the remaining Total
Principal Distribution Amount (for payment to the Class B-2 Certificates,
if the Notes and the Class B-1 Certificates have been paid in full).
14. To Green Tree, any remaining amount as the Monthly Servicing and
Guaranty Fee.
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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, plus
any Guaranty Payment made by Green Tree, in payment of interest and principal
on the Certificates in the manner described above.
For the purposes hereof, the following terms shall have the following
meanings:
"Amount Available" with respect to any Distribution Date, means generally the
sum of payments on the Contracts due and received during the related Monthly
Period, prepayments and other unscheduled collections received during the
related Monthly Period, all collections in respect of principal on the
Contracts received during the current month up to and including the third
Business Day prior to such Distribution Date (but in no event later than the
10th day of the month in which the Distribution Date occurs), any amounts
deposited in respect of Purchased Contracts, any Guaranty Payment, and all
earnings from the investment of funds in the Collection Account, minus, with
respect to all Distribution Dates other than the Distribution Date in October
1998, all collections of principal on the Contracts received during the related
Monthly Period up to and including the third Business Day prior to the
preceding Distribution Date (but in no event later than the 10th day of the
prior month).
The "Formula Principal Distribution Amount" with respect to any Distribution
Date will be an amount equal to the sum of the following amounts with respect
to the related Monthly Period, in each case computed in accordance with the
method specified in each Contract:
(i) all scheduled payments of principal due on each outstanding Contract
during the related Monthly Period (after adjustments for previous Partial
Principal Prepayments and after any adjustments to a Contract's
amortization schedule as a result of a bankruptcy or similar proceeding
involving the related Obligor),
(ii) the Scheduled Principal Balance of each Contract which, during the
related Monthly Period, was purchased by Green Tree pursuant to the Sale
and Servicing Agreement on account of a breach of a representation or
warranty,
(iii) all Partial Principal Prepayments applied and all Principal
Prepayments in Full received on Contracts during the related Monthly
Period,
(iv) the Scheduled Principal Balance of each Contract that became a
Liquidated Contract (as defined below) during the related Monthly Period,
plus the amounts of any reduction in the outstanding principal balance of a
Contract during such Monthly Period ordered as a result of a bankruptcy or
similar proceeding involving the related Obligor,
(v) without duplication of the foregoing, all collections in respect of
principal on the Contracts received during the current month up to and
including the third business day prior to such Distribution Date (but in no
event later than the 10th day of the month in which such Distribution Date
occurs), minus
(vi) the amount, if any, included in the Formula Principal Distribution
Amount for the preceding Distribution Date by virtue of clause (v) above.
"Liquidated Contract" means any defaulted Contract as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Contract through the date of disposition of the related Product have
been recovered; provided that any defaulted Contract in respect of which the
related Product has been realized upon and disposed of and proceeds of such
disposition have been received shall be deemed to be a Liquidated Contract.
"Purchased Contract" means a Contract (i) that Green Tree has become
obligated to repurchase (or, under certain circumstances, has elected to
repurchase) as a result of an uncured breach by Green Tree of a representation
or warranty made by Green Tree with respect to such Contract or (ii) that the
Servicer has
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become obligated to repurchase (or, under certain circumstances, has elected
to repurchase) as a result of an uncured breach of the covenants made by it
with respect to such Contract.
"Principal Balance" means, with respect to any Distribution Date and any
Class of Notes or Certificates, the Original Principal Balance of such Class
minus all amounts previously distributed in respect of principal of such
Class.
Statements to Securityholders
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Indenture Trustee a statement to be delivered to the Noteholders and to
the Owner Trustee a statement to be delivered to the Certificateholders on
such Distribution Date. Such statements will be based on the information in
the related Servicer's Certificate setting forth certain information required
under the Trust Documents. Each such statement to be delivered to Noteholders
will include the following information as to the Notes, and each such
statement to be delivered to Certificateholders will include the following
information as to the Certificates, with respect to such Distribution Date or
the period since the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to interest on or with
respect to each Class of Notes and Certificates;
(ii) the amount of the distribution allocable to principal on or with
respect to each Class of Notes and Certificates;
(iii) the aggregate outstanding principal balance and the Note Pool
Factor for each Class of Notes and the Certificate Principal Balance and
the Certificate Pool Factor for each Class of Certificates after giving
effect to all payments reported under (ii) above on such date;
(iv) the Interest Shortfall for each Class of Notes, the Interest
Shortfall for each Class of Certificates, if any, and the change in such
amounts from the preceding statement;
(v) the amount, if any, of Class B-2 Principal Liquidation Losses,
aggregate unreimbursed Class B-2 Principal Liquidation Losses since the
Closing Date and the amount of the distribution allocable to such losses
for the Class B-2 Certificates;
(vi) the amount, if any, of the Guaranty Payment;
(vii) the amount of the Monthly Servicing and Guaranty Fee paid to the
Servicer;
(viii) the number and aggregate principal balances of delinquent
Contracts, the number of Products repossessed and repossessed and remaining
in inventory and the number of Contracts that became Liquidated Contracts
with respect to the immediately preceding Monthly Period; and
(ix) the aggregate amount of Servicer Advances made by the Servicer with
respect to such Distribution Date, and the aggregate amount paid to the
Servicer as reimbursement of Servicer Advances made on prior Distribution
Dates.
Each amount set forth pursuant to subclauses (i) through (vi) with respect
to Notes or Certificates will be expressed as a dollar amount per $1,000 of
the initial principal amount of the Notes or the initial Certificate Principal
Balance, as applicable.
Unless and until Definitive Notes are issued, such reports will be sent on
behalf of the Trust to Cede & Co., as registered holder of the Notes and the
nominee of DTC. Note Owners may receive copies of such reports upon written
request, together with a certification that they are Note Owners and payment
of any expenses associated with the distribution of such reports, from the
Indenture Trustee. See "Reports to Securityholders" herein and "Reports to
Securityholders" and "Certain Information Regarding the Securities" in the
accompanying Prospectus.
Within the required period of time after the end of each calendar year, the
Indenture Trustee and the Owner Trustee, as applicable, will furnish to each
person who at any time during such calendar year was a
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Noteholder or Certificateholder, a statement as to the aggregate amounts of
interest and principal paid to such Noteholder or Certificateholder,
information regarding the amount of servicing compensation received by the
Servicer and such other information as Green Tree deems necessary to enable
such Noteholder or Certificateholder to prepare its tax returns. See "Certain
Federal Income Tax Consequences" herein.
Termination
As described in the Prospectus under "Description of the Trust Documents--
Termination," Green Tree and the Servicer each will be permitted, at its
option, to purchase from the Trust, on any Distribution Date immediately
following any Monthly Period as of the last day of which the Pool Scheduled
Principal Balance is equal to or less than 10% of the Cutoff Date Pool
Principal Balance, all remaining Contracts and the other remaining Trust
Property at a price equal to the unpaid principal amount of the Securities,
plus accrued and unpaid interest thereon. The exercise of this right will
effect an early retirement of the Certificates and the Class A-7 Notes.
Administrator
Green Tree Financial Servicing Corporation, a Delaware corporation (the
"Administrator"), will provide the notices and perform other administrative
obligations required by the Indenture and the Trust Agreement. The
Administrator, a subsidiary of Green Tree, will enter into an Administration
Agreement with the Trust and the Indenture Trustee relating to its duties and
obligations as Administrator.
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal and state income tax
consequences relating to the purchase, ownership, and disposition of the Notes
and the Certificates. The discussion is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated thereunder, and judicial or ruling authority, all of
which are subject to change, which change may be retroactive. For additional
information regarding federal and state income tax consequences, see "Certain
Federal Income Tax Consequences--Owner Trust Series" and "Certain State Income
Tax Consequences" in the Prospectus.
Prospective investors should consult their own tax advisors to determine the
federal, state, local and other tax consequences of the purchase, ownership and
disposition of the Notes and the Certificates. Prospective investors should
note that no rulings have been or will be sought from the Internal Revenue
Service (the "IRS") with respect to any of the federal income tax consequences
discussed herein or in the accompanying Prospectus, and no assurance can be
given that the IRS will not take contrary positions. Moreover, there are no
cases or IRS rulings on transactions similar to those described herein with
respect to the Trust, involving both debt and equity interests issued by a
trust with terms similar to those of the Notes and the Certificates.
Prospective investors are urged to consult their own tax advisors in
determining the federal, state, local, foreign and any other tax consequences
to them of the purchase, ownership and disposition of the Securities.
In the opinion of [counsel to Green Tree], for federal and Minnesota income
tax purposes, the Notes will be characterized as debt and the Trust will not be
characterized as an association (or a publicly traded partnership) taxable as a
corporation. Each Certificateholder, by the acceptance of a Certificate, agrees
to treat the Trust as a partnership in which the Certificateholders are
partners for federal income tax purposes. The Notes will not be issued with
original issue discount ("OID").
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code, prohibit a pension, profit-
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan") from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under
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<PAGE>
the Code with respect to such Benefit Plan. A violation of these "prohibited
transaction" rules may result in an excise tax or other penalties and
liabilities under ERISA and the Code for such persons. Title I of ERISA also
requires that fiduciaries of a Benefit Plan subject to ERISA make investments
that are prudent, diversified (except if prudent not to do so) and in
accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Securities might be deemed to constitute prohibited transactions under ERISA
and the Code if assets of the Trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the "Plan
Assets Regulation"), the assets of the Trust would be treated as plan assets of
a Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquires an "Equity Interest" in the Trust and none of the exceptions contained
in the Plan Assets Regulation is applicable. An equity interest is defined
under the Plan Assets Regulation as an interest other than an instrument which
is treated as indebtedness under applicable local law and which has no
substantial equity features. Green Tree believes that the Notes should be
treated as indebtedness without substantial equity features for purposes of the
Plan Assets Regulation. However, without regard to whether the Notes are
treated as an Equity Interest for such purposes, the acquisition or holding of
Notes by or on behalf of a Benefit Plan could be considered to give rise to a
prohibited transaction if the Trust, the Owner Trustee or the Indenture
Trustee, the owner of collateral, the Underwriters, or any of their respective
affiliates is or becomes a party in interest or a disqualified person with
respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type of asset
invested and the position of the plan fiduciary making the decision to acquire
a Note. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 84-14, regarding transactions effected by "qualified
professional asset managers"; and PTCE 96-23, regarding transactions effected
by "in-house asset managers."
The Certificates may not be acquired by (a) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (including an insurance company acting on behalf of
its general account). Prior to its purchase of a Certificate, each
Certificateholder must certify in writing to Green Tree, the Owner Trustee, the
Underwriters and the Servicer that its purchase of such Certificate will
satisfy certain conditions specified in the exemptive relief granted by, and
regulations proposed by, the Department of Labor. In this regard, purchasers
that are insurance companies should consult with their counsel with respect to
the United States Supreme Court case interpreting the fiduciary responsibility
rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris Trust and
Savings Bank (decided December 13, 1993). In John Hancock, the Supreme Court
ruled that assets held in an insurance company's general account may be deemed
to be "plan assets" for ERISA purposes under certain circumstances. Prospective
purchasers should determine whether the decision affects their ability to make
purchases of the Certificates. In particular, such an insurance company should
consider the exemptive relief granted by the Department of Labor for
transactions involving insurance company general accounts in PTCE 95-60 and
proposed by the Department of Labor in proposed ERISA regulation Section
2550.401(c)-1, 62 Fed. Reg. 66908 (December 22, 1997). For additional
information regarding treatment of the Certificates under ERISA, see "ERISA
Considerations" in the Prospectus.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements. Such plans may, however, be subject to
the provisions of other applicable federal and state laws, including, for any
such governmental or church plan qualified under Section 401(a) of the Code and
exempt from taxation under Section 501(a) of the Code, the prohibited
transaction rules set forth in Section 503 of the Code.
A plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
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<PAGE>
UNDERWRITING
The Underwriters have agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from Green Tree the respective principal
amounts of Notes and Class B-1 Certificates set forth opposite their names
below:
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
[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 Offered Securities offered hereby, if any of such Offered
Securities are purchased.
Green Tree has been advised by the Underwriters that they propose initially
to offer the Offered Securities to the public at the respective offering prices
set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price less a concession not in excess of the respective amounts
set forth in the table below (expressed as a percentage of the relative Note
Principal Balance or Certificate Principal Balance). The Underwriters may allow
and such dealers may reallow a discount not in excess of the respective amounts
set forth in the table below to certain other dealers.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- -----------
<S> <C> <C>
A-1................................................. % %
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
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Offered Securities. As an exception to
these rules, the Underwriters are permitted to engage in certain transactions
that stabilize the price of the Offered Securities. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of the Offered Securities.
If the Underwriters create a short position in the Offered Securities in
connection with the offering, i.e., if they sell more Offered Securities than
are set forth on the cover page of this Prospectus Supplement, the Underwriters
may reduce that short position by purchasing Offered Securities in the open
market.
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<PAGE>
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither Green Tree nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the Offered Securities. In addition,
neither Green Tree nor any of the Underwriters makes any representation that
the Underwriters will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Underwriting Agreement provides that Green Tree will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or will contribute to payments the
Underwriters may be required to make in respect thereof.
Each of the Underwriters has represented, warranted and agreed that (i) it
has not offered or sold and, prior to the expiration of the period of six
months from the Closing Date, will not offer or sell any Notes to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Notes in, from or otherwise involving the United Kingdom; and (iii) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issue of the Notes to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 (as amended) or is
a person to whom such document may otherwise lawfully be issued or passed on.
The Notes have not been and will not be registered under the Securities and
Exchange Law of Japan (the "Securities and Exchange Law") and each of the
Underwriters has agreed that it will not offer or sell any of the Notes,
directly or indirectly, in Japan or to, or for the benefit of, any resident of
Japan (which term as used herein means any person resident in Japan, including
any corporation or other entity organized under the laws of Japan), except
pursuant to an exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any other applicable
laws, regulations and ministerial guidelines of Japan.
Green Tree does not intend to apply for listing of the Offered Securities on
a national securities exchange, but has been advised by the Underwriters that
the Underwriters currently intend to make a market in the Offered Securities,
as permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Offered Securities and any such
market may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Offered Securities.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, Green Tree and the
Underwriters will promptly deliver, or cause to be delivered, without charge, a
paper copy of the Prospectus Supplement and Prospectus.
LEGAL MATTERS
Certain matters with respect to the legality of the Notes and Certificates
and with respect to the federal and Minnesota income tax matters discussed
under "Certain Federal and State Income Tax Consequences" will be passed upon
for Green Tree by [counsel to Green Tree]. 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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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Notes will be available only in
book-entry form (the "Global Notes"). Investors in the Global Notes may hold
such Global Notes through any of DTC, CEDEL or Euroclear. The Global Securities
will be tradeable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Notes through CEDEL
and Euroclear will be conducted in the ordinary way in accordance with their
normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Notes through DTC
will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment basis
through the respective Depositaries of CEDEL and Euroclear (in such capacity)
and DTC Participants.
Non-U.S. holders (as described below) of Global Notes will be subject to U.S.
withholding taxes unless such holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or
their participants.
Initial Settlement
All Global Notes will be held in book-entry form by DTC in the name of Cede &
Co. as nominee of DTC. Investors' interests in the Global Notes will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Notes through DTC will follow the
settlement practices applicable to United States corporate debt obligations.
Investors securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Notes through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no "lock-
up" or restricted period. Global Notes will be credited to the securities
custody accounts on the settlement date against payments in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market trading
between CEDEL Participants or Euroclear Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Notes are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
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<PAGE>
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its Depositary to receive the Global
Notes against payment. Payment will include interest accrued on the Global
Notes from and including the last coupon payment date to and excluding the
settlement date. Payment will then be made by such Depositary to the DTC
Participant's account against delivery of the Global Notes. After settlement
has been completed, the Global Notes will be credited to the applicable
clearing system and by the clearing system, in accordance with its usual
procedures, to the CEDEL Participant's or Euroclear Participant's account. The
Global Notes credit will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the Global Notes will accrue from,
the value date (which would be the preceding day when settlement occurred in
New York). If settlement is not completed on the intended value date (i.e., the
trade fails), the CEDEL or Euroclear cash debit will be valued instead as of
the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Notes would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Notes were credited to their
accounts. However, interest on the Global Notes would accrue from the value
date. Therefore, in many cases the investment income on the Global Notes earned
during that one-day period may substantially reduce or offset the amount of
such overdraft charges, although this result will depend on each CEDEL
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Notes to the
respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time zone
differences in their favor, CEDEL Participants and Euroclear Participants may
employ their customary procedures for transactions in which Global Notes are to
be transferred by the respective clearing systems, through their respective
Depositaries, to a DTC Participant. The seller will send instructions to CEDEL
or Euroclear through a CEDEL Participant or Euroclear Participant at least one
business day prior to settlement. In these cases, CEDEL or Euroclear will
instruct their respective Depositaries, as appropriate, to deliver the Notes to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Notes from and including the last coupon payment date to
and excluding the settlement date. The payment will then be reflected in the
account of the CEDEL Participant or Euroclear Participant the following day,
and receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be
the preceding day, when settlement occurred in New York). Should the CEDEL
Participant or Euroclear Participant have a line of credit with its clearing
system and elect to be in debit in anticipation of receipt of the sale proceeds
in its account, the bank-valuation will extinguish any overdraft charges
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase Global Notes from DTC Participants for delivery to
CEDEL Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
A-2
<PAGE>
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Notes in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their CEDEL or Euroclear account in
order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Notes holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of Notes that
are non-U.S. Persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status)
and a certificate under penalties of perjury (the "Tax Certificate") that
such beneficial owner is (i) not a controlled foreign corporation (within
the meaning of Section 957(a) of the Code) that is related (within the
meaning of Section 864(d)(4) of the Code) to the Trust or the Transferor
and (ii) not a 10 percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Trust or the Transferor. If the
information shown on Form W-8 or the Tax Certificate changes, a new Form W-
8 or Tax Certificate, as the case may be, must be filed within 30 days of
such change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of Notes
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the beneficial owner of Notes or such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (the clearing agency, in the case of
persons holding directly on the books of the clearing agency). Form W-8 and
Form 1001 are effective for three calendar years and Form 4224 is effective
for one calendar year.
A-3
<PAGE>
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes,
regardless of its source. This summary does not deal with all aspects of U.S.
federal income tax withholding that may be relevant to foreign holders of the
Global Notes. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global Notes.
A-4
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation or an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY , 1999
PROSPECTUS
Green Tree Recreational, Equipment & Consumer Trusts
Asset-Backed Certificates
Asset-Backed Notes
-----------
Green Tree Financial Corporation
(Seller and Servicer)
-----------
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 (which we will refer to as
"Certificates"), or Asset-Backed Notes (which we will refer to as "Notes"), or
both. We will refer to Certificates and Notes collectively as "Securities" in
this Prospectus, and to each separate series of Securities as a "Series." Green
Tree Financial Corporation 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 Green Tree
Financial Corporation or any of its affiliates.
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 the prospectus supplement relating to that Series.
The date of this Prospectus is February , 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: (a) this Prospectus, which provides general information,
some of which many not apply to a particular Series of Securities, including
your Series; and (b) the prospectus supplement related to 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. The information in this document
may only be accurate on the date of this document.
Some persons participating in this offering may engage in transactions that
stabilize, maintain or in some way affect the price of the Securities. These
types of transactions may include stabilizing, the purchase of Securities to
cover syndicate short positions and the imposition of penalty bids. For a more
complete description of these activities, please read the section entitled
"Underwriting" in your prospectus supplement.
REPORTS TO HOLDERS OF THE SECURITIES
We will provide to the holders of the Securities of each Series certain
monthly and annual reports concerning the Securities and the related trust. For
a more complete description of the reports you will receive, please read the
section entitled "Certain Information Regarding the Securities--Statements to
Securityholders."
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with the
Securities and Exchange Commission (the "SEC"), including annual, quarterly and
special reports, proxy statements 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:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, IL 60661
</TABLE>
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.
The SEC allows us to "incorporate by reference" some of the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this Prospectus, and later information
that we file with the SEC will automatically update and supersede this
information.
All documents filed by the Servicer, on behalf of any trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to
the termination of the offering of the Securities issued by that trust, will be
incorporated by reference into this Prospectus.
2
<PAGE>
SUMMARY OF THE TERMS OF THE SECURITIES
This summary highlights selected information regarding the 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 Securities,
read this entire Prospectus and the accompanying prospectus supplement.
Securities Offered.................... Green Tree Financial Corporation will
create a trust and deposit a pool of
contracts in the trust. The trust may
issue Certificates, or Notes, or both.
This Prospectus describes multiple
trusts that Green Tree Financial
Corporation will create from time to
time. Each trust will issue a separate
Series of Securities. Payments on the
Securities will be made primarily from
payments on the related pool of
contracts.
Seller and Servicer................... Green Tree Financial Corporation, 1100
Landmark Towers, 345 St. Peter Street,
St. Paul, Minnesota 55102, telephone:
(651) 293-3400. We refer to Green Tree
Financial Corporation in this
Prospectus as "Green Tree."
Risk Factors.......................... There are special considerations that
are important to a decision to invest
in the Certificates. You should read
carefully the section entitled "Risk
Factors" beginning on page 12 of this
Prospectus.
The Contracts......................... The contracts underlying a Series of
Securities form a contract pool. The
contracts in a contract pool will be
installment sales contracts and
promissory notes for the purchase of a
variety of products. The contracts and
the products whose purchase they
finance are described in the sections
entitled "The Contracts" and "Green
Tree Financial Corporation--Purchase of
Contracts."
The prospectus supplement for each
Series will provide information about
the contracts in that contract pool,
including the following:
. the aggregate principal balance of
the contracts, as of a date specified
in the prospectus supplement;
. the weighted average and range of
contractual rates of interest on the
contracts;
. the weighted average and ranges of
terms to scheduled maturity of the
contracts as of origination and as of
a date specified in the prospectus
supplement;
. the average outstanding principal
balance of the contracts as of a date
specified in the prospectus
supplement;
. the range of loan-to-value ratios;
and
the portions of the contract pool
representing loans for each type of
product financed.
3
<PAGE>
If we so specify in the related
prospectus supplement, the trust may
purchase additional contracts from
Green Tree after the date of issuance
of that Series, from funds on deposit
in a pre-funding account.
The contracts will have been originated
by Green Tree on an individual basis in
the ordinary course of its business,
unless we specify otherwise in the
related prospectus supplement.
Description of the Notes.............. If the Series of Securities being
offered includes any classes of Notes,
the terms of those Notes will be
specified in the related prospectus
supplement.
Any Notes issued by a trust will be
issued pursuant to an Indenture between
the trust and an indenture trustee. The
related prospectus supplement will
identify the indenture trustee for that
series of Notes and provide more
information about the indenture
trustee. The Notes will be payable
primarily from payments collected on
the related contract pool.
If we so specify in the related
prospectus supplement, a Series of
Notes may include one or more classes
with different rights to payments of
principal and interest, including
classes which:
. are entitled to receive only
distributions of interest,
. are entitled to receive only
distributions of principal,
. are entitled to receive principal on
a planned amortization schedule or a
targeted amortization schedule, or
. are entitled to receive principal
only after other classes have
received a specified amount of
principal.
We will issue the Notes in fully
registered form in the authorized
denominations that we specify in the
related prospectus supplement. No
government agency or other insurer will
guarantee or insure the Notes, unless
we otherwise specify in the related
prospectus supplement. Similarly, no
government agency or other insurer will
guarantee or insure payments on the
contracts, except as we specify in this
Prospectus and in the related
prospectus supplement.
Subordinated Notes.................... We may subordinate one or more classes
of any Series of Notes, as specified in
the related prospectus
4
<PAGE>
supplement. The rights of holders of
subordinated Notes to receive any or a
portion of distributions with respect
to the contracts will be subordinated
to the rights of holders of senior
Notes to the extent and in the manner
we specify in the related prospectus
supplement. If a Series of Notes
contains more than one class of
subordinated Notes, distributions and
losses will be allocated among those
classes in the manner specified in the
related prospectus supplement. The
rights of holders of subordinated
Notes, to the extent not subordinated,
may be on a parity with holders of
senior Notes. By subordinating a class
of Notes, we intend to:
. enhance the likelihood of regular
receipt by holders of senior Notes of
the full amount of scheduled monthly
payments of principal and interest
due them, and
. protect holders of senior Notes
against losses.
In addition, the trust may issue one or
more classes of Certificates that would
also be subordinated to the Notes, and
thereby provide credit enhancement for
the Notes.
If we so specify in the applicable
prospectus supplement, we may entitle
some classes of subordinated Notes the
benefits of other forms of credit
enhancement that would benefit only
those subordinated Notes.
Credit Enhancement for the Notes...... As an alternative, or in addition, to
the credit enhancement afforded by
subordination of the subordinated
Notes, we may provide credit
enhancement with respect to a Series of
Notes by pool insurance, letters of
credit, surety bonds, a guarantee of
Green Tree, cash reserve funds or other
forms of enhancement acceptable to each
nationally recognized rating agency
rating a Series of Notes. We will
describe any such credit enhancement in
the related prospectus supplement.
Interest on the Notes................. The trust will pay interest on the
Notes on the dates specified in the
related prospectus supplement. The
related prospectus supplement will
describe the interest rate, if any, for
each class or the method of determining
the interest rate. This rate may be
fixed, variable or adjustable, as
specified in the related prospectus
supplement. For a more complete
description of interest payable on the
Notes, see "Yield and Prepayment
Considerations" and "The
5
<PAGE>
Notes" in this Prospectus. As we
specify in the related prospectus
supplement, classes of a Series of
Notes may not be entitled to receive
interest or may be entitled to receive
interest which is not proportionate to
the principal allocable to such Notes.
Principal (Including Prepayments) on
the Notes............................ Principal will be paid on the Notes on
each payment date, except as we
otherwise describe in the related
prospectus supplement. Some classes of
Notes may not be entitled to payments
of principal until other classes of
Notes have received a specified amount
of principal. For a more complete
description of principal payments on
the Notes, see "Yield and Prepayment
Considerations" and "The Notes" in this
Prospectus.
Description of the Certificates....... If the Series of Securities being
offered includes any classes of
Certificates, the terms of those
Certificates will be specified in the
related prospectus supplement.
Any Certificates issued by a trust will
be issued pursuant to either (i) a
Trust Agreement between Green Tree and
an owner trustee, or (ii) a Pooling and
Servicing Agreement between Green Tree
and a trustee. The related prospectus
supplement will identify the owner
trustee or trustee for that series of
Certificates and provide more
information about the owner trustee or
trustee. The Certificates will be
payable primarily from payments
collected on the related contract pool.
If we so specify in the related
prospectus supplement, a Series of
Certificates may include one or more
classes with different rights to
payments of principal and interest,
including classes which:
. are entitled to receive only
distributions of interest,
. are entitled to receive only
distributions of principal,
. are entitled to receive principal on
a planned amortization schedule or a
targeted amortization schedule, or
. are entitled to receive principal
only after other classes have
received a specified amount of
principal.
We will issue the Certificates in fully
registered form in the authorized
denominations that we specify in
6
<PAGE>
the related prospectus supplement. No
government agency or other insurer will
guarantee or insure the Certificates,
unless we otherwise specify in the
related prospectus supplement.
Similarly, no government agency or
other insurer will guarantee or insure
payments on the contracts, except as we
specify in this Prospectus and in the
related prospectus supplement.
Subordinated Certificates............. If the related trust also issued Notes,
the Certificates of that Series will be
subordinated to the Notes of that
Series (unless we specify otherwise in
the related prospectus supplement). We
may also subordinate one or more
classes of any Series of Certificates
to other classes in the same Series, as
specified in the related prospectus
supplement. The rights of holders of
subordinated Certificates to receive
any or a portion of distributions with
respect to the loans will be
subordinated to the rights of holders
of Notes and senior Certificates to the
extent and in the manner we specify in
the related prospectus supplement. If a
Series of Certificates contains more
than one class of subordinated
Certificates, distributions and losses
will be allocated among those classes
in the manner specified in the related
prospectus supplement. The rights of
holders of subordinated Certificates,
to the extent not subordinated, may be
on a parity with holders of Notes and
holders of senior Certificates. By
subordinating a class of Certificates,
we intend to:
. enhance the likelihood of regular
receipt by holders of Notes and
holders of senior Certificates of the
full amount of scheduled monthly
payments of principal and interest
due them, and
. protect holders of Notes and holders
of senior Certificates against
losses.
If we so specify in the applicable
prospectus supplement, we may entitle
some classes of subordinated
Certificates the benefits of other
forms of credit enhancement that would
benefit only those subordinated
Certificates.
Credit Enhancement for the
Certificates......................... As an alternative, or in addition, to
the credit enhancement afforded by
subordination of the subordinated
Certificates, we may provide credit
enhancement with respect to a Series of
Certificates by pool insurance, letters
of credit, surety bonds, a guarantee of
Green Tree, cash reserve funds or other
forms of enhancement acceptable to each
nationally
7
<PAGE>
recognized rating agency rating a
Series of Certificates. We will
describe any such credit enhancement in
the related prospectus supplement.
Interest on the Certificates.......... We will pay interest on the
Certificates on the dates specified in
the related prospectus supplement. The
related prospectus supplement will
describe the pass-through rate, if any,
for each class or the method of
determining the pass-through rate. This
rate may be fixed, variable or
adjustable, as specified in the related
prospectus supplement. For a more
complete description of interest
payable on the Certificates, see "Yield
and Prepayment Considerations" and "The
Certificates" in this Prospectus. As we
specify in the related prospectus
supplement, classes of a Series of
Certificates may not be entitled to
receive interest or may be entitled to
receive interest which is not
proportionate to the principal
allocable to such Certificates.
Principal (Including Prepayments) on
the Certificates..................... Principal on the Certificates will be
paid on each payment date, except as we
otherwise describe in the related
prospectus supplement. For a more
complete description of principal on
the Certificates, see "Yield and
Prepayment Considerations" and "The
Certificates" in this Prospectus.
Advances.............................. Unless we specify otherwise in the
related prospectus supplement, Green
Tree, as the servicer of the contract
pool, will be obligated to make an
advance for each payment date equal to
the scheduled payments on the contracts
that were due during the prior month
but not received. The servicer will be
entitled to reimbursement of any such
advance from subsequent payments made
on that contract and, if the servicer
decides that the advance will not be
recoverable from payments on that
contract, the servicer will be entitled
to reimbursement out of payments
collected on the other contracts in the
contract pool. For a more complete
description of this advance obligation,
see "Description of the Trust Documents
--Advances."
Optional Termination.................. Unless we specify otherwise in the
related prospectus supplement, Green
Tree may repurchase all the contracts
relating to a Series of Securities
remaining outstanding at the time and
under the circumstances we specify in
the related prospectus supplement.
Unless we specify otherwise in the
related prospectus supplement, the
repurchase price will equal the
8
<PAGE>
principal amount of the contracts plus
accrued and unpaid interest. For a more
complete description of this optional
termination of the Securities, see
"Description of the Trust Documents--
Termination" in this Prospectus.
Representations and Warranties of
Green Tree .......................... Green Tree will make certain
representations and warranties
regarding the contracts. These
representations and warranties are a
condition to Green Tree's conveyance of
the contract pool to the trust. If
Green Tree becomes aware of a breach of
any representation or warranty that
materially adversely affects the
trust's interest in any contract or
receives written notice of a breach
from the trustee or the Servicer, then
Green Tree must either cure the breach,
repurchase the affected contract or, if
the related prospectus supplement so
provides, substitute another contract
for the affected contract, under the
conditions further described in this
Prospectus and in the prospectus
supplement. For a more complete
description of the representations and
warranties of Green Tree, see
"Description of the Trust Documents--
Sale and Assignment of the Contracts."
Federal Income Tax Considerations..... The prospectus supplement for any
series of Securities will specify
whether that trust was structured as an
"owner trust" or as a "grantor trust"
for tax purposes.
If the trust issuing a series of
Securities is structured as an owner
trust, then in the opinion of counsel
to Green Tree, for federal and
Minnesota income tax purposes, the
Notes of that series will be
characterized as debt and the trust
will not be characterized as an
association or a publicly traded
partnership taxable as a corporation.
Each Noteholder, by purchasing a Note,
will agree to treat the Notes as debt.
Each Certificateholder of such a
series, by purchasing a Certificate,
will agree to treat the trust as a
partnership in which the
Certificateholders are partners for
federal income tax purposes.
Alternative characterizations of the
trust, the Notes and the Certificates
of such a series are
9
<PAGE>
possible, but would not result in
materially adverse tax consequences to
Noteholders or Certificateholders of
that series. For a more complete
description of the tax considerations
relating to an owner trust series of
Securities, please see "Certain Federal
Income Tax Consequences--Owner Trust
Series" and "Certain State Income Tax
Consequences."
If the trust issuing a series of
Securities is structured as a grantor
trust, then in the opinion of counsel
to Green Tree, for federal and
Minnesota income tax purposes, the
trust will be classified as a grantor
trust and not as an association which
is taxable as a corporation. Each
Certificateholder of such a series will
be treated as the owner of an undivided
interest in the contracts and the other
property of that trust. For a more
complete description of the tax
considerations relating to a grantor
trust series of Securities, please see
"Certain Federal Income Tax
Consequences--Grantor Trust Series" and
"Certain State Income Tax
Consequences."
ERISA Considerations.................. Subject to the considerations described
under "ERISA Considerations" in this
Prospectus, and unless we specify
otherwise in the related prospectus
supplement, the Notes of any series
will be eligible for purchase by an
employee benefit plan subject to the
Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or the
Internal Revenue Code of 1986, as
amended.
The Certificates of any series may or
may not be eligible for purchase by an
employee benefit plan subject to ERISA
or the Internal Revenue Code of 1986,
as amended. We will provide further
information regarding the eligibility
of a series of Certificates in the
related prospectus supplement.
If you are a fiduciary of any employee
benefit plan subject to ERISA or the
Internal Revenue Code of 1986, as
amended, you should review carefully
with your legal advisors whether the
purchase or holding of Securities could
give rise to a transaction prohibited
or otherwise impermissible under ERISA
or the Internal Revenue Code of 1986,
as amended. For a more complete
description of ERISA considerations,
see "ERISA Considerations" in this
Prospectus and in your prospectus
supplement.
10
<PAGE>
Ratings............................... We will not issue the Securities unless
one or more nationally recognized
rating agencies have assigned a rating
to the Securities in one of their four
highest rating categories.
The rating of each Series of Securities
addresses the likelihood of the timely
receipt of interest and payment of
principal on that Series on or before
the stated maturity date for that
Series. A 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 Securities do not
address the likelihood of payment of
principal on any Series of Securities
prior to the stated maturity date or
the possibility of the imposition of
United States withholding tax with
respect to non-United States persons.
For a more complete description of the
ratings of the Securities, see
"Ratings" in this Prospectus and in
your prospectus supplement.
11
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Securities.
Risks That May Cause Increased Delinquencies and Losses on the
Contracts. 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. As a result, higher than expected delinquencies, higher than expected
defaults, or higher than expected losses after default could all result in a
loss on your investment. You should consider several risks that might cause
higher than expected delinquencies, defaults or losses:
Green Tree's Limited Experience with the Products. Green Tree begain
originating and servicing retail installment contracts for recreational
vehicles in 1985 and for motorcycles in 1988, but has less extensive
underwriting and servicing experience with the other types of products
financed by the contracts that will be included in a contract pool. Green
Tree's extensive experience in originating and servicing consumer financing
contracts for certain types of products, including manufactured housing,
may not be directly applicable to the servicing of contracts secured by
other types of products. You must not assume that the delinquency, default
and loss experience that any particular contract pool will be the same as
the delinquencies, defaults and losses that Green Tree has experienced in
the past for other contracts. If delinquencies, defaults and losses on a
contract pool exceed expected levels, you may suffer a loss on your
investment.
Risks Relating to the Enforceability of the Contracts. When Green Tree
originated each contract, it required the customer to grant a security
interest in the financed product to Green Tree. When Green Tree assigns a
pool of contracts to a trust, it will also assign its security interests in
the financed products. Because of the administrative burden and expense,
the documents reflecting Green Tree's security interest in the products
will not be amended to reflect the assignment of the security interest. As
a result, there is a risk that the trust will not have a perfected security
interest in the products. If Green Tree 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 a contract pool exceed expected levels, you may suffer a loss
on your investment.
Risks Relating to the Ownership of the Contracts. Green Tree 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 Green Tree's
possession. UCC financing statements will be filed in Minnesota reflecting the
assignment of the contracts to the trustee, and Green Tree's accounting records
and computer systems will also reflect that assignment. In addition, Green Tree
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 in the contract pool, then you
may suffer a loss on your investment.
Risks of Subordinate Classes of Securities. Different classes of Securities
will bear different risks of delinquencies and losses on the contracts. The
more subordinate classes face greater risks from delinquencies and losses.
Delinquencies and defaults on the contracts will result in a smaller amount of
cash available for distribution on a payment date. Because the amount available
on each payment date is distributed in a specified priority, classes of
Securities that are lower in that priority may not receive some or even any of
their distribution on that payment date. As a result, subordinate classes of
securities may not receive payments in a timely manner, and may not recover all
of their investment.
12
<PAGE>
In addition, holders of certain classes of Securities of any series may have
the right to take actions that are detrimental to the interests of the holders
of Securities of certain other classes of Securities of such series. For
example, holders of a class of more senior Securities may be entitled to
instruct the Indenture Trustee or Trustee to liquidate the trust property when
it is not in the interest of holders of more junior classes of Securities of
such Series to do so. Conversely, certain actions may require the consent of a
majority of Security owners of all classes of a Series, which may mean that
Security owners of more junior classes can prevent the Security owners of more
senior classes of such series from taking action.
Yield and Prepayment Risks. 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 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" in this Prospectus.
Limited Liquidity. We cannot assure to you that a secondary market will
develop for the Securities of any Series, 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 to you that if a secondary
market does develop, that it will continue to exist for the term of any Series
of Securities.
Certain Matters Relating to Insolvency. Green Tree intends that each transfer
of contracts to the related trust fund will constitute a sale, rather than a
pledge of the contracts to secure indebtedness of Green Tree. However, if Green
Tree were to become a debtor under the federal bankruptcy code, it is possible
that a creditor or trustee in bankruptcy of Green Tree, or Green Tree as
debtor-in-possession, may argue that the sale of the contracts by Green Tree
was a pledge of the contracts rather than a sale. This position, if presented
to or accepted by a court, could result in a delay in or reduction of
distributions to the holders of the Securities.
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THE TRUSTS
With respect to each series of Securities, Green Tree will establish a trust
pursuant to either (i) a Pooling and Servicing Agreement between Green Tree, as
seller and servicer, and a trustee specified in the related prospectus
supplement (the "Trustee"), (ii) a Trust Agreement between Green Tree, as
depositor, and a trustee specified in the related prospectus supplement
(the"Owner Trustee") and a related Sale and Servicing Agreement between Green
Tree, as seller and servicer, and the trust. With respect to 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." Prior to the sale and assignment of the related
Contracts pursuant to the related Trust Documents, the trust will have no
assets or obligations. The trust will not engage in any business activity other
than acquiring and holding the Trust Property (as defined below), issuing the
Certificates and the Notes, if any, of such series and distributing payments
thereon.
Each Certificate, if any, will represent a fractional undivided interest in,
and each Note, if any, will represent an obligation of, the related Trust. The
"Trust Property" of each Trust will include, among other things, (i) a Contract
Pool, as described in "The Contracts"; (ii) all monies paid or payable thereon
on or after the Cutoff Date (as specified in the related Prospectus
Supplement); (iii) such amounts as from time to time may be held in the
Collection Account (including all investments in the Collection Account and all
income from the investment of funds therein and all proceeds thereof) and
certain other accounts (including the proceeds thereof), as described in
"Description of the Trust Documents--Collections"; (iv) an assignment of the
security interests of Green Tree in the products securing the related
Contracts, as described in "The Contracts"; (v) an assignment of the right to
receive proceeds from claims on certain insurance policies covering the related
products or obligors; and (vi) certain other rights under the related Trust
Documents. The Trust Property will also include, if so specified in the related
Prospectus Supplement, monies on deposit in a Pre-Funding Account to be
established with the Indenture Trustee or the Trustee, which will be used to
purchase Subsequent Contracts from the Seller from time to time (and as
frequently as daily) during the Pre-Funding Period specified in the related
Prospectus Supplement. Any Subsequent Contracts so purchased will be included
in the related Contract Pool forming part of the Trust Property, subject to the
prior rights of the related Indenture Trustee and the Noteholders therein. In
addition, to the extent specified in the related Prospectus Supplement, a form
of credit enhancement may be issued to or held by the Trustee or the Indenture
Trustee for the benefit of holders of one or more classes of Securities.
The Servicer will service the Contracts held by each Trust and will receive
fees for such services. See "Description of the Trust Documents--Servicing
Compensation." Unless otherwise specified in the related Prospectus Supplement,
Green Tree, on behalf of each Trust, will hold the original installment sales
contract or promissory note as well as copies of documents and instruments
relating to each Contract and evidencing the security interest in the Product
securing each Contract (the "Contract Files"). In order to protect the Trust's
ownership interest in the Contracts, Green Tree will file a UCC-1 financing
statement in Minnesota to give notice of such Trust's ownership of the related
Contracts and the related Trust Property.
The Trustee
The Trustee or Owner Trustee, is applicable, for each Trust will be specified
in the related prospectus supplement. The trustee's liability in connection
with the issuance and sale of the Securities of such series will be limited
solely to the express obligations of such trustee set forth in the related
Trust Documents. A trustee may resign at any time, in which event the General
Partner (if the related trust is structured as an owner trust) or the Servicer
or its successor (if the related trust is structured as a grantor trust) will
be obligated to appoint a successor trustee. The General Partner (if the
related trust is structured as an owner trust) or the Servicer (if the related
trust is structured as a grantor trust) may also remove the trustee if the
trustee ceases to be eligible to continue as Trustee under the related Trust
Documents or if the trustee becomes insolvent. In such circumstances, the
General Partner (if the related trust is structured as an owner trust) or the
Servicer (if the related trust is structured as a grantor trust) will be
obligated to appoint a successor trustee. Any resignation or removal of a
Trustee and appointment of a successor trustee will be subject to any
conditions or approvals
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specified in the related prospectus supplement and will not become effective
until acceptance of the appointment by the successor trustee.
THE CONTRACTS
Each pool of Contracts with respect to a trust (a "Contract Pool") will
consist of retail installment sales contracts and promissory notes (the
"Contracts") to finance the purchase of Products (described below). The
Contracts will be originated or purchased by Green Tree on an individual basis
in the ordinary course of business. Except as otherwise specified in the
related prospectus supplement, the Contracts will be fully amortizing and will
bear interest at a fixed or variable rate (the "Contract Rate").
The "Products" financed by the Contracts included in a Contract Pool are
expected to include all the types of consumer products Green Tree is then
financing for retail customers (subject to the availability of such contracts
and subject to any eligibility criteria specified in the Trust Documents).
Currently, Green Tree provides financing for the purchase of motorcycles;
marine products (including boats, boat trailers and outboard motors); pianos
and organs; horse trailers; sport vehicles (including snowmobiles, personal
watercraft and all-terrain vehicles); trucks; aircraft; and recreational
vehicles. Any Trust whose Securities are offered pursuant to this Prospectus
will include only Contracts secured by the foregoing types of Products. The
types of Products securing a Contract Pool and the relative concentrations of
each such type will be specified in the related prospectus supplement. Because
Green Tree has less extensive experience in underwriting and servicing retail
installment sales contracts for items such as the Products, Green Tree has no
basis upon which to distinguish the expected delinquency, default or prepayment
experience of Contracts secured by different types of Products.
GREEN TREE FINANCIAL CORPORATION
General
Green Tree is a Delaware corporation that, as of December 31, 1997, had
stockholders' equity of approximately $1,332,000,000. Through its various
divisions, Green Tree purchases, pools, sells and services retail conditional
sales contracts for manufactured housing and retail installment sales contracts
for home improvements, a variety of consumer products and equipment finance,
and provides credit to manufactured housing dealers for purposes of purchasing
manufactured home inventory from manufacturers. Green Tree conducts its
business throughout the United States through 50 manufactured housing offices,
80 home improvement locations and three regional wholesale lending centers, as
well as centralized operations in St. Paul, Minnesota and Rapid City, South
Dakota. Its principal executive offices are located at 1100 Landmark Towers,
St. Paul, Minnesota 55102-1639 (telephone (651) 293-3400). Green Tree's Annual
Report on Form 10-K for the year ended December 31, 1997, most recent Proxy
Statement and, when available, subsequent quarterly and annual reports are
available from Green Tree upon written request.
Purchase of Contracts
Green Tree arranges to purchase certain contracts originated by dealers of
Products located throughout the United States ("Dealers"). Green Tree's
personnel contact dealers and explain Green Tree's available financing plans,
terms, prevailing rates and credit and financing policies. If the dealer wishes
to utilize Green Tree's available customer financing, the dealer must make an
application for dealer approval.
All contracts that Green Tree purchases are written on forms provided or
approved by Green Tree and are purchased on an individually approved basis in
accordance with Green Tree's guidelines. The dealer submits the customer's
credit application and purchase order to Green Tree's office where an analysis
of the creditworthiness of the proposed buyer is made. The analysis includes a
review of the applicant's paying habits, length and likelihood of continued
employment and certain other procedures. Green Tree's underwriting guidelines
for consumer products focus primarily on the obligor's ability to repay the
loan rather than the collateral value of the product financed. The maximum loan
amount for an obligor will depend on a variety of
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factors, including the type of product, whether the product is new or used,
the obligor's debt-to-income ratio, and the manufacturer's invoice price of
the product (plus certain dealer-installed accessories, sales taxes, title
fees, registration fees, and certain other items). For products other than
aircraft and trucks, the maximum permissible debt-to-income ratio (based on
the monthly loan payments) is between 55% and 65%, the maximum loan-to-invoice
ratio (for new products) ranges from 100% to 125%, and the maximum loan-to-
sales-price ratio (for used products) is typically 90% (subject to further
limitation based on a standard assumed value for such a used product). Green
Tree's underwriting guidelines for truck loans (other than a small number of
loans made to corporate borrowers to finance the purchase of a fleet of
trucks) emphasize the trucking experience of the obligor and the projected
operating revenues of the truck, rather than the obligor's current income,
because the obligor's income as owner-operator of the truck is generally
expected to be the source of funds to make payments on the contract and
because Green Tree believes that the obligor's past trucking experience is the
best predictor of success as an owner-operator of the truck. With respect to
some truck loans, Green Tree may allow the dealer to maintain collection
responsibility with respect to the customers' payments and to remit such
payments to Green Tree; if the customer should fail to make timely payment on
the loan, the dealer remains obligated to make payment to Green Tree. Green
Tree nevertheless requires that the customer meet Green Tree's underwriting
standards, and Green Tree's records show the customer as the obligor on the
loan. There is a risk, however, that insolvency or fraud on the part of the
dealer could result in a loss on such truck loans. A loan for the purchase of
an aircraft is generally subject to limitations of a 45% debt-to-income ratio
and generally will not exceed $1,000,000, although loans of up to $10,000,000
may be made with senior management approval. Green Tree management may revise
these guidelines from time to time, and the underwriting guidelines may be
exceeded in certain cases with the approval of Green Tree management.
Accordingly, some of the Contracts included in a Trust may not conform in all
respects to the criteria described above. Green Tree will generally finance
premiums for the term of the contract on optional credit life, accident and
health and extended warranty insurance, up to 20% of the sales price of the
Product, and may finance premiums for required physical damage insurance on
the product. If the application meets Green Tree's guidelines and the credit
is approved, Green Tree purchases the contract when the customer accepts
delivery of the Product.
Currently, Green Tree's consumer finance and equipment finance divisions
finance the purchase of motorcycles; marine products (including boats, boat
trailers and outboard motors); pianos and organs; horse trailers; sport
vehicles (including snowmobiles, personal watercraft and all-terrain
vehicles); trucks; aircraft; and recreational vehicles. The Products financed
by Contracts included in any Trust whose Securities are offered pursuant to
this Prospectus will include only the products listed above.
Loss and Delinquency Information
Each Prospectus Supplement will include Green Tree's loss and delinquency
experience with respect to its entire servicing portfolio of consumer product
contracts. However, there can be no assurance that such experience will be
indicative of the performance of the Contracts included in a particular
Contract Pool.
Ratio of Earnings to Fixed Charges for the Company
Set forth below are the Company's ratios of earnings to fixed charges for
the past five years and the nine months ended September 30, 1998. For the
purposes of compiling these ratios, earnings consist of earnings before income
taxes plus fixed charges. Fixed charges consist of interest expense and the
interest portion of rent expense.
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended
------------------------ September 30,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges.......... 4.81 7.98 7.90 5.44 3.94
</TABLE>
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YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, many of the
Contracts will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the period will be less than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly greater, and the principal balance will be amortized
more rapidly than scheduled. Conversely, if an Obligor pays an installment
after its due date, the portion of the payment allocable to interest will be
greater than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly less,
and the principal balance will be amortized slower than scheduled, in which
case a larger portion of the principal balance may be due on the final
scheduled payment date. Any interest shortfalls resulting from early payment or
prepayment of a Contract will be funded by collections on other Contracts or,
to the extent collections are insufficient, by payments under the applicable
form of credit enhancement, if any, described in the related Prospectus
Supplement.
The Contracts will be prepayable, without premium or penalty, by Obligors at
any time. Prepayments (or, for this purpose, equivalent payments to a Trust)
also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by Green Tree due to breach of a representation
or warranty, or as a result of Green Tree or the Servicer exercising its option
to purchase the Contract Pool. See "Description of the Trust Documents." The
rate of prepayments on the Contracts may be influenced by a variety of
economic, social and other factors. No assurance can be given that prepayments
on the Contracts will conform to any estimated or actual historical experience,
and no prediction can be made as to the actual prepayment rates which will be
experienced on the Contracts. Certificateholders and Noteholders will bear all
reinvestment risk resulting from the timing of payments of principal on the
Certificates or the Notes, as the case may be.
POOL FACTOR
The "Certificate Pool Factor" for each class of Certificates will be an
eight-digit decimal which the Servicer will compute indicating the Certificate
Balance with respect to such Certificates as of each Distribution Date (after
giving effect to all distributions of principal made on such Distribution
Date), as a fraction of the Original Principal Balance of such Certificates.
The "Note Pool Factor" for each class of Notes, if any, will be an eight-digit
decimal which the Servicer will compute indicating the remaining outstanding
principal balance with respect to such Notes as of each Distribution Date
(after giving effect to all distributions of principal on such Distribution
Date) as a fraction of the initial outstanding principal balance of such class
of Notes. Each Certificate Pool Factor and each Note Pool Factor will initially
be 1.00000000; thereafter, the Certificate Pool Factor and the Note Pool Factor
will decline to reflect reductions in the Certificate Balance of the applicable
class of Certificates or reductions in the outstanding principal balance of the
applicable class of Notes, as the case may be. The amount of a
Certificateholder's pro rata share of the Certificate Balance for the related
class of Certificates can be determined by multiplying the original
denomination of the Certificateholder's Certificate by the then applicable
Certificate Pool Factor. The amount of a Noteholder's pro rata share of the
aggregate outstanding principal balance of the applicable class of Notes can be
determined by multiplying the original denomination of such Noteholder's Note
by the then applicable Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents, on
each Distribution Date or Payment Date, as the case may be, the related
Certificateholders and Noteholders will receive periodic reports from the
Trustee stating the Certificate Pool Factor or the Note Pool Factor, as the
case may be, and containing various other items of information. Unless and
until Definitive Certificates or Definitive Notes are issued, such reports will
be sent on behalf of the Trust to the Trustee and the Indenture Trustee (if
any) and Cede & Co., as registered holder of the Certificates and the Notes and
the nominee of DTC. Certificate Owners and Note Owners may receive such
reports, upon written request, together with a certification that they are
Certificate
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Owners or Note Owners and payment of any expenses associated with the
distribution of such reports, from the Trustee and the Indenture Trustee (if
any) at the addresses specified in the related Prospectus Supplement. See
"Certain Information Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds to be received by the Trust from the sale of each series of Securities
will be used to pay to Green Tree the purchase price for the Contracts and to
make the deposit of the Pre-Funded Amount into the Pre-Funding Account, if any,
to repay warehouse lenders and/or to provide for other forms of credit
enhancement specified in the related Prospectus Supplement. The net proceeds to
be received by Green Tree will be used to pay its warehouse loans, and any
additional proceeds will be added to Green Tree's general funds and used for
its general corporate purposes.
THE CERTIFICATES
General
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to Trust Documents to be entered into between
Green Tree, as Seller and as Servicer, and the Trustee, forms of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. Where particular provisions of or terms used in the Trust
Documents are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Certificates will initially be represented by a single Certificate
registered in the name of the nominee of DTC (together with any successor
depository selected by the Seller, the "Depository"). See "Certain Information
Regarding the Securities--Book-Entry Registration." Unless otherwise specified
in the related Prospectus Supplement, the Certificates evidencing interests in
a Trust will be available for purchase in denominations of $1,000 initial
principal amount and integral multiples thereof, except that one Certificate
evidencing an interest in such Trust may be issued in a denomination that is
less than $1,000 initial principal amount. Certificates may be transferred or
exchanged without the payment of any service charge other than any tax or
governmental charge payable in connection with such transfer or exchange.
Unless otherwise specified in the related Prospectus Supplement, the Trustee
will initially be designated as the registrar for the Certificates.
Distributions of Interest and Principal
The timing and priority of distributions, seniority, allocations of loss,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest (or, where applicable, with respect to
principal only or interest only) on the Certificates of any series will be
described in the related Prospectus Supplement. Distributions of interest on
the Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and, unless otherwise specified in the
related Prospectus Supplement, will be made prior to distributions with respect
to principal. A series may include one or more classes of Stripped Certificates
entitled to (i) distributions in respect of principal with disproportionate,
nominal or no interest distribution, or (ii) interest distributions, with
disproportionate, nominal or no distributions in respect of principal. Each
class of Certificates may have a different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through Rate (and which may be zero for
certain classes of Stripped Certificates), or any combination of the foregoing.
The related Prospectus Supplement will specify the Pass-Through Rate for each
class of Certificate, or the initial Pass-Through Rate and the method for
determining the Pass-Through Rate. Unless otherwise specified in the related
Prospectus Supplement, interest on the Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Unless otherwise
specified in the related Prospectus Supplement, distributions in respect of the
Certificates will be subordinate to payments in respect of the Notes, if any,
as more fully described in the related Prospectus Supplement. Distributions in
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respect of 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 set forth in the related Prospectus Supplement.
THE NOTES
General
A series of Securities may include one or more classes of Notes issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Unless otherwise specified in the related Prospectus Supplement, no Notes will
be issued as a part of any series. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Notes and the Indenture, and the following summary
will be supplemented in whole or in part by the related Prospectus Supplement.
Where particular provisions of or terms used in the Indenture are referred to,
the actual provisions (including definition of terms) are incorporated by
reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by a single Note registered in the name
of the nominee of the Depository. See "Certain Information Regarding the
Securities--Book-Entry Registration." Unless otherwise specified in the related
Prospectus Supplement, Notes will be available for purchase in denominations of
$1,000 and integral multiples thereof. Notes may be transferred or exchanged
without the payment of any service charge other than any tax or governmental
charge payable in connection with such transfer or exchange. Unless otherwise
provided in the related Prospectus Supplement, the Indenture Trustee will
initially be designated as the registrar for the Notes.
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on the Notes will be described in the related Prospectus Supplement. The right
of holders of any class of Notes to receive payments of principal and interest
may be senior or subordinate to the rights of holders of any class or classes
of Notes of such series, or any class of Certificates, as described in the
related Prospectus Supplement. A series may include one or more classes of
Stripped Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payment, or (ii) interest payments with
disproportionate, nominal or no principal payments. Each class of Notes may
have a different Interest Rate, which may be a fixed, variable or adjustable
Interest Rate (and which may be zero for certain classes of Notes), or any
combination of the foregoing. The related Prospectus Supplement will specify
the Interest Rate for each class of Notes, or the initial Interest Rate and the
method for determining the Interest Rate. One or more classes of Notes of a
series may be redeemable under the circumstances specified in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of interest to Noteholders of all classes within a series will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Payment Date"), in which case each class of Noteholders will receive their
ratable share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to be distributed in respect of
interest on the Notes.
In the case of a series of Securities which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions
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applicable to the determination thereof, of each such class will be set forth
in the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, payments in respect of principal and interest of any
class of Notes will be made on a pro rata basis among all of the Notes of such
class.
The Indenture
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Green Tree will provide a copy
of the applicable Indenture (without exhibits) upon request to a holder of
Notes issued thereunder.
Modification of Indenture Without Noteholder Consent. Each Trust and related
Indenture Trustee (on behalf of such Trust) may, without consent of the related
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Note
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders; (iv) to
convey, transfer, assign, mortgage or pledge any property to or with the
Indenture Trustee; (v) to cure any ambiguity or correct or supplement any
provision in the Indenture or in any supplemental indenture; (vi) to provide
for the acceptance of the appointment of a successor Indenture Trustee or to
add to or change any of the provisions of the Indenture or any supplemental
indenture which may be inconsistent with any other provision of the Indenture
as shall be necessary and permitted to facilitate the administration by more
than one trustee; (vii) to modify, eliminate or add to the provisions of the
Indenture in order to comply with the Trust Indenture Act of 1939, as amended;
and (viii) to add any provisions to, change in any manner, or eliminate any of
the provisions of, the Indenture or modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in this
clause (viii) shall not, as evidenced by an opinion of counsel, adversely
affect in any material respect the interests of any related Noteholder unless
Noteholder consent is otherwise obtained as described below.
Modifications of Indenture With Noteholder Consent. With respect to each
Trust, with the consent of the holders representing a majority of the principal
balance of the outstanding related Notes (a "Note Majority"), the Owner Trustee
and the Indenture Trustee may execute a supplemental indenture to add
provisions, to change in any manner or eliminate any provisions of, the related
Indenture, or modify in any manner the rights of the related Noteholders.
Without the consent of the holder of each outstanding related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate specified thereon or the redemption price
with respect thereto or change the manner of calculating any such payment, any
place of payment where, or the coin or currency in which any Note or any
interest thereon is payable; (ii) impair the right to institute suit for the
enforcement of certain provisions of the Indenture regarding payment; (iii)
reduce the percentage of the aggregate amount of the outstanding Notes the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the Indenture or of certain defaults thereunder and
their consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the related
Trust, any other obligor on the Notes, the Seller or an affiliate of any of
them; (v) reduce the percentage of the aggregate outstanding amount of the
Notes the consent of the holders of which is required to direct the Indenture
Trustee to sell or liquidate the Contracts if the proceeds of such sale would
be insufficient to pay the principal amount and accrued but unpaid interest on
the outstanding Notes; (vi) decrease the percentage of the aggregate principal
amount of the Notes required to amend the sections of the Indenture which
specify the applicable percentage of aggregate principal amount of the Notes
necessary to amend the Indenture or certain other related agreements; or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien
of the Indenture with respect to any of the collateral for the Notes or, except
as otherwise permitted or contemplated in the Indenture, terminate the lien of
the Indenture on any such collateral or deprive the holder of any Note of the
security afforded by the lien of the Indenture.
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Events of Default; Rights Upon Event of Default. With respect to each Trust,
unless otherwise specified in the related Prospectus Supplement, "Events of
Default" under the Indenture will consist of: (i) a default for five days or
more in the payment of any interest on any Note; (ii) a default in the payment
of the principal of or any installment of the principal of any Note when the
same becomes due and payable; (iii) a default in the observance or performance
in any material respect of any covenant or agreement of the Trust made in the
Indenture, or any representation or warranty made by the Trust in the Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect as of the time made, and the continuation of any such
default or the failure to cure such breach of a representation or warranty for
a period of 30 days after notice thereof is given to the Trust by the Indenture
Trustee or to the Trust and the Indenture Trustee by the holders of at least
25% in principal amount of the Notes then outstanding; or (iv) certain events
of bankruptcy, insolvency, receivership or liquidation of the Trust. However,
the amount of principal due and payable on any class of Notes on any Payment
Date (prior to the Final Scheduled Payment Date, if any, for such class) will
generally be determined by amounts available to be deposited in the Note
Distribution Account for such Payment Date. Therefore, unless otherwise
specified in the related Prospectus Supplement, the failure to pay principal on
a class of Notes generally will not result in the occurrence of an Event of
Default unless such class of Notes has a Final Scheduled Payment Date, and then
not until such Final Scheduled Payment Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or a Note Majority may declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by a Note Majority.
Unless otherwise specified in the related Prospectus Supplement, if the Notes
of any series have been declared due and payable following an Event of Default
with respect thereto, the related Indenture Trustee may institute proceedings
to collect amounts due or foreclose on Trust Property, exercise remedies as a
secured party, sell the related Contracts or elect to have the Trust maintain
possession of such Contracts and continue to apply collections on such
Contracts as if there had been no declaration of acceleration. Unless otherwise
specified in the related Prospectus Supplement, the Indenture Trustee, however,
will be prohibited from selling the related Contracts following an Event of
Default, unless (i) the holders of all the outstanding related Notes consent to
such sale; (ii) the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding Notes at the date of
such sale; or (iii) the Indenture Trustee determines that the proceeds of the
Contracts would not be sufficient on an ongoing basis to make all payments on
the Notes as such payments would have become due if such obligations had not
been declared due and payable, and the Indenture Trustee obtains the consent of
the holders of 66 2/3% of the aggregate outstanding amount of the Notes. Unless
otherwise specified in the related Prospectus Supplement, following a
declaration upon an Event of Default that the Notes are immediately due and
payable, (i) Note Owners will be entitled to ratable repayment of principal on
the basis of their respective unpaid principal balances and (ii) repayment in
full of the accrued interest on and unpaid principal balances of the Notes will
be made prior to any further payment of interest or principal on the
Certificates.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, a Note Majority in a series will have the right to
direct the time, method and place of conducting any proceeding or any remedy
available to the Indenture Trustee, and a Note Majority may, in certain cases,
waive any default with respect thereto, except a default in the payment of
principal or interest or a default in respect of a covenant or provision of the
Indenture that cannot be modified without the waiver or consent of all of the
holders of such outstanding Notes.
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No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in principal amount of
the outstanding Notes of such series have made written request of the Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee,
(iii) such holder or holders have offered the Indenture Trustee reasonable
indemnity, (iv) the Indenture Trustee has for 60 days failed to institute such
proceeding, and (v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the holders of
a majority in principal amount of such outstanding Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by accepting
the related Notes, will covenant that they will not at any time institute
against the Seller or the related Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee nor the Trustee in its individual capacity, nor
any holder of a Certificate including, without limitation, the Seller, nor any
of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of an express
agreement to the contrary, be personally liable for the payment of the related
Notes or for any agreement or covenant of the related Trust contained in the
Indenture.
Certain Covenants. Each Indenture will provide that the related Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed
by or surviving such consolidation or merger is organized under the laws of the
United States or any state, (ii) such entity expressly assumes the Trust's
obligation to make due and punctual payments upon the Notes and the performance
or observance of every agreement and covenant of the Trust under the Indenture,
(iii) no Event of Default shall have occurred and be continuing immediately
after such merger or consolidation, (iv) the Trustee has been advised that the
then current rating of the related Notes or Certificates then in effect would
not be reduced or withdrawn by the Rating Agencies as a result of such merger
or consolidation, (v) the Trustee has received an opinion of counsel to the
effect that such consolidation or merger would have no material adverse tax
consequence to the Trust or to any related Note Owner or Certificate Owner.
Each Trust will not, among other things, (i) except as expressly permitted by
the Indenture, the Trust Documents or certain related documents for such Trust
(collectively, the "Related Documents"), sell, transfer, exchange or otherwise
dispose of any of the assets of the Trust, (ii) claim any credit on or make any
deduction from the principal and interest payable in respect of the related
Notes (other than amounts withheld under the Code or applicable state law) or
assert any claim against any present or former holder of such Notes because of
the payment of taxes levied or assessed upon the Trust, (iii) dissolve or
liquidate in whole or in part, (iv) permit the validity or effectiveness of the
related Indenture to be impaired or permit any person to be released from any
covenants or obligations with respect to the related Notes under such Indenture
except as may be expressly permitted thereby, or (v) except as expressly
permitted by the Related Documents, permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of the Trust or any part thereof,
or any interest therein or proceeds thereof.
No Trust may engage in any activity other than as specified under the section
of the related Prospectus Supplement entitled "The Trust." No Trust will incur,
assume or guarantee any indebtedness other than indebtedness incurred pursuant
to the related Notes and the related Indenture or otherwise in accordance with
the Related Documents.
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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 held by the Indenture Trustee as such and any action taken by it
that materially affects the Notes and that has not been previously reported.
Note Owners may receive such reports upon written request, together with a
certification that they are Note Owners and payment of reproduction and postage
expenses associated with the distribution of such reports, from the Indenture
Trustee at the address specified in the related Prospectus Supplement.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all of such Notes.
The Indenture Trustee
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee may resign at any time, in which
event the Seller will be obligated to appoint a successor trustee. Green Tree
may also remove the Indenture Trustee if the Indenture Trustee ceases to be
eligible to continue as such under the Indenture or if the Indenture Trustee
becomes insolvent. In such circumstances, Green Tree will be obligated to
appoint a successor trustee. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee will be subject to any
conditions or approvals, if any, specified in the related Prospectus Supplement
and will not become effective until acceptance of the appointment by a
successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless otherwise provided in the related Prospectus Supplement, the
Securities of each series will be registered in the name of Cede & Co., the
nominee of DTC. DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC accepts securities for deposit from its participating
organizations ("Participants") and facilitates the clearance and settlement of
securities transactions between Participants in such securities through
electronic book-entry changes in accounts of Participants, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks and trust companies and clearing corporations and
may include certain other organizations. Indirect access to the DTC system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("indirect participants").
Certificate Owners and Note Owners who are not Participants but desire to
purchase, sell or otherwise transfer ownership of Securities may do so only
through Participants (unless and until Definitive Certificates or Definitive
Notes, each as defined below, are issued). In addition, Certificate Owners and
Note Owners will receive all distributions of principal of, and interest on,
the Securities from the Trustee or the Indenture Trustee, as applicable,
through DTC and Participants. Certificate Owners and Note Owners will not
receive or be entitled to receive certificates representing their respective
interests in the Securities, except under the limited
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circumstances described below and such other circumstances, if any, as may be
specified in the related Prospectus Supplement.
Unless and until Definitive Securities are issued, it is anticipated that the
only Certificateholder of the Certificates and the only Noteholder of the
Notes, if any, will be Cede & Co., as nominee of DTC. Certificate Owners and
Note Owners will not be recognized by the Trustee as Certificateholders or by
the Indenture Trustee as Noteholders as those terms are used in the related
Trust Documents or Indenture. Certificate Owners and Note Owners will be
permitted to exercise the rights of Certificateholders or Noteholders, as the
case may be, only indirectly through Participants and DTC.
With respect to any series of Securities, while the Securities are
outstanding (except under the circumstances described below), under the rules,
regulations and procedures creating and affecting DTC and its operations (the
"Rules"), DTC is required to make book-entry transfers among Participants on
whose behalf it acts with respect to the Securities and is required to receive
and transmit distributions of principal of, and interest on, the Securities.
Participants with whom Certificate Owners or Note Owners have accounts with
respect to Securities are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Certificate Owners and Note Owners. Accordingly, although Certificate Owners
and Note Owners will not possess Securities, the Rules provide a mechanism by
which Certificate Owners and Note Owners will receive distributions and will be
able to transfer their interests.
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, Certificates and Notes (if any) will be issued
in registered form to Certificate Owners and Note Owners, or their nominees,
rather than to DTC (such Certificates and Notes being referred to herein as
"Definitive Certificates" and "Definitive Notes," respectively), only if (i)
DTC, the Seller or the Servicer advises the Trustee or the Indenture Trustee,
as the case may be, in writing that DTC is no longer willing or able to
discharge properly its responsibilities as nominee and depository with respect
to the Certificates or the Notes, and the Seller, the Servicer, the Trustee or
the Indenture Trustee, as the case may be, is unable to locate a qualified
successor, (ii) the Seller or the Administrator (if any) at its sole option has
advised the Trustee or the Indenture Trustee, as the case may be, in writing
that it elects to terminate the book-entry system through DTC and (iii) after
the occurrence of a Servicer Termination Event, the holders representing a
majority of the Certificate Balance (a "Certificate Majority") or a Note
Majority advises the Trustee or the Indenture Trustee, as the case may be,
through DTC, that continuation of a book-entry system is no longer in their
best interests. Upon issuance of Definitive Certificates or Definitive Notes to
Certificate Owners or Note Owners, such Certificates or Notes will be
transferable directly (and not exclusively on a book-entry basis) and
registered holders will deal directly with the Trustee or the Indenture
Trustee, as the case may be, with respect to transfers, notices and
distributions.
DTC has advised the Seller that, unless and until Definitive Certificates or
Definitive Notes are issued, DTC will take any action permitted to be taken by
a Certificateholder or a Noteholder under the related Trust Documents or
Indenture only at the direction of one or more Participants to whose DTC
accounts the Certificates or Notes are credited. DTC has advised the Seller
that DTC will take such action with respect to any fractional interest of the
Certificates or the Notes only at the direction of and on behalf of such
Participants beneficially owning a corresponding fractional interest of the
Certificates or the Notes. DTC may take actions, at the direction of the
related Participants, with respect to some Certificates or Notes which conflict
with actions taken with respect to other Certificates or Notes.
Issuance of Certificates and Notes in book-entry form rather than as physical
certificates or notes may adversely affect the liquidity of Certificates or
Notes in the secondary market and the ability of the Certificate Owners or Note
Owners to pledge them. In addition, since distributions on the Certificates and
the Notes will be made by the Trustee or the Indenture Trustee to DTC and DTC
will credit such distributions to the accounts of its Participants, with the
Participants further crediting such distributions to the accounts of indirect
participants or Certificate Owners or Note Owners, Certificate Owners and Note
Owners may experience delays in the receipt of such distributions.
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Statements to Securityholders
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Trustee a statement to be delivered to the related Certificateholders on
such Distribution Date. On or prior to each Distribution Date, the Servicer
will prepare and provide to the Indenture Trustee a statement to be delivered
to the related Noteholders on such Distribution Date. Such statements will be
based on the information in the related Servicer's Certificate setting forth
certain information required under the Trust Documents (the "Servicer's
Certificate"). Unless otherwise specified in the related Prospectus Supplement,
each such statement to be delivered to Certificateholders will include the
following information as to the Certificates with respect to such Distribution
Date or the period since the previous Distribution Date, as applicable, and
each such statement to be delivered to Noteholders will include the following
information as to the Notes with respect to such Distribution Date or the
period since the previous Distribution Date, as applicable:
(i) the amount of the distribution allocable to interest on or with
respect to each class of Securities;
(ii) the amount of the distribution allocable to principal on or with
respect to each class of Securities;
(iii) the Certificate Balance and the Certificate Pool Factor for each
class of Certificates and the aggregate outstanding principal balance and
the Note Pool Factor for each class of Notes, after giving effect to all
payments reported under (ii) above on such date;
(iv) the amount of the Servicing Fee paid to the Servicer with respect to
the related Monthly Period or Periods, as the case may be;
(v) the Pass-Through Rate or Interest Rate for the next period for any
class of Certificates or Notes with variable or adjustable rates;
(vi) the amount of Advances made by the Servicer with respect to such
Distribution Date, and the amount paid to the Servicer on such Distribution
Date as reimbursement of Advances made on previous Distribution Dates;
(vii) the amount, if any, distributed to Certificateholders and
Noteholders applicable to payments under the related form of credit
enhancement, if any; and
(viii) such other information as may be specified in the related
Prospectus Supplement.
Each amount set forth pursuant to subclauses (i), (ii), (iv) and (vi) with
respect to Certificates or Notes will be expressed as a dollar amount per
$1,000 of the initial Certificate Balance or the initial principal balance of
the Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are issued, such
reports with respect to a series of Securities will be sent on behalf of the
related Trust to the Trustee, the Indenture Trustee and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of DTC.
Certificate Owners and Note Owners may receive copies of such reports upon
written request, together with a certification that they are Certificate Owners
or Note Owners, as the case may be, and payment of reproduction and postage
expenses associated with the distribution of such reports, from the Trustee or
the Indenture Trustee, as applicable. See "Reports to Securityholders" and "--
Book-Entry Registration" above.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year during the term of a Trust, the Trustee and the Indenture
Trustee, as applicable, will mail to each holder of a class of Securities who
at any time during such calendar year has been a Securityholder, and received
any payment thereon, a statement containing certain information for the
purposes of such Securityholder's preparation of federal income tax returns.
DTC will convey such information to its Participants, who in turn will convey
such information to their related indirect participants in accordance with
arrangements among DTC and such participants. Certificate Owners and Note
Owners may receive such reports upon written request, together with a
certification that they are Certificate Owners or Note Owners and payment of
reproduction and postage expenses associated with the distribution of such
information, from the Trustee, with respect to Certificate
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Owners, or from the Indenture Trustee, with respect to Note Owners, at the
addresses specified in the related Prospectus Supplement. See "Certain Federal
Income Tax Consequences."
Lists of Securityholders
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Certificates, at such time, if any, as Definitive
Certificates have been issued, the Trustee will, upon written request by three
or more Certificateholders or one or more holders of Certificates evidencing
not less than 25% of the Certificate Balance, within five Business Days after
provision to the Trustee of a statement of the applicants' desire to
communicate with other Certificateholders about their rights under the related
Trust Documents or the Certificates and a copy of the communication that the
applicants propose to transmit, afford such Certificateholders access during
business hours to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Trust Documents. Unless otherwise specified in the related Prospectus
Supplement, the Trust Documents will not provide for holding any annual or
other meetings of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Notes, if any, at such time, if any, as Definitive Notes have
been issued, the Indenture Trustee will, upon written request by three or more
Noteholders or one or more holders of Notes evidencing not less than 25% of the
aggregate principal balance of the related Notes, within five Business Days
after provision to the Indenture Trustee of a statement of the applicants'
desire to communicate with other Noteholders about their rights under the
related Indenture or the Notes and a copy of the communication that the
applicants propose to transmit, afford such Noteholders access during business
hours to the current list of Noteholders for purposes of communicating with
other Noteholders with respect to their rights under the Indenture. Unless
otherwise specified in the related Prospectus Supplement, the Indenture will
not provide for holding any annual or other meetings of Noteholders.
DESCRIPTION OF THE TRUST DOCUMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of either (i) the Pooling and
Servicing Agreements or (ii) the Sale and Servicing Agreements and the Trust
Agreements (in either case collectively referred to as the "Trust Documents")
pursuant to which Green Tree will sell and assign such Contracts to a Trust and
the Servicer will agree to service such Contracts on behalf of the Trust, and
pursuant to which such Trust will be created and Certificates will be issued.
Forms of the Trust Documents have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. Green Tree will provide a copy
of such agreements (without exhibits) upon request to a holder of Securities
described therein. This summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all of the provisions of the
Trust Documents. Where particular provisions or terms used in the Trust
Documents are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of such summary.
Sale and Assignment of the Contracts
On the Closing Date, Green Tree will sell and assign to the Trust, without
recourse, Green Tree's entire interest in the related Contracts and the
proceeds thereof, including its security interests in the related Products.
Each Contract transferred by Green Tree to the Trust will be identified in a
schedule appearing as an exhibit to the related Trust Documents (the "Schedule
of Contracts"). Concurrently with such sale and assignment, the Trustee will
execute and deliver the related certificates representing the Certificates to
or upon the order of the Seller, and the Trustee will execute and the Indenture
Trustee will authenticate and deliver the Notes, if any, to or upon the order
of the Seller.
Except as otherwise specified in the related Prospectus Supplement, Green
Tree will make certain warranties in the Trust Documents with respect to each
Contract as of the Closing Date, including that: (a) as
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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 Green Tree as
an additional insured party; (f) each Contract has been originated by a dealer
or Green Tree in the ordinary course of such dealer's, or Green Tree's
business and, if originated by a dealer, was purchased by Green Tree in the
ordinary course of business; (g) no Contract was originated in or is subject
to the laws of any jurisdiction whose laws would make the transfer of the
Contract or an interest therein to the Trustee pursuant to the Trust Documents
or pursuant to the Notes or Certificates unlawful; (h) each Contract complies
with all requirements of law; (i) no Contract has been satisfied, subordinated
to a lower lien ranking than its original position in whole or in part or
rescinded and the Product has not been released from the lien of the Contract
in whole or in part; (j) each Contract creates a valid and enforceable first
priority security interest in favor of Green Tree in the Product covered
thereby and such security interest has been assigned by Green Tree to the
Trustee; (k) all parties to each Contract had capacity to execute such
Contract; (l) no Contract has been sold, assigned or pledged to any other
person and prior to the transfer of the Contracts by Green Tree to the
Trustee, Green Tree had good and marketable title to each Contract free and
clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest, and was the sole owner and had full right to transfer such Contract
to the Trustee; (m) as of the Cutoff Date, there was no default, breach,
violation or event permitting acceleration under any Contract (except for
payment delinquencies permitted by clause (a) above), no event which with
notice and the expiration of any grace or cure period would constitute a
default, breach, violation or event permitting acceleration under such
Contract, and Green Tree has not waived any of the foregoing; (n) as of the
Closing Date there were, to the best of Green Tree's knowledge, no liens or
claims which have been filed for work, labor or materials affecting the
Product securing a Contract, which are or may be liens prior or equal to the
lien of the Contract; (o) each Contract is a fully-amortizing loan and
provides for level payments over the term of such Contract; (p) each Contract
contains customary and enforceable provisions such as to render the rights and
remedies of the Holder thereof adequate for realization against the collateral
of the benefits of the security; (q) the description of each Contract set
forth in the Schedule of Contracts delivered to the Trustee is true and
correct; and (r) there is only one original of each Contract (other than the
copy in the possession of the Obligor).
The warranties of Green Tree will be made as of the execution and delivery
of the related Trust Documents and will survive the sale, transfer and
assignment of the related Contracts and other Trust Property to the Trust but
will speak only as of the date made.
Green Tree will be obligated to repurchase for the Repurchase Price (as
defined below) any Contract on the first business day after the first
Determination Date which is more than 90 days after Green Tree becomes aware,
or should have become aware, or Green Tree's receipt of written notice from
the Trustee or the Servicer, of a breach of any representation or warranty of
Green Tree in the Trust Documents that materially adversely affects the
Trust's interest in any Contract if such breach has not been cured. The
Repurchase Price for any Contract will be the remaining principal amount
outstanding on such Contract on the date of repurchase plus accrued and unpaid
interest thereon at its Contract Rate to the date of such repurchase. This
repurchase obligation constitutes the sole remedy available to the Trust and
the Securityholders for a breach of a representation or warranty under the
Trust Documents with respect to the Contracts (but not with respect to any
other breach by Green Tree of its obligations under the Trust Documents).
Upon the purchase by Green Tree of a Contract due to a breach of a
representation or warranty, the Trustee will convey such Contract and the
related Trust Property to Green Tree.
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Custody of Contract Files
Unless otherwise specified in the related Prospectus Supplement, Green Tree
initially will be appointed to act as custodian for the Contract Files of each
Trust. Prior to the appointment of any custodian other than Green Tree, the
Trust and such institution specified in the related Prospectus Supplement shall
enter into a custodian agreement pursuant to which such institution will agree
to hold the Contract Files on behalf of the related Trust. Any such custodian
agreement may be terminated by the Trust on 30 days' notice to such
institution.
To facilitate servicing and save administrative costs, the documents will not
be physically segregated from other similar documents that are in Green Tree's
possession. UCC financing statements will be filed in Minnesota reflecting the
sale and assignment of the Contracts to the Trustee, and Green Tree's
accounting records and computer systems will also reflect such sale and
assignment. In addition, the Contracts that are in Green Tree's possession will
be stamped or otherwise marked to indicate that such Contracts have been sold
to the related Trust. Despite these precautions, if, through inadvertence or
otherwise, any of the Contracts were sold to another party (or a security
interest therein were granted to another party) that purchased (or took such
security interest in) any of such Contracts in the ordinary course of its
business and took possession of such Contracts, the purchaser (or secured
party) would acquire an interest in the Contracts superior to the interest of
the related Trust if the purchaser (or secured party) acquired (or took a
security interest in) the Contracts for new value and without actual knowledge
of such Trust's interest. See "Certain Legal Aspects of the Contracts--Rights
in the Contracts."
Collections
With respect to each Trust, the Servicer will establish one or more
Collection Accounts in the name of the Trustee or, in the case of any series
including one or more classes of Notes, in the name of the Indenture Trustee
for the benefit of the related Securityholders. If so specified in the related
Prospectus Supplement, the Trustee will establish and maintain for each series
an account, in the name of the Trustee on behalf of the related
Certificateholders, in which amounts released from the Collection Account and
any Pre-Funding Account and any amounts received from any source of credit
enhancement for distribution to such Certificateholders will be deposited and
from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With respect to any series including one
or more classes of Notes, the Indenture Trustee will establish and maintain for
each series an account, in the name of the Indenture Trustee on behalf of the
related Noteholders, in which amounts released from the Collection Account and
any Pre-Funding Account and any amounts received from any source of credit
enhancement for payment to such Noteholders will be deposited and from which
all distributions to such Noteholders will be made (the "Note Distribution
Account"). The Collection Account, the Certificate Distribution Account (if
any), and the Note Distribution Account (if any), are referred to herein
collectively as the "Designated Accounts." Any other accounts to be established
with respect to a Trust will be described in the related Prospectus Supplement.
Each Designated Account will be an Eligible Account maintained with the
Trustee, the Indenture Trustee and/or other depository institutions. "Eligible
Account" means any account which is (i) an account maintained with an Eligible
Institution (as defined below); (ii) an account or accounts the deposits in
which are fully insured by either the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC; (iii) a "segregated trust account"
maintained with the corporate trust department of a federal or state chartered
depository institution or trust company with trust powers and acting in its
fiduciary capacity for the benefit of the Trustee, which depository institution
or trust company has capital and surplus (or, if such depository institution or
trust company is a subsidiary of a bank holding company system, the capital and
surplus of the bank holding company) of not less than $50,000,000 and the
securities of such depository institution (or, if such depository institution
is a subsidiary of a bank holding company system and such depository
institution's securities are not rated, the securities of the bank holding
company) has a credit rating from each rating agency rating such series of
Notes and/or Certificates (a "Rating Agency") in one of its generic credit
rating categories which signifies investment grade; or (iv) an account that
will not cause any Rating Agency to
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downgrade or withdraw its then-current rating assigned to the Securities, as
confirmed in writing by each Rating Agency. "Eligible Institution" means any
depository institution organized under the laws of the United States or any
state, the deposits of which are insured to the full extent permitted by law by
the Bank Insurance Fund (currently administered by the Federal Deposit
Insurance Corporation), whose short-term deposits have been rated in one of the
two highest rating categories or such other rating category as will not
adversely affect the ratings assigned to the Securities of such series. On the
Closing Date specified in the related Prospectus Supplement, the Servicer will
cause to be deposited in the Collection Account all payments on the Contracts
received by the Servicer after the Cutoff Date and on or prior to the second
Business Day preceding the Closing Date.
The Servicer will deposit all payments on the Contracts held by any Trust
received directly by the Servicer from Obligors and all proceeds of Contracts
collected directly by the Servicer during each Monthly Period into the
Collection Account no later than one Business Day after receipt.
Notwithstanding the foregoing and unless otherwise provided in the related
Prospectus Supplement, the Servicer may utilize an alternative remittance
schedule, if the Servicer provides to the Trustee and the Indenture Trustee
written confirmation from each Rating Agency that such alternative remittance
schedule will not result in the downgrading or withdrawal by such Rating Agency
of the rating(s) then assigned to the Securities. Green Tree will also deposit
into the Collection Account on or before the Deposit Date the Purchase Amount
of each Contract to be purchased by it for breach of a representation or
warranty.
For any series of Securities, funds in the Designated Accounts and any other
accounts identified in the related Prospectus Supplement will be invested, as
provided in the related Trust Documents, at the direction of the Servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related Trust Documents ("Eligible
Investments"). Eligible Investments shall mature no later than the Business Day
preceding the applicable Distribution Date for the Monthly Period to which such
amounts relate. Investments in Eligible Investments will be made in the name of
the Trustee or the Indenture Trustee, as the case may be, and such investments
will not be sold or disposed of prior to their maturity.
Unless otherwise specified in the related Prospectus Supplement, collections
or recoveries on a Contract (other than late fees or certain other similar fees
or charges) received during a Monthly Period and Purchase Amounts deposited
with the Trustee prior to a Distribution Date will be applied first to any
outstanding Monthly Advances made by the Servicer with respect to such
Contract, and then to interest and principal on the Contract in accordance with
the terms of the Contract.
Servicing Procedures
The Servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the Servicer with respect to Contracts owned
or serviced by it, to collect all payments due with respect to the Contracts
held by any Trust and, in a manner consistent with the Trust Documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the Trust Documents, the Servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
Product securing a Contract, with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on such Contract. The Servicer is authorized to follow such of
its normal collection practices and procedures as it deems necessary or
advisable to realize upon any Contract. The Servicer may repossess and sell the
Product securing such Contract at judicial sale, or take any other action
permitted by applicable law. See "Certain Legal Aspects of the Contracts." The
Servicer will be entitled to recover all reasonable expenses incurred by it in
connection therewith. The proceeds of such realization (net of such expenses)
will be deposited in the Collection Account at the time and in the manner
described above under "--Collections."
The Trust Documents will provide that the Servicer will indemnify and defend
the Trustee, the Indenture Trustee, the Trust and the Securityholders against,
among other things, any and all costs, expenses, losses,
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damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, or in respect of any action taken or failed
to be taken by the Servicer with respect to any portion of the Trust Property
in violation of the provisions of the Trust Documents. The Servicer's
obligations to indemnify the Trustee, the Indenture Trustee, the Trust and the
Securityholders for the Servicer's actions or omissions will survive the
removal of the Servicer but will not apply to any action or omission of a
successor Servicer.
Servicing Compensation
Unless otherwise specified in the related Prospectus Supplement, with respect
to each series of Securities, the Servicer will be entitled to receive the
Servicing Fee for each Monthly Period in an amount equal to the product of one-
twelfth of the Servicing Rate and the Aggregate Principal Balance as of the
first day of such Monthly Period. The Servicer also will be entitled to collect
and retain any late fees or other administrative fees or similar charges
allowed by the terms of the Contracts or applicable law. Unless otherwise
provided in the related Prospectus Supplement, the "Servicing Rate" will equal
.75% per annum calculated on the basis of a 360-day year consisting of twelve
30-day months. As long as Green Tree is the Servicer, the Servicing Fee and any
additional servicing compensation will be paid out of collections on or with
respect to the Contracts after the required distributions to Noteholders and
Certificateholders. If Green Tree is no longer the Servicer, the Servicing Fee
and any additional servicing compensation will be paid out of collections on or
with respect to the Contracts prior to distributions to Certificateholders and
Noteholders. Unless otherwise specified in the related Prospectus Supplement, a
"Monthly Period" with respect to any Distribution Date is the calendar month
immediately preceding the month in which the Distribution Date occurs.
Green Tree, as Servicer, will be required to pay all expenses incurred by it
in connection with its servicing activities (including fees, expenses and
disbursements of the Trustee, the Indenture Trustee, the Custodian and
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Certificateholders and
Noteholders), except certain expenses incurred in connection with realizing
upon the Contracts.
Distributions
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of Securities
entitled thereto will be made by the Trustee or the Indenture Trustee, as
applicable, to the Certificateholders and the Noteholders. The timing,
calculation, allocation, order, source, priorities of and requirements for all
distributions to each class of Certificateholders and all payments to each
class of Noteholders will be set forth in the related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement, on the
third Business Day prior to each Distribution Date (the "Determination Date"),
the Servicer will determine the Amount Available and the amounts to be
distributed on the Notes and Certificates for such Distribution Date. Except as
otherwise specified in the related Prospectus Supplement, the "Amount
Available" for any Distribution Date will be equal to (i) the funds on deposit
in the Collection Account at the close of business on the last day of the
related Monthly Period, plus (ii) any Advances to be made by the Servicer with
respect to delinquent payments, plus (iii) any Repurchase Amounts to be
deposited by Green Tree with respect to Contracts to be repurchased due to a
breach of a representation or warranty, minus (iv) any amounts paid by Obligors
in the related Monthly Period, but to be applied in respect of a regular
monthly payment due in a subsequent Monthly Period (an "Advance Payment"),
minus (v) any amounts incorrectly deposited in the Collection Account.
Except as otherwise specified in the related Prospectus Supplement, on each
Distribution Date, prior to making distributions in respect of the Notes and
Certificates, the Amount Available will be applied, first, if Green Tree is no
longer the Servicer, to pay the servicing fee to the successor Servicer, and
second, to reimburse the Servicer (including Green Tree) for any Advances made
with respect to a prior Monthly Period
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and subsequently recovered and for any Advances previously made that the
Servicer has determined are Uncollectible Advances.
Enhancement
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, with respect to each class of Securities will be set forth in
the related Prospectus Supplement. If and to the extent provided in the related
Prospectus Supplement, enhancement may be in the form of a financial guaranty
insurance policy, letter of credit, Green Tree guaranty, cash reserve fund,
derivative product, or other form of enhancement, or any combination thereof,
as may be described in the related Prospectus Supplement. If specified in the
applicable Prospectus Supplement, enhancement for a class of Securities of a
Series may cover one or more other classes of Securities in such Series, and
accordingly may be exhausted for the benefit of a particular class and
thereafter be unavailable to such other classes. Further information regarding
any provider of enhancement, including financial information when material,
will be included in the related Prospectus Supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the Certificateholders and the Noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
Certificateholders and the Noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the enhancement for a class of Securities will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal and interest thereon. If losses occur which exceed the amount
covered by any enhancement or which are not covered by any enhancement,
Securityholders will bear their allocable share of deficiencies. In addition,
if a form of enhancement covers more than one class of Securities of a Series,
Securityholders of any such class will be subject to the risk that such
enhancement will be exhausted by the claims of Securityholders of other
classes.
Advances
Unless otherwise specified in the related Prospectus Supplement, the Servicer
will be obligated to make Advances each month of any scheduled payments on the
Contracts included in a Trust that were due but not received during the prior
Monthly Period. The Servicer will be entitled to reimbursement of an Advance
from Available Funds in the Collection Account for the related Trust (i) when
the delinquent payment is recovered by the Trust, or (ii) when the Servicer has
determined that such Advance has become an Uncollectible Advance. The Servicer
will be obligated to make an Advance only to the extent that it determines that
such Advance will be recoverable from subsequent funds available therefor in
the Collection Account for the related Trust.
Evidence as to Compliance
On or before March 31 of each year the Servicer will deliver to each Trustee
and each Indenture Trustee a report of a nationally recognized accounting firm
stating that such firm has examined certain documents and records relating to
the servicing of Contracts serviced by the Servicer under pooling and servicing
agreements or sale and servicing agreements similar to the Trust Documents and
stating that, on the basis of such procedures, such servicing has been
conducted in compliance with the applicable Trust Documents, except for any
exceptions set forth in such report. A copy of such statement may be obtained
by any Certificate Owner or Note Owner upon compliance with the requirements
described above. See "Certain Information Regarding the Securities--Statements
to Securityholders" above.
Certain Matters Regarding the Servicer
Unless otherwise provided in the related Prospectus Supplement, Green Tree's
appointment as Servicer under the related Trust Documents will continue until
such time as it resigns or is terminated as Servicer, or
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until such time, if any, as a Servicer Termination Event shall have occurred
under the related Trust Documents. The related Trust Documents will provide
that the Servicer may not resign from its obligations and duties as Servicer
thereunder, except upon a determination (as evidenced by an opinion of
independent counsel, delivered and acceptable to the Trustee and the Indenture
Trustee), that by reason of a change in legal requirements its performance of
such duties would cause it to be in violation of such legal requirements in a
manner which would result in a material adverse effect on the Servicer. No such
resignation will become effective until a successor Servicer has assumed the
servicing obligations and duties under the related Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, resulting from any merger or consolidation to which the Servicer
is a party, which acquires by conveyance, transfer or lease substantially all
of the assets of the Servicer or succeeds to all or substantially all the
business of the Servicer, where the Servicer is not the surviving entity, which
corporation or other entity assumes every obligation of the Servicer under each
Trust Document, will be the successor to the Servicer under the related Trust
Documents; provided, however, that (i) such entity is an Eligible Servicer, and
(ii) immediately after giving effect to such transaction, no Servicer
Termination Event and no event which, after notice or lapse of time, or both,
would become a Servicer Termination Event shall have occurred and be
continuing.
Indemnification and Limits on Liability
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will be liable only to the extent of
the obligations specifically undertaken by it under the Trust Documents and
will have no other obligations or liabilities thereunder. The Trust Documents
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will have any liability to the Trust, the
Certificateholders or the Noteholders, except as provided in the Trust
Documents, for any action taken or for refraining from taking any action
pursuant to the Trust Documents, other than any liability that would otherwise
be imposed by reason of the Servicer's breach of the Trust Documents or willful
misfeasance, bad faith or negligence (including errors in judgment) in the
performance of its duties, or by reason of reckless disregard of obligations
and duties under the Trust Documents or any violation of law.
The Servicer may, with the prior consent of the Trustee and the Indenture
Trustee, if any, delegate duties under the related Trust Documents to any of
its affiliates. In addition, the Servicer may at any time perform the specific
duty of repossessing Products through subcontractors who are in the business of
servicing consumer receivables. The Servicer may also perform other specific
duties through subcontractors; provided, however, that no such delegation of
such duties by the Servicer shall relieve the Servicer of its responsibility
with respect thereto.
Servicer Termination Events
Except as otherwise specified in the related Prospectus Supplement, Servicer
Termination Events under the Trust Documents will include (i) any failure by
the Servicer to deliver to the Indenture Trustee for distribution to the
Noteholders or to the Trustee for distribution to the Certificateholders any
required payment which continues unremedied for 5 days (or such other period
specified in the related Prospectus Supplement) after the giving of written
notice; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the Trust
Documents that materially and adversely affects the interests of
Securityholders, which, in either case, continues unremedied for 30 days after
the giving of written notice of such failure of breach; (iii) any assignment or
delegation by the Servicer of its duties or rights under the Trust Documents,
except as specifically permitted under the Trust Documents, or any attempt to
make such an assignment or delegation; (iv) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings regarding the Servicer; and (v) the Servicer is no longer an
Eligible Servicer (as defined in the Trust Documents). Notice as used herein
shall mean notice to the Servicer by the Trustee, the Indenture Trustee, if
any, or Green Tree, or to Green Tree, the Servicer, the Indenture Trustee, if
any, and the
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Trustee by the holders of Securities representing interests aggregating not
less than 25% of the outstanding principal balance of the Securities issued by
such Trust.
Unless otherwise specified in the related Prospectus Supplement, if a
Servicer Termination Event occurs and is continuing, the Trustee, the Indenture
Trustee (if any), or the holders of at least 25% in aggregate principal balance
of the outstanding Securities issued by such Trust, by notice then given in
writing to the Servicer (and to the Trustee and the Indenture Trustee if given
by the Securityholders) may terminate all of the rights and obligations of the
Servicer under the Trust Documents. Immediately upon the giving of such notice,
and, in the case of a successor Servicer other than the Trustee, the acceptance
by such successor Servicer of its appointment, all authority of the Servicer
will pass to the Trustee or other successor Servicer. The Trustee, the
Indenture Trustee and the successor Servicer may set off and deduct any amounts
owed by the Servicer from any amounts payable to the outgoing Servicer.
On and after the time the Servicer receives a notice of termination, the
Trustee or other successor Servicer specified in the related Prospectus
Supplement (the "Backup Servicer") will be the successor in all respects to the
Servicer and will be subject to all the responsibilities, restrictions, duties
and liabilities of the Servicer under the related Trust Documents; provided,
however, that the successor Servicer shall have no liability with respect to
any obligation which was required to be performed by the prior Servicer prior
to the date that the successor Servicer becomes the Servicer or any claim of a
third party (including a Securityholder) based on any alleged action or
inaction of the prior Servicer. Notwithstanding such termination, the Servicer
shall be entitled to payment of certain amounts payable to it prior to such
termination, for services rendered prior to such termination. No such
termination will affect in any manner Green Tree's obligation to repurchase
certain Contracts for breaches of representations or warranties under the Trust
Documents. In the event that the Trustee would be obligated to succeed the
Servicer but is unwilling or unable so to act, it may appoint, or petition to a
court of competent jurisdiction for the appointment of a Servicer. Pending such
appointment, the Trustee is obligated to act in such capacity. The Trustee and
such successor Servicer may agree upon the servicing compensation to be paid,
which in no event may be greater than the compensation to the Servicer under
the Trust Documents.
Upon any termination of, or appointment of a successor to, the Servicer, the
Trustee and the Indenture Trustee (if any) will each give prompt written notice
thereof to Certificateholders and Noteholders, respectively, at their
respective addresses appearing in the Certificate Register or the Note Register
and to each Rating Agency.
Amendment
Unless otherwise provided in the related Prospectus Supplement, the Trust
Documents may be amended by the Seller, the Servicer, the Trustee and the
Indenture Trustee, if any, but without the consent of any of the
Securityholders, to cure any ambiguity or to correct or supplement any
provision therein, provided that such action will not, in the opinion of
counsel (which may be internal counsel to Green Tree or the Servicer)
reasonably satisfactory to the Trustee and the Indenture Trustee, materially
and adversely affect the interests of the Securityholders. The Trust Documents
may also be amended by Green Tree, the Servicer and the Trustee and the
Indenture Trustee (if any), and a Certificate Majority and a Note Majority (if
applicable), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Trust Documents or of
modifying, in any manner, the rights of the Certificateholders or the
Noteholders. No such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on the
related Contracts or distributions that are required to be made on any related
Certificate or Note or the related Pass-Through Rate or Interest Rate or (ii)
reduce the percentage of the Certificate Balance evidenced by Certificates or
of the aggregate principal amount of Notes then outstanding required to consent
to any such amendment, without the consent of the holders of all Certificates
or all Notes, as the case may be, then outstanding.
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Termination
The obligations created by the Trust Documents will terminate upon the date
calculated as specified in the Trust Documents, generally upon (i) the later of
the final payment or other liquidation of the last Contract subject thereto and
the disposition of all property acquired upon repossession of any Product and
(ii) the payment to the Securityholders of all amounts held by the Servicer or
the Trustee and required to be paid to the Securityholders pursuant to the
Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Securities, in order to avoid excessive administrative
expense, Green Tree and the Servicer each will be permitted, at its option, to
purchase from the Trust, on any Distribution Date immediately following any
Monthly Period as of the last day of which the Aggregate Principal Balance is
equal to or less than 10% (or such other percentage as may be specified in the
related Prospectus Supplement) of the Cutoff Date Principal Balance, all
remaining Contracts in the related Trust and the other remaining Trust Property
at a price equal to the aggregate of the Purchase Amounts therefor and the
appraised value of any other remaining Trust Property. The exercise of this
right will effect an early retirement of the related Certificates and Notes.
If a General Partner is named in the related Prospectus Supplement, unless
otherwise specified in the related Prospectus Supplement, the Trust Agreement
will provide that, in the event that the General Partner becomes insolvent,
withdraws or is expelled as a General Partner or is terminated or dissolved,
the Trust will terminate in 90 days and effect redemption of the Notes (if any)
and prepayment of the Certificates following the winding-up of the affairs of
the related Trust, unless within such 90 days the remaining General Partner, if
any, and holders of a majority of the Certificates of such series agree in
writing to the continuation of the business of the Trust and to the appointment
of a successor to the former General Partner, and the Owner Trustee is able to
obtain an opinion of counsel to the effect that the Trust will not thereafter
be an association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes.
Unless otherwise specified in the related Prospectus Supplement, with respect
to each series of Securities, the Trustee will give written notice of the final
distribution with respect to the Certificates to each Certificateholder of
record and the Indenture Trustee will give written notice of the final payment
with respect to the Notes (if any), to each Noteholder of record. The final
distribution to any Certificateholder and the final payment to any Noteholder
will be made only upon surrender and cancellation of such holder's Certificate
or Note at the office or agency of the Trustee, with respect to Certificates,
or of the Indenture Trustee, with respect to Notes, specified in the notice of
termination. Any funds remaining in the Trust, after the Trustee or the
Indenture Trustee has taken certain measures to locate a Certificateholder or
Noteholder, as the case may be, and such measures have failed, will be
distributed to The United Way, and the Certificateholders and Noteholders, by
acceptance of their Certificates and Notes, will waive any rights with respect
to such funds.
The Trustee
The Trustee or Owner Trustee, as applicable, for each Trust will be specified
in the related Prospectus Supplement. The Trustee, in its individual capacity
or otherwise, and any of its affiliates may hold Certificates or Notes in their
own names or as pledgee. In addition, for the purpose of meeting the legal
requirements of certain jurisdictions, the Trustee, with the consent of the
Servicer, shall have the power to appoint co-trustees or separate trustees of
all or any part of the related Trust. In the event of such appointment, all
rights, powers, duties and obligations conferred or imposed upon the Trustee by
the related Trust Documents will be conferred or imposed upon the Trustee and
such separate trustee or co-trustee jointly, or, in any jurisdiction where the
Trustee is incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee of any Trust may resign at any time, in which event the General
Partner, if any, specified in the related Prospectus Supplement or, if no such
General Partner is specified, the Servicer or its successor will be obligated
to appoint a successor trustee. The General Partner, if any, specified in the
related Prospectus
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Supplement (or, if no such General Partner is specified, the Servicer) may
also remove the Trustee, if the Trustee ceases to be eligible to serve,
becomes legally unable to act, is adjudged insolvent or is placed in
receivership or similar proceedings. In such circumstances, the General
Partner, if any, specified in the related Prospectus Supplement or, if no such
General Partner is specified, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the Trustee and appointment
of a successor trustee will not become effective until acceptance of the
appointment by the successor trustee.
Duties of the Trustee
The Trustee will make no representation as to the validity or sufficiency of
any Trust Document, the Certificates or the Notes (other than its execution of
the Certificates and the Notes), the Contracts or any related documents, and
will not be accountable for the use or application by the Servicer of any
funds paid to the Servicer in respect of the Certificates, the Notes or the
Contracts prior to deposit in the related Collection Account.
The Trustee will be required to perform only those duties specifically
required of it under the Trust Documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other
instruments required to be furnished by the Servicer to the Trustee under the
Trust Documents, in which case it will only be required to examine such
certificates, reports or instruments to determine whether they conform
substantially to the requirements of the Trust Documents.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Trust Documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders or Noteholders, unless such
Certificateholders or Noteholders have offered the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No Certificateholder nor any Noteholder will have any
right under the Trust Documents to institute any proceeding with respect to
such Trust Documents, unless such holder has given the Trustee written notice
of default and unless the holders of Certificates evidencing not less than 25%
of the Certificate Balance or the holders of Notes evidencing not less than
25% of the aggregate principal balance of the Notes then outstanding, as the
case may be, have made written request to the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity, and the Trustee for 30 days after the receipt of
such notice, request and offer to indemnify has neglected or refused to
institute any such proceedings.
Administrator
If an Administrator is specified in the related Prospectus Supplement, such
Administrator will enter into an agreement (the "Administration Agreement")
pursuant to which such Administrator will agree, to the extent provided in
such Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture and the Trust
Agreement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
Rights in the Contracts
The Contracts are "chattel paper" as defined in the UCC as in effect in the
State of Minnesota. Pursuant to the UCC, an ownership interest in chattel
paper may be perfected by possession or by filing a UCC-1 financing statement
in the state where the seller's principal executive office is located.
Accordingly, financing statements covering the Contracts will be filed by
Green Tree in Minnesota.
The Servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each Trust's interest in the related
Contracts and the proceeds thereof. Green Tree will warrant in the Trust
Documents with respect to the Contracts held by the related Trust and the
Trustee will pledge the right to enforce
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such warranty to the Indenture Trustee as collateral for the Notes, if any,
that, as of the Closing Date, such Contracts have not been sold, pledged or
assigned by Green Tree to any other person, and that it has good and
indefeasible title thereto and is the sole owner thereof free of any Liens and
that, immediately upon the transfer of the Contracts to such Trust pursuant to
the related Trust Document, the Trust will have good and indefeasible title to
and will be the sole owner of the Contracts, free of any Liens. In the event
of an uncured breach of any of such warranties in the Trust Documents that
materially and adversely affects the related Trust's, Certificateholders' or
Noteholders' interest in any Contract (a "Repurchase Event"), Green Tree will
be obligated to repurchase such Contract.
Unless otherwise provided in the related Prospectus Supplement, Green Tree
will hold the Contract Files on behalf of each Trust. To facilitate servicing
and save administrative costs, the documents will not be physically segregated
from other similar documents that are in Green Tree's possession. UCC
financing statements will be filed in Minnesota reflecting the sale and
assignment of the Contracts to the Trustee, and Green Tree's accounting
records and computer systems will also reflect such sale and assignment. In
addition, the Contracts will be stamped or otherwise marked to indicate that
such Contracts have been sold to the related Trust. Despite these precautions,
if, through inadvertence or otherwise, any of the Contracts were sold to
another party (or a security interest therein were granted to another party)
that purchased (or took such security interest in) any of such Contracts in
the ordinary course of its business and took possession of such Contracts, the
purchaser (or secured party) would acquire an interest in the Contracts
superior to the interest of the related Trust if the purchaser (or secured
party) acquired (or took a security interest in) the Contracts for new value
and without actual knowledge of such Trust's interest. See "Description of the
Trust Documents--Custody of Contract Files."
Security Interests in the Products (Other than Aircraft)
Security interests in some Products must be perfected by notation of the
secured party's lien on the certificate of title or by actual possession of
the certificate of title, depending on the law of the state wherein the
purchaser resides. Security interests in certain other Products must be
perfected by the filing of a UCC financing statement, naming the Obligor as
debtor and Green Tree as secured party. Purchase money security interests in
Products that are "consumer goods" (as defined in the UCC) are deemed
perfected under some states' laws when the contract is executed and Green Tree
has advanced the purchase price of the goods. The practice of Green Tree is to
take such action as is required to perfect its security interest under the
laws of the state in which the Product is located. In the event of clerical
errors, administrative delays or otherwise, such actions may not have been
taken with respect to a Product and such security interest may be subordinate
to the interests of, among others, subsequent purchasers of the Products,
holders of perfected security interests in the Product, and the trustee in
bankruptcy of the Obligor. Likewise, where Green Tree did not file a UCC
financing statement because its security interest was perfected as a purchase
money security interest in "consumer goods," (i) such security interest may be
deemed not to be perfected if the Product were ultimately determined not to be
"consumer goods," and (ii) a subsequent purchaser of the Product may acquire
the Product free of Green Tree's security interest. Such events would,
however, give rise to a Repurchase Event and obligate Green Tree to repurchase
the affected Contract if the interests of the related Certificateholders,
Noteholders or Trust were materially and adversely affected.
Pursuant to the related Trust Document, Green Tree will assign the security
interests in the Products to the Owner Trustee on behalf of the related Trust.
However, because of the administrative burden and expense that would be
entailed in doing so, none of Green Tree, the Seller, the Trustee or the
Servicer will be required, except to the extent provided below, to amend the
certificates of title or UCC financing statements to identify the Trustee as
the new secured party and, accordingly, Green Tree will continue to be named
as the secured party on the certificates of title or UCC financing statements
relating to the Products. The Servicer will be required to note the interest
of the related Trust on the certificates of title for the Products or to amend
the UCC financing statements only upon a Servicer Termination Event. In most
states, an assignment such as that under the related Trust Documents should be
an effective transfer of a security interest without amendment of any lien
noted on the related certificate of title or financing statement, and the
assignee should succeed to the assignor's status as the secured party. In the
absence of fraud or forgery by the Obligor or administrative error
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by state recording officials, the notation of the lien of Green Tree on the
certificate of title or the UCC financing statement should be sufficient to
protect the related Trust against the rights of subsequent purchasers of a
Product or subsequent lenders who take a security interest in the related
Product. However, in the absence of such an amendment, the security interest of
the related Trust in the related Products might be defeated by, among others,
the trustee in bankruptcy of Green Tree or the Obligor. However, such failure
would give rise to a Repurchase Event and obligate Green Tree to repurchase the
affected Contract if the interests of the related Certificateholders,
Noteholders or Trust were materially and adversely affected.
In most states, a perfected security interest in a Product subject to
certificate of title or a financing statement continues for four months after
the Product is moved to a different state and thereafter until the owner re-
registers the Product in the new state, but in no event beyond the surrender of
the certificate of title. A majority of states require surrender of a
certificate of title to re-register a Product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to such Product.
In the case of Products registered in states which provide for notation of a
lien but not possession of the certificate of title by the holder of the
security interest in the related Product, the secured party should receive
notice of surrender if the security interest in the Product is noted on the
certificate of title. Accordingly, the secured party should have the
opportunity to re-perfect its security interest in the Product in the state of
relocation. In states that do not require a certificate of title for
registration of a Product, re-registration could defeat perfection.
In the ordinary course of servicing its secured consumer contract portfolio,
it is the practice of Green Tree to effect such re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Product subject to a certificate of title,
Green Tree must surrender possession of the certificate of title or receive
notice as a result of its lien noted thereon and accordingly should have an
opportunity to require satisfaction of the related Contract before release of
the lien.
Under the laws of most states, liens for repairs performed on a Product and
liens for unpaid taxes take priority over even a perfected security interest in
a Product. Green Tree in the related Trust Document will represent that,
immediately prior to the sale, assignment and transfer thereof to the related
Trust, each Contract held by such Trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in favor of Green Tree,
as secured party. However, liens for taxes, judicial liens or liens arising by
operation of law could arise at any time during the term of a Contract. In
addition, the laws of certain states and federal law permit the confiscation of
motor vehicles and certain other consumer products by governmental authorities
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
product. No notice will be given to the Owner Trustee, Indenture Trustee,
Certificateholders or Noteholders in the event such a lien or confiscation
arises, and if such lien arises or confiscation occurs after the date of
issuance of any series of Certificates and Notes, neither Green Tree nor the
Servicer will be required to repurchase or purchase the related Contract.
Security Interests in Aircraft
In order for a valid security interest in a United States-registered aircraft
to be perfected against third parties, including a trustee in bankruptcy of the
borrower, it must be perfected in accordance with the Federal Aviation Act. The
UCC has been preempted by the Federal Aviation Act with respect to the method
and location of filing against goods such as aircraft, engines, propellers,
appliances and certain spare parts to the extent that it is possible to record
against them at the Federal Aviation Administration ("FAA") Aircraft Registry
located in Oklahoma City, Oklahoma (the "Registry").
Security interests perfected by filing with the Registry may nevertheless be
subject to (1) purchase money security interests which may be filed up to ten
days (21 days in some states) after a debtor receives possession and which will
then have, in most states, priority in the aircraft (unless it is property held
as inventory) over a conflicting security interest in the same aircraft and (2)
the rights of buyers in the ordinary course of business from persons in the
business of selling goods of that kind.
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Exceptions also include possessory mechanic's and storage liens, which may or
may not need to be filed and which usually have priority over a mortgage,
whether or not such liens are incurred before or after the mortgage is
recorded. Non-possessory mechanic's liens, which exist under many state laws,
probably do not take priority over mortgages previously filed with the
Registry. If provided for by state law, a non-possessory mechanic's lien on an
aircraft may be filed at the Registry.
Federal tax liens are filed according to Federal law in the appropriate
location in each state and cannot be filed at the Registry. When so filed,
Federal tax liens can have priority over subsequent FAA recorded mortgages in
aircraft with many exceptions, including the exception of a purchase money
security interest. It is an open issue whether unrecorded liens arising out of
FAA penalties have priority over filed security interests in a registered
aircraft.
The principal effect of recordation is that each mortgage or other conveyance
that is filed with the Registry for recordation affecting the applicable
aircraft, engine, propeller, appliance or spare parts (so long as they are
maintained at any designated locations) is valid and perfected from the time of
filing as to all persons with whatever priority is given by state law. If not
filed for recordation, such a mortgage or other conveyance will not be valid
against third persons except persons having actual notice thereof. The date of
filing for recordation at the Registry is the date of perfection of the
mortgage or other conveyance, even though recordation by the Registry may not
occur for several weeks or months after delivery to the Registry. The case law
is not clear as to the effect of a rejection of the documents when they are
examined by the Registry several weeks after filing. The usual practice is to
retain expert FAA counsel to ensure, among other things, that the documents are
in due form for recording, that the record is free and clear of liens and that
the documents are filed correctly. Title companies are also available to check
the FAA records and file documents.
If the aircraft is not registered with the Registry, under the UCC, the
perfection and effect of perfection of the mortgage or any security interest in
other collateral would be governed by the law (including the conflict of laws
rules) of the jurisdiction in which the debtor is located.
Repossession
In the event of default by an Obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. The
remedies of a secured party under the UCC include the right to repossession by
self-help means, unless such means would constitute a breach of the peace.
Self-help repossession is the method employed by Green Tree in most cases and
is accomplished simply by taking possession of the Product. In the event of
default by the Obligor, some jurisdictions require that the Obligor be notified
of the default and be given a time period within which the Obligor may cure the
default prior to repossession. In cases where the Obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the Product
must then be repossessed in accordance with that order. If a breach of the
peace cannot be avoided, judicial action is required. A secured party may be
held responsible for damages caused by a wrongful repossession of a Product,
including a wrongful repossession conducted by an agent of the secured party.
In many states, a Product may be repossessed without notice to the Obligor, but
only if the repossession can be accomplished without a breach of the peace.
Notice of Sale; Redemption Rights
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
has the right to redeem the collateral prior to actual sale by paying the
secured party the entire unpaid time balance of the obligation (less any
unaccrued finance charges) plus accrued default charges, reasonable expenses
for repossessing, holding and preparing the collateral for disposition and
arranging for its sale, plus, to the extent provided in the financing
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documents, reasonable attorneys' fees, or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of Products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the related
Contract. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in other states that do not
prohibit or limit such judgments, subject to satisfaction of statutory
procedural requirements by the holder of the obligation. However, any
deficiency judgment would be a personal judgment against the Obligor for the
shortfall, and a defaulting Obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many
cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or not paid at all. Green
Tree generally seeks to recover any deficiency existing after repossession and
sale of a Product.
Occasionally, after resale of a repossessed Products, and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the law
of most states requires the secured party to remit the surplus to any holder of
another lien with respect to the Product, if proper notification of demand for
proceeds is received prior to distribution, or, if no such lienholder exists,
to remit the surplus to the former owner of the Product.
Soldiers' and Sailors' Civil Relief Act
The Relief Act imposes certain limitations upon the actions of creditors with
respect to persons serving in the Armed Forces of the United States and, to a
more limited extent, their dependents and guarantors and sureties of debt
incurred by such persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her
ability to pay interest at a higher rate. Further, a secured party may not
repossess during a person's military service a Product subject to an
installment sales contract or a promissory note entered into prior to the
person's entering military service, for a loan default which occurred prior to
or during such service, without court action. The Relief Act imposes penalties
for knowingly repossessing property in contravention of its provisions.
Additionally, dependents of military personnel are entitled to the protection
of the Relief Act, upon application to a court, if such court determines the
obligation of such dependent has been materially impaired by reason of the
military service. To the extent an obligation is unenforceable against the
person in military service or a dependent, any guarantor or surety of such
obligation will not be liable for performance.
Consumer Protection Laws
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts
and promissory notes pursuant to which purchasers finance the acquisition of
consumer products. These laws place finance charge ceilings on the amount that
a creditor may charge in connection with financing the purchase of a consumer
product. These laws also impose other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who
fail to comply. In some cases, this liability could affect the ability of an
assignee, such as the related Trust, to enforce consumer finance
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contracts such as the Contracts. The "Credit Practices" Rule of the Federal
Trade Commission (the "FTC") imposes additional restrictions on contract
provisions and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions (and certain related lenders
and their assignees) to all claims and defenses which the purchaser could
assert against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the event of a successful
claim is limited to amounts paid by the purchaser under the consumer credit
contract. However, the assignee's ability to collect any balance remaining due
thereunder is subject to these claims and defenses. Accordingly, each Trust, as
assignee of the related Contracts, will be subject to claims or defenses, if
any, that the purchaser of the related Product may assert against the seller of
such Product.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
Green Tree will warrant in the related Trust Document that as of the date of
origination each Contract held by the related Trust complied with all
requirements of applicable law in all material respects. Accordingly, if such
Trust's interest in a Contract were materially and adversely affected by a
violation of any such law, such violation would constitute a Repurchase Event
and would obligate Green Tree to repurchase the Contract unless the breach were
cured. See "Description of the Trust Documents--Sale and Assignment of the
Contracts."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the collateral at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under a contract, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing such
indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences relating to the purchase, ownership, and disposition of the
Securities. The discussion is based upon the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The discussion does not
deal with federal income tax consequences applicable to all categories of
investors, some of which may be subject to special rules. Investors are
encouraged to consult their own tax advisors with respect to the federal,
state, local, and any other tax consequences of the purchase, ownership, and
disposition of the Securities.
Dorsey & Whitney LLP, counsel to the Seller, has delivered an opinion
regarding certain federal income tax matters discussed below. Counsel to the
Seller identified in the related Prospectus Supplement ("Counsel") will deliver
an opinion regarding tax matters applicable to each Series of Securities. Such
an opinion, however, is not binding on the Internal Revenue Service (the
"Service") or the courts. The opinion of Counsel will specifically address only
those issues specifically identified below as being covered by such opinion;
however, the opinion of Counsel also will state that the additional discussion
set forth below accurately sets forth
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Counsel's advice with respect to material tax issues. No ruling on any of the
issues discussed below will be sought from the Service.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the Securities of any series will depend upon whether the Trust
created with respect to such series is structured as an owner trust (treated as
a partnership for federal income tax purposes) or as a grantor trust. The
Prospectus Supplement for each series of Securities will indicate whether the
Trust created for such series will be treated as a partnership or as a grantor
trust. The following discussion deals first with series with respect to which
the Trust has been structured as an owner trust (treated as a partnership), and
then with series with respect to which the Trust has been structured as a
grantor trust.
Owner Trust Series
Tax Status of the Trust
With respect to each series of Securities which includes both Notes and
Certificates, Counsel will deliver its opinion that the Trust will not be an
association or publicly traded partnership taxable as a corporation for federal
income tax purposes. As a result, in the opinion of Counsel, the Trust itself
will not be subject to federal income tax but, instead, each Certificateholder
will be required to take into account its distributive share of items of income
and deduction (including deductions for distributions of interest to the
Noteholders) of the Trust as though such items had been realized directly by
the Certificateholder. This opinion will be based on the assumption that the
terms of the Trust Agreement and related documents will be complied with, and
on counsel's conclusion that the nature of the income of the Trust will exempt
it from the rule that certain publicly traded partnerships are taxable as
corporations. There are, however, no cases or Service rulings on transactions
involving a trust issuing both debt and equity interests with terms similar to
those of the Notes and the Certificates. As a result, the Service may disagree
with all or a part of this discussion.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Contracts, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The Owner Trustee, on behalf of the
Trust, will agree, and the Noteholders will agree by their purchase of Notes,
to treat the Notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the Notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
Notes is correct.
Interest Income on the Notes. Interest on the Notes will be taxable as
ordinary interest income when received by Noteholders utilizing the cash-basis
method of accounting and when accrued by Noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the Notes would be
considered issued with original issue discount ("OID") if the "stated
redemption price at maturity" of a Note (generally equal to its principal
amount as of the date of issuance plus all interest other than "qualified
stated interest" payable prior to or at maturity) exceeds the original issue
price (in this case, the initial offering price at which a substantial amount
of the Notes are sold to the public). Any OID would be considered de minimis
under the OID regulations if it does not exceed 1/4% of the stated redemption
price at maturity of a Note multiplied by the number of full years until its
maturity date. It is anticipated that the Notes will not be considered issued
with more than de minimis OID. Under the OID regulations, an owner of a Note
issued with a de minimis amount of OID must include such OID in income, on a
pro rata basis, as principal payments are made on the Note.
While it is not anticipated that the Notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to be
issued with OID. This deemed OID could arise, for example, if
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interest payments on the Notes are not deemed to be "qualified stated interest"
because the Notes do not provide for default remedies ordinarily available to
holders of debt instruments or do not contain terms and conditions that make
the likelihood of late payment or nonpayment a remote contingency. Based upon
existing authority, however, the Trust will treat interest payments on the
Notes as qualified stated interest under the OID regulations. If the Notes are
issued or are deemed to be issued with OID, all or a portion of the taxable
income to be recognized with respect to the Notes would be includible in the
income of Noteholders as OID. Any amount treated as OID would not, however, be
includible again when the amount is actually received. If the yield on a class
of Notes were not materially different from its coupon, this treatment would
have no significant effect on Noteholders using the accrual method of
accounting. However, cash method Noteholders may be required to report income
with respect to the Notes in advance of the receipt of cash attributable to
such income.
A Noteholder must include OID in income as interest over the term of the
Notes under a constant yield method. In general, OID must be included in income
in advance of the receipt of cash representing that income. Each Noteholder is
encouraged to consult its own tax advisor regarding the impact of the OID rules
if the Notes are issued with OID.
Market Discount. The Notes, whether or not issued with original issue
discount, will be subject to the "market discount rules" of Section 1276 of the
Code. In general, these rules provide that if a Noteholder purchases the Note
at a market discount (i.e., a discount from its original issue price plus any
accrued original issue discount) that exceeds a de minimis amount specified in
the Code, and thereafter recognizes gain upon a disposition, the lesser of (i)
such gain or (ii) the accrued market discount will be taxed as ordinary
interest income. Market discount also will be recognized and taxable as
ordinary interest income as payments of principal are received on the Notes to
the extent that the amount of such payments does not exceed the accrued market
discount. Generally, the accrued market discount will be the total market
discount on the Note multiplied by a fraction, the numerator of which is the
number of days the Noteholder held the Note and the denominator of which is the
number of days after the date the Noteholder acquired the Note until and
including its maturity date. The Noteholder may elect, however, to determine
accrued market discount under the constant-yield method, which election shall
not be revoked without the consent of the Service.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder may elect to include market
discount in gross income as it accrues and, if such Noteholder makes such an
election, is exempt from this rule. The adjusted basis of a Note subject to
such election will be increased to reflect market discount included in gross
income, thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any such election to include market discount in gross income as it
accrues shall apply to all debt instruments held by the Noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the Service.
Amortizable Bond Premium. In general, if a Noteholder purchases a Note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), such Noteholder will be considered to have purchased such Note with
"amortizable bond premium" equal to the amount of such excess. Such Noteholder
may elect to deduct the amortizable bond premium as it accrues under a
constant-yield method over the remaining term of the Note. Such Noteholder's
tax basis in the Note will be reduced by the amount of the amortizable bond
premium deducted. Amortizable bond premium with respect to a Note will be
treated as an offset to interest income on such Note, and a Noteholder's
deduction for amortizable bond premium with respect to a Note will be limited
in each year to the amount of interest income derived with respect to such Note
for such year. Any election to deduct amortizable bond premium shall apply to
all debt instruments (other than instruments the interest on which is
excludible from gross income) held by the Noteholder at the beginning of the
first taxable year to which the election applies or thereafter acquired and is
irrevocable without the consent of the Service. Bond premium on a Note held by
a Noteholder who does not elect to deduct the premium will decrease the gain or
increase the loss otherwise recognized on the disposition of the Note.
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Disposition of Notes. If a Noteholder sells a Note, the Noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the Noteholder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder generally will equal
the Noteholder's cost for the Note, increased by any market discount, OID and
gain previously included by such Noteholder in income with respect to the Note
and decreased by principal payments previously received by such Noteholder and
the amount of bond premium previously amortized with respect to the Note. Any
such gain or loss will be capital gain or loss if the Note was held as a
capital asset, except for gain representing accrued interest and accrued market
discount not previously included in income, and will be short-term, mid-term or
long-term capital gain or loss depending upon whether the Note was held for
more or less than one year or for more than eighteen months. Capital losses
generally may be used only to offset capital gains.
Foreign Holders. Generally, interest paid to a Noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
Note in connection with a United States trade or business will be treated as
"portfolio interest" and therefore will be exempt from the 30% withholding tax.
Such a Noteholder will be entitled to receive interest payments on the Notes
free of United States federal income tax provided that such Noteholder
periodically provides the Indenture Trustee (or other person who would
otherwise be required to withhold tax) with a statement certifying under
penalty of perjury that such Noteholder is not a United States person and
providing the name and address of such Noteholder and will not be subject to
federal income tax on gain from the disposition of a Note unless the Noteholder
is an individual who is present in the United States for 183 days or more
during the taxable year in which the disposition takes place and certain other
requirements are met.
Tax Administration and Reporting. The Indenture Trustee will furnish to each
Noteholder with each distribution a statement setting forth the amount of such
distribution allocable to principal and to interest. Reports will be made
annually to the Service and to holders of record that are not excepted from the
reporting requirements regarding such information as may be required with
respect to interest and original issue discount, if any, with respect to the
Notes.
Backup Withholding. Under certain circumstances, a Noteholder may be subject
to "backup withholding" at a 31% rate. Backup withholding may apply to a
Noteholder who is a United States person if the holder, among other
circumstances, fails to furnish his Social Security number or other taxpayer
identification number to the Indenture Trustee. Backup withholding may apply,
under certain circumstances, to a Noteholder who is a foreign person if the
Noteholder fails to provide the Indenture Trustee or the Noteholder's
securities broker with the statement necessary to establish the exemption from
federal income and withholding tax on interest on the Note. Backup withholding,
however, does not apply to payments on a Note made to certain exempt
recipients, such as corporations and tax-exempt organizations, and to certain
foreign persons. Noteholders should consult their tax advisors for additional
information concerning the potential application of backup withholding to
payments received by them with respect to a Note.
On October 6, 1997, the Treasury Department issued new regulations which make
certain modifications to the withholding, backup withholding and information
reporting rules described above. The new regulations attempt to unify
certification requirements and modify reliance standards, and will generally be
effective for payments made after December 31, 1999, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding the new regulations.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
Counsel, the Service successfully asserted that the Notes did not represent
debt for federal income tax purposes, the Notes might be treated as equity
interests in the Trust. If so treated, the Trust would be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a partnership could have adverse tax consequences to
certain holders. For example, income to foreign holders generally would be
subject to federal tax and federal tax return filing and withholding
requirements, income to certain tax-exempt entities (including pension funds)
would be
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"unrelated business taxable income", and individual holders might be subject to
certain limitations on their ability to deduct their share of Trust expenses.
Tax Consequences to Certificateholders
Treatment of the Trust as a Partnership. The Seller, the General Partner and
the Owner Trustee will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the Trust, the partners of the partnership being the Certificateholders and
the General Partner, and the Notes being debt of the partnership. The proper
characterization of the arrangement involving the Trust, the Certificates, the
Notes, the General Partner, the Seller and the Servicer, however, is not
certain because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example, because
the Certificates have certain features characteristic of debt, the Certificates
might be considered debt of the Trust. Any such characterization would not
result in materially adverse tax consequences to Certificateholders as compared
to the consequences from treatment of the Certificates as equity in a
partnership, described below. The following discussion assumes that the
Certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the Contracts (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of the Contracts. The Trust's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of the
Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass-Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the Contracts that corresponds to any excess
of the principal amount of the Certificates over their initial issue price;
(iii) Prepayment Premium payable to the Certificateholders for such month; and
(iv) any other amounts of income payable to the Certificateholders for such
month. Although it is not anticipated that the Certificates will be issued at a
price which exceeds their principal amount, such allocations of Trust income to
the Certificateholders will be reduced by any amortization by the Trust of
premium on Contracts that corresponds to any such excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust will be allocated to the General Partner. Based on the economic
arrangement of the parties, this approach for allocating Trust income should be
permissible under applicable Treasury regulations, although no assurance can be
given that the Service would not require a greater amount of income to be
allocated to Certificateholders. Moreover, even under the foregoing method of
allocation, Certificateholders may be allocated income equal to the entire
Pass-Through Rate plus the other items described above even though the Trust
might not have sufficient cash to make current cash distributions of such
amount. Thus, cash basis holders will in effect be required to report income
from the Certificates on the accrual basis, and Certificateholders may become
liable for taxes on Trust income even if they have not received cash from the
Trust to pay such taxes. In addition, because tax allocations and tax reporting
will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to them
by the Trust.
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All of the taxable income allocated to a Certificateholder that is a pension,
profit sharing or employee benefit plan or other tax-exempt entity (including
an individual retirement account) will constitute "unrelated business taxable
income" generally taxable to such a holder under the Code.
A Certificateholder's share of expenses of the Trust (including fees to the
Servicer but not interest expense) will be miscellaneous itemized deductions.
An individual, an estate, or a trust that holds a Certificate either directly
or through a pass-through entity will be allowed to deduct such expenses under
Section 212 of the Code only to the extent that, in the aggregate and combined
with certain other itemized deductions, they exceed 2% of the adjusted gross
income of the Certificateholder. In addition, Section 68 of the Code provides
that the amount of itemized deductions (including those provided for in Section
212 of the Code) otherwise allowable for the taxable year for an individual
whose adjusted gross income exceeds a threshold amount determined under the
Code ($121,000 in 1997, in the case of a joint return) will be reduced by the
lesser of (i) 3% of the excess of adjusted gross income over the specified
threshold amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year. To the extent that a Certificateholder is not
permitted to deduct servicing fees allocable to a Certificate, the taxable
income of the Certificateholder attributable to that Certificate will exceed
the net cash distributions related to such income. Certificateholders may
deduct any loss on disposition of the Contracts to the extent permitted under
the Code.
Discount and Premium. It is believed that the Contracts were not issued with
OID, and, therefore, the Trust should not have OID income. The purchase price
paid by the Trust for the Contracts may exceed the remaining principal balance
of the Contracts at the time of purchase. If the Trust is deemed to acquire the
Contracts at such a premium or at a market discount, the Trust will elect to
offset any such premium against interest income on the Contracts or to include
any such discount in income currently as it accrues over the life of the
Contracts. The Trust will make this premium or market discount calculation on
an aggregate basis but may be required to recompute it on a Contract-by-
Contract basis. As indicated above, a portion of such premium deduction or
market discount income may be allocated to Certificateholders.
Distributions to Certificateholders. Certificateholders generally will not
recognize gain or loss with respect to distributions from the Trust. A
Certificateholder will recognize gain, however, to the extent that any money
distributed exceeds the Certificateholder's adjusted basis in its Certificates
(as described below under "Disposition of Certificates") immediately before the
distribution. A Certificateholder will recognize loss upon termination of the
Trust or termination of the Certificateholder's interest in the Trust if the
Trust only distributes money to the Certificateholder and the amount
distributed is less than the Certificateholder's adjusted basis in the
Certificates. Any such gain or loss generally will be capital gain or loss if
the Certificates are held as capital assets and will be long-term gain or loss
if the holding period of the Certificates is more than one year.
Section 708 Termination. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. Under Treasury regulations, if such a termination occurs, the
Trust will be considered to have contributed the assets of the Trust (the "Old
Partnership") to a new partnership (the "New Partnership") in exchange for
interests in the New Partnership. Such interests would be deemed distributed to
the partners of the Old Partnership in liquidation thereof, which would not
constitute a sale or exchange for United States federal income tax purposes.
Disposition of Certificates. If a Certificateholder sells a Certificate, the
Certificateholder generally will recognize capital gain or loss in an amount
equal to the difference between the amount realized on the sale and the
seller's tax basis in the Certificate. A Certificateholder's tax basis in a
Certificate generally will equal the Certificateholder's cost increased by the
Certificateholder's share of Trust income and decreased by any distributions
received with respect to such Certificate. In addition, both the tax basis in
the Certificate and the amount realized on a sale of a Certificate would
include the Certificateholder's share of the Notes and other liabilities of the
Trust. A Certificateholder acquiring Certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the
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Certificates, allocate a portion of such aggregate tax basis to the
Certificates sold (rather than maintain a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the Certificateholder's
share of unrecognized accrued market discount on the Contracts would generally
be treated as ordinary income to the Certificateholder and would give rise to
special tax reporting requirements. The Trust does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the Trust will elect to include
market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of income
(not including income attributable to disallowed itemized deductions described
above) over the life of the Certificates that exceeds the aggregate cash
distributions with respect thereto, such excess generally will give rise to a
capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly, and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the
close of the related Record Date. As a result, a Certificateholder purchasing a
Certificate may be allocated tax items (which will affect the
Certificateholder's tax liability and tax basis) attributable to periods before
the Certificateholder actually owns the Certificate. The use of such a
convention may not be permitted by existing regulations. If a monthly
convention is not permitted (or only applies to transfers of less than all of
the Certificateholder's interest), taxable income or losses of the Trust may be
reallocated among the Certificateholders. The General Partner is authorized to
revise the Trust's method of allocation between transferors and transferees to
conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit or loss, the purchasing Certificateholder will have a
higher or lower basis in the Certificate than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher or lower basis unless the Trust files an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders may be allocated a greater or lesser amount of Trust
income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. Pursuant to an administration agreement (the
"Administration Agreement"), the Trustee will monitor the performance of the
following responsibilities of the Trust by other service providers. The Trust
is required to keep or have kept complete and accurate books of the Trust. Such
books will be maintained for financial reporting and tax purposes on an accrual
basis and the fiscal year of the Trust will be the calendar year. The Trust
will file a partnership information return (IRS Form 1065) with the Service for
each taxable year of the Trust and will report each Certificateholder's
allocable share of items of Trust income and expense to Certificateholders and
the Service on Schedule K-1. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with certain required
information statements relating to identification of beneficial owners of
Certificates and such nominees will be required to forward such information to
such beneficial owners. Generally, Certificateholders must file tax returns
that are consistent with the information return filed by the Trust or be
subject to penalties unless the Certificateholder notifies the Service of all
such inconsistencies.
Green Tree or a subsidiary identified in the related Prospectus Supplement
will be designated as the tax matters partner in the Trust Agreement and, as
such, will be responsible for representing the Certificateholders in any
dispute with the Service. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return
is filed. Any adverse determination following an audit of the return of the
Trust by the appropriate taxing authorities could result in
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an adjustment of the returns of the Certificateholders, and, under certain
circumstances, a Certificateholder may be precluded from separately litigating
a proposed adjustment to the items of the Trust. An adjustment could also
result in an audit of a Certificateholder's returns and adjustments of items
not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust will be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust will be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
It is expected that the Trust will withhold on the portion of its taxable
income that is allocable to foreign Certificateholders pursuant to Section 1446
of the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for foreign holders that are taxable as corporations
and 39.6% for all other foreign Certificateholders. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements may
require the Trust to change its withholding procedures. In determining a
Certificateholder's nonforeign status, the Trust may rely on Form W-8, Form W-9
or the Certificateholder's certification of nonforeign status signed under
penalties of perjury.
Each foreign Certificateholder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign
Certificateholder must obtain a taxpayer identification number from the Service
and submit that number to the Trust on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign Certificateholder generally will be
entitled to file with the Service a claim for refund with respect to taxes
withheld by the Trust, taking the position that no taxes are due because the
Trust is not engaged in a U.S. trade or business. However, the Service may
assert that additional taxes are due, and no assurance can be given as to the
appropriate amount of tax liability.
Backup Withholding. Under certain circumstances, a Certificateholder may be
subject to "backup withholding" at a 31% rate. See the discussion above under
"Tax Consequences to Noteholders--Backup Withholding."
Grantor Trust Series
Tax Status of the Trust
With respect to each series of Securities which includes only Certificates,
unless otherwise specified in the related Prospectus Supplement, Counsel will
deliver its opinion that the Trust will be classified as a grantor trust for
federal income tax purposes and not as an association which is taxable as a
corporation. The Trust will be classified as a trust regardless of whether the
Seller is considered to retain an interest in the Contracts, as discussed
below. While such a retained interest might be viewed as a second class of
beneficial interest in the Trust and Treasury Regulations Section 301.7701-4(c)
generally provides that an investment trust with more than one class of
ownership interest will be classified as an association taxable as a
corporation or a partnership, that regulation would treat the Trust as a
grantor trust because there will be no power under the Pooling and Servicing
Agreement to vary the investment of the Certificateholders, the purpose of the
Trust will be to facilitate direct investment in the Contracts, and the
existence of multiple classes of ownership interests in the Trust will be
incidental to that purpose.
Tax Consequences to Certificateholders
Because the Trust will be classified as a grantor trust, each
Certificateholder (including any holder of a subordinated Certificate) will, in
the opinion of Counsel, be treated for federal income tax purposes as the owner
of an undivided interest in the Contracts and other Trust Property.
Accordingly, subject to the discussion below of certain limitations on
deductions and the "stripped bond" rules of the Code, each Certificateholder
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must report on its federal income tax return its pro rata share of the entire
income from the Contracts and other Trust Property, and may deduct its pro rata
share of the fees paid by the Trust, at the same time as such items would be
reported under the Certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the Trust and received and paid
directly the amounts received and paid by the Trust. A Certificateholder's
share of expenses of the Trust will be miscellaneous itemized deductions
subject to certain limits on deductibility. See the discussion above under
"OWNER TRUST SERIES--Tax Consequences to Certificateholders--Partnership
Taxation."
A purchaser of a Certificate will be treated as purchasing an interest in
each Contract in the Trust at a price determined by allocating the purchase
price paid for the Certificate among all Contracts in proportion to their fair
market values at the time of purchase of the Certificate. To the extent that
the portion of the purchase price of a Certificate allocated to a Contract is
greater than or less than the portion of the principal balance of the Contract
allocable to the Certificate, that interest in the Contract will be deemed to
have been acquired with premium or discount, respectively. See the discussions
above under "OWNER TRUST SERIES--Tax Consequences to Noteholders--Market
Discount" and "--Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount represents
original issue discount or market discount. It is not anticipated that the
Contracts will have original issue discount, unless they are subject to the
"stripped bond" rules of the Code described below. If the Contracts are subject
to the stripped bond rules of the Code, the market discount rules discussed
above may not apply.
Subordinated Certificates. If the subordinated Certificateholders receive
distributions of less than their share of the Trust's receipts of principal or
interest (the "Shortfall Amount") because of the subordination of the
subordinated Certificates, holders of subordinated Certificates would probably
be treated for federal income tax purposes as if they had (i) received as
distributions their full share of such receipts, (ii) paid over to the senior
Certificateholders an amount equal to such Shortfall Amount, and (iii) retained
the right to reimbursement of such amounts to the extent available from future
collections on the Contracts.
Under this analysis, (a) subordinated Certificateholders would be required to
accrue as current income any interest or OID income of the Trust that was a
component of the Shortfall Amount, even though such amount was in fact paid to
the senior Certificateholders, (b) a loss would only be allowed to the
subordinated Certificateholders when their right to receive reimbursement of
such Shortfall Amount became worthless (i.e., when it becomes clear that amount
will not be available from any source to reimburse such loss), and (c)
reimbursement of such Shortfall Amount prior to such a claim of worthlessness
would not be taxable income to subordinated Certificateholders because such
amount was previously included in income. Those results should not
significantly affect the inclusion of income for subordinated
Certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to subordinated Certificateholders on the cash method of
accounting by, in effect, placing them on the accrual method. Moreover, the
character and timing of loss deductions is unclear.
Under current Service interpretations of applicable Treasury Regulations, the
Seller would be able to sell or otherwise dispose of any subordinated
Certificates. Accordingly, the Seller may offer subordinated Certificates for
sale to investors.
Stripped Certificates. Certain classes of Certificates may be subject to the
stripped bond rules of Section 1286 of the Code and for purposes of this
discussion will be referred to as "Stripped Certificates." In general, a
Stripped Certificate will be subject to the stripped bond rules where there has
been a separation of ownership of the right to receive some or all of the
principal payments on a Contract from ownership of the right to receive some or
all of the related interest payments. Certificates will constitute Stripped
Certificates and will be subject to these rules under various circumstances,
including the following: (i) if any servicing compensation is deemed to exceed
a reasonable amount; (ii) if two or more classes of Certificates are issued
representing the right to non-pro rata percentages of the interest or principal
payments on the Contracts; or (iii) if Certificates are issued which represent
the right to interest only payments or principal only payments.
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Although not entirely clear, each Stripped Certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original issue discount. Original issue discount with
respect to a Stripped Certificate, if any, must be included in ordinary gross
income for federal income tax purposes as it accrues in accordance with the
constant-yield method that takes into account the compounding of interest and
such accrual of income may be in advance of the receipt of any cash
attributable to such income. See "OWNER TRUST SERIES--Tax Consequences to
Noteholders--Interest Income on the Notes" above. For purposes of applying the
original issue discount provisions of the Code, the issue price of a Stripped
Certificate will be the purchase price paid by the holder thereof and the
stated redemption price at maturity may include the aggregate amount of all
payments to be made with respect to the Stripped Certificate whether or not
denominated as interest. The amount of original issue discount with respect to
a Stripped Certificate may be treated as zero under the original issue discount
de minimis rules described above. Under rules similar to those provided in Rev.
Proc. 91-49, applicable only to mortgages secured by real property, a
Certificateholder may be required to account for any discount on a Stripped
Certificate as market discount rather than original issue discount if either
(i) the amount of original issue discount with respect to the Certificate was
treated as zero under the original issue discount de minimis rule when the
Certificate was stripped or (ii) no more than 100 basis points (including any
amount of servicing in excess of reasonable servicing) is stripped off of the
Contracts.
When an investor purchases more than one class of Stripped Certificates, it
is currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the Service may take a contrary position with respect to
some or all of the foregoing tax consequences. For example, a holder of a
Stripped Certificate may be treated as the owner of (i) as many stripped bonds
or stripped coupons as there are scheduled payments of principal and/or
interest on each Contract or (ii) a separate installment obligation for each
Contract representing the Stripped Certificate's pro rata share of principal
and/or interest payments to be made with respect thereto. In addition, if a
Trust issues more than one class of Certificates with different Pass-Through
Rates, a holder of such a Certificate may be treated as the owner of a stripped
bond with a rate equal to the lowest such Pass-Through Rate and a stripped
coupon representing the excess, if any, of the Pass-Through Rate on such
Certificate over the lowest Pass-Through Rate. As a result of these possible
alternative characterizations, investors should consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.
The Servicing Fee to be received by the Servicer and the fee for the
enhancement, if any, provided with respect to a series of Certificates may be
questioned by the Service with respect to certain Certificates or Contracts as
exceeding a reasonable fee for the services being performed in exchange
therefor, and a portion of such servicing compensation could be recharacterized
as an ownership interest retained by the Servicer or other party in a portion
of the interest payments to be made pursuant to the Contracts. In this event, a
Certificate might be treated as a Stripped Certificate subject to the stripped
bond rules of Section 1286 of the Code and the original issue discount
provisions rather than to the market discount and premium rules.
Disposition of Certificates. If a Certificate is sold, gain or loss will be
recognized equal to the difference between the amount realized on the sale and
the Certificateholder's adjusted tax basis in the Certificate. See the
discussion above under "OWNER TRUST SERIES--Tax Consequences to Noteholders--
Disposition of Notes."
Foreign Holders. Generally, interest paid to a Certificateholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
Certificates in connection with a United States trade or business will be
treated as "portfolio interest." See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Foreign Holders."
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Tax Administration and Reporting
The Trustee will furnish to each Certificateholder with each distribution a
statement setting forth the amount of such distribution allocable to principal
and to interest. In addition, the Trustee will furnish, within a reasonable
time after the end of each calendar year, to each Certificateholder who was a
Certificateholder at any time during such year, information regarding the
amount of servicing compensation received by the Servicer and such other
factual information as the Seller deems necessary to enable Certificateholders
to prepare their tax returns. Reports will be made annually to the Internal
Revenue Service and to holders of record that are not excepted from the
reporting requirements regarding information as may be required with respect to
interest and original issue discount, if any, with respect to the Certificates.
Backup Withholding
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Backup Withholding."
CERTAIN STATE INCOME TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Contracts will take place in Minnesota. The State of Minnesota imposes an
income tax on individuals, trusts and estates and a franchise tax measured by
net income on corporations. This discussion of Minnesota taxation is based upon
current statutory provisions and the regulations promulgated thereunder, and
applicable judicial or ruling authority, all of which are subject to change
(which may be retroactive). No ruling on any of the issues discussed below will
be sought from the Minnesota Department of Revenue.
Owner Trust Series
If the Notes are treated as debt for federal income tax purposes, in the
opinion of Counsel this treatment will also apply for Minnesota tax purposes.
Noteholders not otherwise subject to Minnesota income or franchise taxation
would not become subject to such a tax solely because of their ownership of the
Notes. Noteholders already subject to income or franchise taxation in Minnesota
could, however, be required to pay such a tax on all or a portion of the income
generated from ownership of the Notes.
If the Trust is treated as a partnership (not taxable as a corporation) for
federal income tax purposes, in the opinion of Counsel the Trust would also be
treated as a partnership for Minnesota income tax purposes. The partnership
therefore would not be subject to Minnesota taxation. Certificateholders that
are not otherwise subject to Minnesota income or franchise taxation would not
become subject to such a tax solely because of their interests in the
partnership. Certificateholders already subject to income or franchise taxation
in Minnesota could, however, be required to pay such a tax on all or a portion
of the income from the partnership.
If the Certificates are treated as ownership interests in an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes, in the opinion of Counsel this treatment would also apply for
Minnesota income and franchise tax purposes. Pursuant to this treatment, the
Trust would be subject to the Minnesota franchise tax measured by net income
(which could result in reduced distributions to Certificateholders).
Certificateholders that are not otherwise subject to Minnesota income or
franchise taxation would not become subject to such a tax solely because of
their interests in the constructive corporation. Certificateholders already
subject to income or franchise taxation in Minnesota could, however, be
required to pay such a tax on all or a portion of the income from the
constructive corporation.
Grantor Trust Series
If the Trust is treated as a grantor trust for federal income tax purposes,
in the opinion of Counsel the Trust would also be treated as a grantor trust
for Minnesota income tax purposes. The Trust therefore would
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not be subject to Minnesota taxation. Certificateholders that are not otherwise
subject to Minnesota income or franchise taxation would not become subject to
such a tax solely because of their interests in the Trust. Certificateholders
already subject to income or franchise taxation in Minnesota could, however, be
required to pay such a tax on all or a portion of the income from the Trust.
Because state tax laws vary, it is not possible to describe the tax
consequences to the Noteholders and Certificateholders in all of the states.
Noteholders and Certificateholders are therefore urged to consult their own tax
advisors with respect to the state tax treatment of the Notes and Certificates
and income derived therefrom.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan (a "Benefit Plan") from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the Benefit Plan. ERISA also imposes certain duties and certain prohibitions on
persons who are fiduciaries of plans subject to ERISA. Under ERISA, generally
any person who exercises any authority or control with respect to the
management or disposition of the assets of a Benefit Plan is considered to be a
fiduciary of such plan. A violation of these "prohibited transaction" rules may
generate excise tax and other liabilities under ERISA and the Code for such
persons.
Certain transactions involving the related Trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Benefit Plan that purchased Securities if assets of the related Trust were
deemed to be assets of the Benefit Plan. Under a regulation issued by the
United States Department of Labor (the "Plan Assets Regulation"), the assets of
a Trust would be treated as plan assets of a Benefit Plan for the purposes of
ERISA and the Code only if the Benefit Plan acquired an "equity interest" in
the Trust and none of the exceptions contained in the Plan Assets Regulation
was applicable. An equity interest is defined under the Plan Assets Regulation
as an interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The likely
treatment of Notes and Certificates will be discussed in the related Prospectus
Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A Benefit Plan fiduciary considering the purchase of Securities should
consult its tax and/or legal advisors regarding whether the assets of the Trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase from
the Seller, the principal amount of each class of Securities of the related
series set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default
by any such underwriter, each Underwriting Agreement will provide that, in
certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased, or the Underwriting Agreement may be terminated.
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Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and any
concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the underwriters in negotiated transactions at varying prices to
be determined at the time of such sale. After the initial public offering of
any Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that Green Tree will indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.
The Indenture Trustee, if any, may, from time to time, invest the funds in
the Designated Accounts in Eligible Investments acquired from the underwriters.
Under each Underwriting Agreement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of
all other such classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain matters with respect to the validity of the Certificates and the
Notes will be passed upon for the Seller by the counsel for the Seller
identified in the applicable Prospectus Supplement. The validity of the
Certificates and the Notes will be passed upon for the underwriters named in
the related Prospectus Supplement by Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1998
and for the year ended December 31, 1998, incorporated by reference herein have
been audited by PricewaterhouseCoopers LLP, independent accountants, as stated
in their opinion given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of the Company as of December 31, 1997
and for each of the years in the two-year period ended December 31, 1997
incorporated by reference herein have been audited by KPMG Peat Marwick LLP,
independent accountants, as stated in their opinion given upon their authority
as experts in accounting and auditing.
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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.
[GREEN TREE LOGO]
A CONSECO COMPANY
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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........... $ 556,000.00
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........................................ 5,969.70
-------------
Total..................................................... $1,277,969.70
=============
</TABLE>
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* All fees and expenses, other than the Securities and Exchange Commission
Registration Fee, are estimated.
Item 15. Indemnification of Directors and Officers.
Green Tree Financial Corporation is incorporated under the laws of Delaware.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation,
by reason of the fact that such person was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, 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 proceedings,
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 identify 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 an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director actually and reasonably incurred.
The Certificate of Incorporation and Bylaws of Green Tree Financial
Corporation provide, in effect, that, subject to certain limited exceptions,
such corporation will indemnify its officers and directors to the extent
permitted by the Delaware General Corporation Law.
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 --Certificate of Incorporation of Green Tree (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement No. 333-
49933).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
3.2 --Restated By-Laws of Green Tree (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement No. 333-52233).
4.1 --Form of Pooling and Servicing Agreement between Green Tree, as
Seller and as Servicer, and the Owner Trustee (for Grantor Trusts)
(incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement No. 33-63575).
4.2 --Form of Sale and Servicing Agreement relating to Owner Trusts
(incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement No. 33-63575).
4.3 --Form of Trust Agreement relating to Owner Trusts (incorporated by
reference to Exhibit 4.3 to the Registrant's Registration Statement
No. 33-63575).
4.4 --Form of Indenture between the Trust and the Indenture Trustee,
including form of Note (incorporated by reference to Exhibit 4.4 to
the Registrant's Registration Statement No. 33-63575).
* 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 the Registrant's Annual Report on Form
10-K for the period ended December 31, 1998).
**23.1 --Consent of KPMG Peat Marwick 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 by amendment.
***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 such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
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
II-2
<PAGE>
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such 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 prospectus filed with the
Commission 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 such post-effective amendment 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.
(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 Commission under section 305(b)(2) of the Trust
Indenture Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Saint Paul, State of Minnesota, on the 29th day of
March, 1999.
Green Tree Financial Corporation
/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 Registration
Statement has been signed by the following persons in the capacities and on the
date indicated. Each person whose signature to this Registration Statement
appears below hereby constitutes and appoints Joel H. Gottesman and Scott T.
Young and each of them, as his true and lawful attorney-in-fact and agent, with
full power of substitution, to sign on his behalf individually and in the
capacity stated below and to perform any acts necessary to be done in order to
file all amendments and post-effective amendments to this Registration
Statement, and any and all instruments or documents filed as part of or in
connection with this Registration Statement or the amendments thereto and each
of the undersigned does hereby ratify and conform all that said attorney-in-
fact and agent, or his substitutes, shall do or cause to be done by virtue
hereof.
Signature Title Date
/s/ Thomas J. Kilian Director and March 29, 1999
- ------------------------------------- President
Thomas J. Kilian
/s/ Rollin M. Dick Director/Executive March 29, 1999
- ------------------------------------- Vice President and
Rollin M. Dick Chief Financial
Officer (Principal
Financial Officer)
/s/ James S. Adams Senior Vice March 29, 1999
- ------------------------------------- President and Chief
James S. Adams Accounting Officer
(Principal
Accounting Officer)
/s/ Stephen C. Hilbert Director March 29, 1999
- -------------------------------------
Stephen C. Hilbert
II-4
<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 --Certificate of Incorporation of Green Tree (incorporated by
reference to Exhibit 3.1 to the Registrant's Registration
Statement No. 333-49933).
3.2 --Restated By-Laws of Green Tree (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement No.
333-52233).
4.1 --Form of Pooling and Servicing Agreement between Green Tree,
as Seller and as Servicer, and the Owner Trustee (for Grantor
Trusts) (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement No. 33-63575).
4.2 --Form of Sale and Servicing Agreement relating to Owner Trusts
(incorporated by reference to Exhibit 4.2 to the Registrant's
Registration Statement No. 33-63575).
4.3 --Form of Trust Agreement relating to Owner Trusts
(incorporated by reference to Exhibit 4.3 to the Registrant's
Registration Statement No. 33-63575).
4.4 --Form of Indenture between the Trust and the Indenture
Trustee, including form of Note (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement No. 33-
63575).
* 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 tot he
Registrasnt's Annual Report on Form 10-K for the period ended
December 31, 1998).
**23.1 --Consent of KPMG Peat Marwick 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 by amendment.
***To be filed subsequently pursuant to section 305(b)(2) of the Trust
Indenture Act of 1939, as amended.
<PAGE>
[Letterhead of Dorsey & Whitney LLP]
EXHIBIT 5.1
Green Tree Financial Corporation
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 Green Tree Financial Corporation, a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission (the "Commission") on March 31, 1999 (the "Registration
Statement"), relating to the registration by the Company of $2,000,000,000 of
Asset-Backed Securities (the "Securities") to be issued by Green Tree
Recreational, Consumer & Equipment Trusts to be formed by the Company 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"), between the Company, as seller 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.
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
<PAGE>
Gree Tree Financial Corporation
March 31, 1999
Page 2
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 duly executed and
delivered by the Company and the Trustee, will constitute the valid and binding
obligation of the Company, 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 duly executed and
delivered by the Company and the Trustee, will constitute the valid and binding
obligation of the Company, 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 duly executed and delivered by the Company and the
Trustee, will constitute the valid and binding obligation of the Company. 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 result in a
violation of any agreement or instrument then
<PAGE>
Gree Tree Financial Corporation
March 31, 1999
Page 3
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 (S) 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: March 31, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
<PAGE>
[Letterhead of Dorsey & Whitney LLP]
EXHIBIT 8.1
Green Tree Financial Corporation
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102-1639
Re: Federal Income Tax Consequences of Recreational,
Equipment & Consumer Trust Securities
Ladies and Gentlemen:
We have acted as counsel to Green Tree Financial Corporation, a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission (the "Commission") on March 31, 1999 (the "Registration
Statement"), relating to the registration by the Company of $1,000,000,000 of
Asset-Backed Securities (the "Securities") to be issued by Green Tree
Recreation, Equipment & Consumer Trusts to be formed by the Company 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 the Company, as seller 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>
Green Tree Financial Corporation
March 31, 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>
Green Tree Financial Corporation
March 31, 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: March 31, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
