-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NSPPW/tqyYu25h/641R3e80bcsr8FBxGscVSy8XC/pDBFaccG1MoHLlbahiZmPnK 4PIE4G4LcFVdNQmLDDJPqA== 0000890175-02-000002.txt : 20020415 0000890175-02-000002.hdr.sgml : 20020415 ACCESSION NUMBER: 0000890175-02-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSECO FINANCE CORP CENTRAL INDEX KEY: 0000890175 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 411775853 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08916 FILM NUMBER: 02597096 BUSINESS ADDRESS: STREET 1: 1100 LANDMARK TOWERS STREET 2: 345 ST PETER ST CITY: SAINT PAUL STATE: MN ZIP: 55102-1639 BUSINESS PHONE: 6512933400 MAIL ADDRESS: STREET 1: 300 LANDMARK TOWERS STREET 2: 345 ST PETER ST CITY: SAINT PAUL STATE: MN ZIP: 55102-1639 FORMER COMPANY: FORMER CONFORMED NAME: GREEN TREE ACCEPTANCE INC DATE OF NAME CHANGE: 19600201 FORMER COMPANY: FORMER CONFORMED NAME: GREEN TREE FINANCIAL CORP DATE OF NAME CHANGE: 19930225 10-K 1 cfcbody.txt FORM 10-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period_____from to_____ Commission file number: 1-08916 CONSECO FINANCE CORP. Delaware No. 41-1807858 ---------------------- ------------------------------- State of Incorporation IRS Employer Identification No. 1100 Landmark Towers Saint Paul, Minnesota 55102-1639 (651) 293-3400 -------------------------------------- -------------- Address of principal executive offices Telephone Securities registered pursuant to Section 12(b)of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- 10-1/4% Senior Subordinated Notes due 2002 New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: None The Registrant meets the conditions set forth in the General Instructions (I)(1)(a) and (b) on Form 10-K and is therefore filing this form with the reduced disclosure. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Aggregate market value of common stock held by nonaffiliates: Effective July 1, 1998, the Company's common stock is no longer traded on an established public trading market. Shares of common stock outstanding as of March 22, 2002: 103 ================================================================================ PART I ITEM 1. BUSINESS OF CONSECO FINANCE The Registrant meets the conditions set forth in the General Instructions (I) (1) (a) and (b) of Form 10-K and is therefore omitting the information otherwise required by Item 1, except for a brief description of the business done by the Registrant and its subsidiaries during the most recent fiscal year. Conseco Finance Corp. ("Conseco Finance", formerly Green Tree Financial Corporation prior to its name change in November 1999) is a financial services holding company that originates, securitizes and services manufactured housing, home equity, home improvement, retail credit and floorplan extension throughout the United States. As used in this report, the terms "we," "Conseco Finance" or the "Company" refer to Conseco Finance Corp. and its consolidated subsidiaries. Conseco Finance became a wholly owned subsidiary of Conseco, Inc. ("Conseco"), a financial services holding company, on June 30, 1998, as a result of Conseco's acquisition (the "Merger") of Conseco Finance. During the last two years, Conseco has taken a number of actions with respect to the Company, including: (i) the sale, closing or runoff of several business units (including asset-based lending, vendor leasing, bankcards, transportation and park construction); (ii) monetization of certain on-balance sheet financial assets through sales or as collateral for additional borrowings; and (iii) cost savings and restructuring of ongoing businesses such as the streamlining of credit origination operations in the manufactured housing and home equity lending divisions. In addition, we moved a significant number of jobs to India, where a highly-educated, low-cost, English-speaking labor force is available. These actions had a significant effect on the Company's operating results during 2000 and 2001. In early 2002, we announced our decision to reduce the size of our floorplan lending business. In March 2002, we completed a tender offer pursuant to which we purchased $75.8 million par value of our senior subordinated notes due June 2002. The purchase price was equal to 100 percent of the principal amount of the notes plus accrued interest. The remaining principal amount outstanding of the senior subordinated notes after giving effect to the tender offer and other debt repurchases completed prior to the tender offer is $58.4 million (of which $23.7 million is held by Conseco). Also, during the first quarter of 2002, we announced the tendering for all our remaining public debt - $167 million due in September 2002 and $4 million due in April 2003. (Such amounts reflect all 2002 debt repurchases completed prior to announcing the tender offer). Such offer expires on April 12, 2002. The tender offer price is equal to 100 percent of the principal amount of the notes plus accrued interest. The Company was originally incorporated under the laws of the State of Minnesota in 1975. In 1995, the Company reincorporated under the laws of the State of Delaware. The Company's principal executive offices are located at 1100 Landmark Towers, 345 Saint Peter Street, Saint Paul, Minnesota 55102-1639, and our telephone number is (651) 293-3400. MARKETING AND DISTRIBUTION Conseco Finance, with nationwide operations and managed finance receivables of $43.0 billion at December 31, 2001, is one of America's largest consumer finance companies, with leading market positions in retail home equity mortgages, home improvement loans, private label credit cards and manufactured housing credit. Originations to customers in the following states accounted for at least 5 percent of our 2001 originations: Texas (8.5 percent), California (8.2 percent), Florida (6.4 percent) and Michigan (5.2 percent). Unless otherwise noted, references to loans we have made may include purchase by us of credit contracts between dealers and buyers. During 2001, 43 percent of our finance products came indirectly from customers through intermediary channels such as dealers, contractors, retailers and correspondents. The remaining products were marketed directly to our customers through our regional offices and service centers. A description of the primary distribution channels is as follows: Dealers, Contractors, Retailers and Correspondents. Manufactured housing, home improvement and home equity receivables are purchased from and originated by selected dealers and contractors after being underwritten and analyzed via one of the Company's automated credit scoring systems at one of our regional service centers. During 2001, these marketing channels accounted for the following percentages of total loan originations: 93 percent of manufactured housing, 72 percent of home improvement and 6 percent of home equity. 2 Regional Service Centers, Retail Satellite Offices and Telemarketing Center. We market and originate manufactured housing loans through 33 regional offices and 3 origination and processing centers. We originate home equity loans through a system of 128 retail satellite offices and 6 regional centers. We also market private label retail credit products through selected retailers and process the contracts through Conseco Bank, Inc. ("Conseco Bank"), a Utah industrial loan company, and through Green Tree Retail Services Bank, Inc. ("Retail Bank"), a South Dakota limited purpose credit card bank, both of which are subsidiaries of the Company. We also utilize direct mail to originate home improvement loans and home equity loans. During 2001, these marketing channels accounted for the following percentages of total loan originations: 7 percent of manufactured housing, 28 percent of home improvement, 94 percent of home equity and 100 percent of retail credit contracts. Our products include the following product lines: Manufactured Housing. We provide financing for consumer purchases of manufactured housing. During 2001, we originated $2.5 billion of contracts for manufactured housing purchases, or 22 percent of our total originations. At December 31, 2001, our managed receivables included $25.6 billion of contracts for manufactured housing purchases, or 59 percent of total managed receivables. A manufactured home is a structure, transportable in one or more sections, designed to be a dwelling with or without a permanent foundation. Manufactured housing does not include either modular housing (which typically involves more sections, greater assembly and a separate means of transporting the sections) or recreational vehicles. Through our regional service centers, we purchase manufactured housing contracts from dealers located throughout the United States. Our regional service center personnel solicit dealers in their region. If the dealer wishes to utilize our financing, the dealer completes an application. Upon approval, a dealer agreement is executed. We also originate manufactured housing installment loan agreements directly with customers. For the year ended December 31, 2001, 93 percent of our manufactured housing loan originations were purchased from dealers and 7 percent were originated directly by us. Our manufactured housing contracts are secured by either the manufactured home or, in the case of land-and-home contracts, by a lien on the real estate where the manufactured home is permanently affixed. In 2001, approximately 27 percent of our manufactured housing originations were for land-and-home contracts. Customers who finance their homes with us are required to make a minimum down payment of 5 percent. For manufactured housing originations, the average loan-to-value ratio was approximately 88 percent in 2001. Customers' credit applications for new manufactured homes are reviewed in our service centers. If the application meets our guidelines, we generally purchase the contract after the customer has moved into the manufactured home. We use a proprietary automated credit scoring system to evaluate manufactured housing contracts. The scoring system is statistically based, quantifying information using variables obtained from customer credit applications and credit reports. We perform monthly audits on samples of new loan originations to measure adherence to our underwriting policies and procedures. Mortgage Services. Products within this category include home equity and home improvement loans. During 2001, we originated $3.0 billion of contracts for these products, or 27 percent of our total originations. At December 31, 2001, our managed receivables included $11.9 billion of contracts for home equity and home improvement loans, or 28 percent of total managed receivables. We originate home equity loans through 128 retail satellite offices and 6 regional centers, and through a network of correspondent and broker originators throughout the United States. The retail offices are responsible for originating, processing and funding the loan transaction. Underwriting of the application is handled through central locations. Subsequently, loans are re-underwritten on a test basis by a third party to ensure compliance with our credit policy. After the loan has closed, the loan documents are forwarded to our loan servicing center. The servicing center is responsible for handling customer service and performing document handling, custodial, quality control and collection functions. During 2001, approximately 94 percent of our home equity finance loans were originated directly with the borrower. The remaining finance volume was originated through a few correspondent lenders. The Company decreased the volume of loans originated through the correspondent channel in 2000. Typically, home equity loans are secured by first or second liens. Homes used for collateral in securing home equity loans may be either residential or investor owned, one-to-four-family properties having a minimum appraised value of $25,000. During 2001, approximately 81 percent of the loans originated were secured by first liens. The average loan to value for loans originated in 2001 was approximately 90 percent. Approximately 97 percent of our home equity loan originations during 2001 were fixed rate closed-end loans. 3 We originate the majority of our home improvement loan contracts indirectly through a network of home improvement contractors located throughout the United States. We review the financial condition, business experience and qualifications of all contractors through which we obtain loans. We finance conventional home improvement contracts generally secured by first, second or, to a lesser extent, third liens on the improved real estate. We also finance unsecured conventional home improvement loans (generally from $2,500 to $15,000). Typically, an approved contractor submits the customer's credit application and construction contract to our centralized service center where an analysis of the creditworthiness of the customer is made using a proprietary credit scoring system. If it is determined that the application meets our underwriting guidelines, we typically purchase the contract from the contractor when the customer verifies satisfactory completion of the work. We also originate home improvement loans directly with borrowers. After receiving a mail solicitation, the customer calls our telemarketing center and our sales representative explains the available financing plans, terms and rates depending on the customer's needs. The majority of the loans are secured by a second or third lien on the real estate of the customer. Direct distribution accounted for approximately 28 percent of the home improvement loan originations during 2001. The types of home improvements we finance include exterior renovations (such as windows, siding and roofing); pools and spas; kitchen and bath remodeling; and room additions and garages. We may also extend additional credit beyond the purchase price of the home improvement for the purpose of debt consolidation. Private Label Credit Card. During 2001, we originated $3.6 billion of private label credit card receivables primarily through our bank subsidiaries, or 32 percent of our total originations. At December 31, 2001, our managed receivables included $2.7 billion of contracts for credit card loans, or 6 percent of total managed receivables. We originate private label credit card receivables through contractual relationships with selected retailer and dealer partners. Our core relationships are with retailers and dealers of home improvement products, powersports vehicles (motorcycles, all-terrain-vehicles, snowmobiles and personal watercraft) and outdoor power equipment. We perform an initial review on all retailer and dealer partners as well as periodic monitoring of their financial condition. Credit card applications are generated primarily through retail and dealer outlets and the internet. We utilize a proprietary automated credit scoring system to review the credit of individual customers seeking credit cards. We periodically monitor payment behavior trends within our credit card portfolio through the use of automated portfolio management tools. If we make poor credit decisions with respect to our partners and borrowers, it could have a material adverse effect on our business. ITEM 2. PROPERTIES. The Company's headquarters are based in St. Paul, Minnesota in a building owned by the Company (120,000 square feet of which are occupied by the Company). We lease additional space in downtown St. Paul (185,000 square feet), which is used by our mortgage services and private credit card divisions. We own a building in Rapid City, South Dakota (137,000 square feet), which is used by our manufactured housing services units. We also lease office space in Rapid City (75,000 square feet) which is used by our private label credit card and retail bank servicing units. We also lease buildings in Tempe, Arizona (200,000 square feet) and Atlanta, Georgia (96,000 square feet) which serve as collection and service centers. We lease 33 regional manufactured housing division offices and 128 mortgage services branch offices across the United States; the lease terms generally range from three to five years. ITEM 3. LEGAL PROCEEDINGS. Conseco Finance was served with various related lawsuits filed in the United States District Court for the District of Minnesota. These lawsuits were generally filed as purported class actions on behalf of persons or entities who purchased common stock or options to purchase common stock of Conseco Finance during alleged class periods that generally run from July 1995 to January 1998. One action (Florida State Board of Admin. v. Green Tree Financial Corp., et. al, Case No. 98- 1162) was brought not on behalf of a class, but by the Florida State Board of Administration, which invests and reinvests retirement funds for the benefit of state employees. In addition to Conseco Finance, certain current and former officers and directors of Conseco Finance are named as defendants in one or more of the lawsuits. Conseco Finance and other defendants obtained an order consolidating the lawsuits seeking class action status into two actions, one of which pertains to a purported class of common stockholders (In re Green Tree Financial Corp. Stock Litig., Case No. 97-2666) and the other of which 4 pertains to a purported class of stock option traders (In re Green Tree Financial Corp. Options Litig., Case No. 97-2679). Plaintiffs in the lawsuits assert claims under Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco Finance and the other defendants violated federal securities laws by, among other things, making false and misleading statements about the current state and future prospects of Conseco Finance (particularly with respect to prepayment assumptions and performance of certain loan portfolios of Conseco Finance) which allegedly rendered Conseco Finance's financial statements false and misleading. On August 24, 1999, the United States District Court for the District of Minnesota issued an order dismissing with prejudice all claims alleged in the lawsuits. The plaintiffs subsequently appealed the decision to the U.S. Court of Appeals for the 8th Circuit. A three judge panel issued an opinion on October 25, 2001, reversing the United States District Court's dismissal order and remanding the actions to the United States District Court. Pretrial discovery is expected to commence in all three lawsuits approximately in April 2002. The Company believes that the lawsuits are without merit and intends to continue to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty. Conseco Finance is a defendant in two arbitration proceedings in South Carolina (Lackey v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp. and Bazzle v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp.) where the arbitrator, over Conseco Finance's objection, allowed the plaintiffs to pursue purported class action claims in arbitration. The two purported arbitration classes consist of South Carolina residents who obtained real estate secured credit from Conseco Finance's Manufactured Housing Division (Lackey) and Home Improvement Division (Bazzle) in the early and mid 1990s, and did not receive a South Carolina specific disclosure form relating to selection of attorneys and insurance agents in connection with the credit transactions. The arbitrator, in separate awards issued on July 24, 2000, awarded a total of $26.8 million in penalties and attorneys' fees. The awards were confirmed as judgments in both Lackey and Bazzle. These cases have been consolidated into one case which is currently on appeal before the South Carolina Supreme Court. Oral argument was heard on March 21, 2002. Conseco Finance has posted appellate bonds, including $20 million of cash, for these cases. Conseco Finance intends to vigorously challenge the awards and believes that the arbitrator erred by, among other things, conducting class action arbitrations without the authority to do so and misapplying South Carolina law when awarding the penalties. The ultimate outcome of this proceeding cannot be predicted with certainty. In addition, the Company and its subsidiaries are involved on an ongoing basis in other lawsuits (including purported class actions) related to their operations. The ultimate outcome of all of these other legal matters pending against the Company or its subsidiaries cannot be predicted, and, although such lawsuits are not expected to individually have a material adverse effect on the Company, such lawsuits could have, in the aggregate, a material adverse effect on the Company's consolidated financial condition, cash flows or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Registrant meets the conditions set forth in the General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore omitting the information otherwise required by Item 4. 5 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Effective July 1, 1998, the Company became a wholly owned subsidiary of Conseco and its common stock is no longer traded on an established public trading market. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA. The Registrant meets the conditions set forth in the General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore omitting the information otherwise required by Item 6. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Registrant meets the conditions set forth in the General Instructions (I) (1) (a) and (b) of Form 10-K and is therefore omitting the information otherwise required by Item 7, except for management's narrative analysis of the results of operations explaining the reasons for material changes in the amount of revenue and expense items between 2001, 2000 and 1999. In this section, we review the consolidated results of operations of Conseco Finance for the three years ended December 31, 2001, and where appropriate, provide explanations for material changes in the amount of revenue and expense items during such periods. Please read this discussion in conjunction with the accompanying consolidated financial statements and notes. All statements, trend analyses and other information contained in this report and elsewhere (such as in filings by the Company with the Securities and Exchange Commission, press releases, presentations by the Company or its management or oral statements) relative to markets for the Company's products and trends in the Company's operations or financial results, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "project," "intend," "may," "will," "would," "contemplate," "possible," "attempts," "seeks," "should," "could," "goal," "target," "on track," "comfortable with," "optimistic," and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from the future results, performance or achievements, expressed or implied by the forward-looking statements. Assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, among other things: (i) general economic conditions and other factors, including prevailing interest rate levels and stock and credit market performance, which may affect (among other things) the Company's ability to sell its products, its ability to make loans and access capital resources and the costs associated therewith, the market value of the Company's investments and the level of defaults and prepayments of loans made by the Company; (ii) the Company's ability to achieve anticipated synergies and levels of operational efficiencies, including from our process excellence initiatives; (iii) customer response to new products, distribution channels and marketing initiatives; (iv) performance of our investments; (v) changes in the Federal income tax laws and regulations which may affect the relative tax advantages of some of the Company's products; (vi) increasing competition in the finance business; (vii) regulatory changes or actions, including those relating to regulation of financial services; (viii) the outcome of the Company's efforts to sell assets and reduce, refinance or modify indebtedness and the availability and cost of capital in connection with this process; (ix) actions by rating agencies and the effects of past or future actions by these agencies on the Company's business; (x) the ultimate outcome of lawsuits filed against the Company; and (xi) the risk factors or uncertainties listed from time to time in the filings of the Company or its parent, Conseco, Inc., with the Securities and Exchange Commission. Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement. Our forward-looking statements speak only as of the date made. We assume no obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements. 6 CRITICAL ACCOUNTING POLICIES The accounting policies described below require management to make significant estimates and assumptions using information available at the time the estimates are made. Such estimates and assumptions significantly affect various reported amounts of assets and liabilities. Management has made estimates in the past that we believed to be appropriate, but were subsequently revised to reflect actual experience. If our future experience differs materially from these estimates and assumptions, our results of operations and financial condition could be affected. Accordingly, we consider them to be critical in preparing our consolidated financial statements. A more detailed description of our accounting policies is included in the notes to our consolidated financial statements. Retained Interests in Securitization Trusts Retained interests in securitization trusts represent the right to receive certain future cash flows from securitization transactions structured prior to September 8, 1999. Such cash flows generally are equal to the value of the principal and interest to be collected on the underlying financial contracts of each securitization in excess of the sum of the principal and interest to be paid on the securities sold and contractual servicing fees. These interests include interests represented by: (i) actively managed fixed maturities of $528.5 million; and (ii) interest-only securities of $141.7 million. We carry these retained interests at estimated fair value. We determine fair value by discounting the projected cash flows over the expected life of the receivables sold using current estimates of future prepayment, default, loss and interest rates. We record any unrealized gain or loss determined to be temporary, net of tax, as a component of shareholder's equity. Declines in value are considered to be other than temporary when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security. When declines in value considered to be other than temporary occur, we reduce the amortized cost to estimated fair value and recognize a loss in the statement of operations. The assumptions used to determine new values are based on our internal evaluations and consultation with external advisors having significant experience in valuing these securities. The determination of the value of our retained interests requires significant judgment. The Company has recognized significant impairment charges when the interest-only securities did not perform as well as anticipated based on our assumptions and expectations. Our current valuation of retained interests may prove inaccurate in future periods. In the securitizations to which these interest-only securities relate, we have retained certain contingent risks in the form of guarantees of certain lower rated securities issued to third parties by the securitization trusts. As of December 31, 2001, the total amount of these guarantees was $1.5 billion. If we have to make more payments on these guarantees than anticipated, or we experience higher than anticipated rates of loan prepayments, including those due to foreclosures or charge-offs, or any adverse changes in our other assumptions used for such valuation (such as interest rates and our loss mitigation policies), we could be required to recognize additional impairment charges (including potential payments related to $1.5 billion of guarantees) which could have a material adverse effect on our financial condition or results of operations. We consider any estimated payments related to these guarantees in the projected cash flows used to determine the value of our interest-only securities. Finance Receivables At December 31, 2001, the balance of our finance receivables was $18.0 billion. This value is significantly affected by our assessment of the collectibility of the receivables, servicing actions and the provision for credit losses that we establish. The provision for credit losses charged to expense is based upon an assessment of current and historical loss experience, loan portfolio trends, the value of collateral, prevailing economic and business conditions, and other relevant factors. We reduce the carrying value of finance receivables to net realizable value at the earlier of: (i) six months of contractual delinquency; or (ii) when we take possession of the property securing the finance receivable. Estimates of the provision are revised each period, and changes are recorded in the period they become known. A significant change in the level of collectible finance receivables would have a significant adverse effect on our results of operations and financial position in future periods. Income Taxes Our income tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax bases of assets and liabilities. These amounts are reflected in the balance of our income tax assets which totaled $267.2 million at December 31, 2001. In assessing the realization of our deferred income tax assets, we consider whether it is more likely than not that the deferred income tax assets will be realized. The ultimate realization of our 7 deferred income tax assets depends upon generating future taxable income during the periods in which our temporary differences become deductible. We evaluate the recoverability of our deferred income tax assets by assessing the need for a valuation allowance on a quarterly basis. If we determine that it is more likely than not that our deferred income tax assets will not be recovered, a valuation allowance will be established against some or all of our deferred income tax assets. This could have a significant effect on our future results of operations and financial position. No valuation allowance has been provided on our deferred income tax assets at December 31, 2001, as we believe it is more likely than not that all such assets will be realized. We reached this conclusion after considering the availability of taxable income in prior carryback years, tax planning strategies, and the likelihood of future taxable income exclusive of reversing temporary differences. Differences between forecasted and actual future operating results could adversely impact our ability to realize our deferred income tax assets. At December 31, 2001, we did not have any net operating loss carryforwards. However, if our deferred income tax assets started to reverse into net operating losses, we would have 20 years to generate future taxable income and utilize these potential net operating losses before they would begin to expire under current tax law. In recent years, we have had losses before income taxes for financial reporting purposes. However, we believe that existing levels of income from our continuing operations coupled with changes in our operations that either have taken place or will take place are sufficient to generate the levels of taxable income needed to utilize our net deferred income tax assets. Such changes include: (i) various cost saving initiatives; (ii) the transfer of certain customer service and backroom operations to our India affiliate; and (iii) restructuring our business to increase profitability such as streamlining our loan origination operations in the manufactured housing and home equity divisions. The following chart reconciles our income (loss) before taxes for financial statement purposes to our taxable income (loss) for income tax purposes:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Income (loss) before income taxes, extraordinary gain (loss), and cumulative effect of accounting change........... $(165.2) $(742.6) $ 34.0 Adjustments to determine taxable income: Net investment income ........................... (37.2) 81.0 257.5 Impairment charges .............................. 386.9 515.7 554.3 Gain on sale of finance receivables.............. - - (550.6) Provision for losses............................. 114.6 99.8 45.4 Special charges.................................. - 211.2 - Extraordinary gain (loss) on extinguishment of debt...................................... 9.4 - (3.8) Cumulative effect of accounting change........... - 70.0 - Issuance of common shares for stock option and for employee benefit plans................ - - (9.4) Other............................................ (129.2) 8.1 142.6 ------- ------- ------- Taxable income for income tax purposes........ $ 179.3 $ 243.2 $ 470.0 ======= ======= =======
Based on our projections of future financial reporting income and assuming that our deferred income tax assets and liabilities reverse to the extent of future projected financial reporting income, we expect to utilize all of our net deferred income tax assets of $245.3 million over the next three to four years. Liabilities for Contingencies We are involved on an ongoing basis in lawsuits relating to our operations, including with respect to sales practices, and we and current and former officers and directors are defendants in pending class action lawsuits asserting claims under the securities laws and in derivative lawsuits. The ultimate outcome of these lawsuits cannot be predicted with certainty. We recognize an estimated loss from these loss contingencies when we believe it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, it is difficult to measure the actual loss that might be incurred related to litigation. The ultimate outcome of these lawsuits could have a significant impact on our results of operations and financial position. 8 Results of operations for the three years ended December 31, 2001: The following tables and narratives summarize the results of our operations.
2001 2000 1999 ---- ---- ---- (Dollars in millions) Contract originations: Manufactured housing......................................................... $ 2,499.5 $ 4,395.8 $ 6,607.3 Mortgage services............................................................ 3,043.7 4,448.3 6,745.8 Retail credit................................................................ 3,585.8 2,582.1 2,036.0 Consumer finance - closed-end................................................ - 544.6 790.7 Floorplan.................................................................... 2,101.5 3,950.4 5,559.1 Discontinued................................................................. 86.8 969.1 3,370.1 --------- --------- --------- Total...................................................................... $11,317.3 $16,890.3 $25,109.0 ========= ========= ========= Sales of finance receivables: Manufactured housing......................................................... $ 3.6 $ 600.7 $ 5,598.2 Mortgage services............................................................ 833.8 913.1 3,748.4 Floorplan.................................................................... - - 117.7 Retained bonds............................................................... - - (379.7) Discontinued lines........................................................... 802.3 1,174.9 574.5 --------- --------- --------- Total...................................................................... $ 1,639.7 $ 2,688.7 $ 9,659.1 ========= ========= ========= Managed receivables (average): Manufactured housing......................................................... $25,979.1 $25,700.4 $22,899.2 Mortgage services............................................................ 12,555.5 13,254.6 10,237.5 Retail credit................................................................ 2,248.0 1,523.0 937.9 Consumer finance - closed-end................................................ 1,735.2 2,173.1 2,121.6 Floorplan................................................................... 1,181.7 2,070.4 2,098.4 Discontinued lines........................................................... 674.7 2,700.3 3,469.2 --------- --------- --------- Total...................................................................... $44,374.2 $47,421.8 $41,763.8 ========= ========= ========= Revenues: Net investment income: Finance receivables and other.............................................. $ 2,260.2 $ 1,945.0 $ 647.1 Interest-only securities................................................... 51.5 106.6 185.1 Gain on sale of finance receivables.......................................... 26.9 7.5 550.6 Fee revenue and other income................................................. 345.0 385.7 372.7 ---------- ---------- --------- Total revenues............................................................. 2,683.6 2,444.8 1,755.5 ---------- ---------- --------- Expenses: Provision for losses......................................................... 563.6 354.2 128.7 Interest expense............................................................. 1,234.4 1,152.4 341.3 Other operating costs and expenses........................................... 642.4 770.8 697.2 ---------- ---------- --------- Total expenses............................................................. 2,440.4 2,277.4 1,167.2 ---------- ---------- --------- Operating income before impairment charges, special charges, income taxes and extraordinary charge........................................... 243.2 167.4 588.3 Impairment charges.............................................................. 386.9 515.7 554.3 Special charges................................................................. 21.5 394.3 - ---------- ---------- --------- Income (loss) before income taxes and extraordinary charge................. $ (165.2) $ (742.6) $ 34.0 ========== ========== =========
9 General: We provide financing for manufactured housing, home equity, home improvements, consumer products and equipment, and provide consumer and commercial revolving credit. Finance products include both fixed-term and revolving loans and leases. The Company also markets physical damage and other credit protection relating to the loans it services. After September 8, 1999, we no longer structure our securitizations in a manner that results in recording a sale of the loans. Instead, new securitization transactions are being structured to include provisions that entitle the Company to repurchase assets transferred to the special purpose entity when the aggregate unpaid principal balance reaches a specified level. Until these assets are repurchased, however, the assets are the property of the special purpose entity and are not available to satisfy the claims of creditors of the Company. In addition, our securitization transactions are structured so that the Company, as servicer for the loans, is able to exercise significant discretion in making decisions about the serviced portfolio. Pursuant to Financial Accounting Standards Board Statement No. 140, "Accounting for the Transfer and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"), such securitization transactions are accounted for as secured borrowings whereby the loans and securitization debt remain on the balance sheet, rather than as sales. The change to the structure of our new securitizations has no effect on the total profit we recognize over the life of each new loan, but it changes the timing of profit recognition. Under the portfolio method (the accounting method required for our securitizations which are structured as secured borrowings), we recognize: (i) earnings over the life of new loans as interest revenues are generated; (ii) interest expense on the securities which are sold to investors in the loan securitization trusts; and (iii) provisions for losses. As a result, our reported earnings from new loans securitized in transactions accounted for under the portfolio method are lower in the period in which the loans are securitized (compared to our historical method) and higher in later periods, as interest spread is earned on the loans. During the last two years, Conseco has taken a number of actions with respect to the Company, including: (i) the sale, closing or runoff of several business units (including asset-based lending, vendor leasing, bankcards, transportation and park construction); (ii) monetization of certain on-balance sheet financial assets through sales or as collateral for additional borrowings; and (iii) cost savings and restructuring of ongoing businesses such as the streamlining of loan origination operations in the manufactured housing and home equity lending divisions. These courses of action and the change to the portfolio method of accounting have caused significant fluctuations in account balances as further described below. In early 2002, we announced our decision to reduce the size of our floorplan lending business. The risks associated with our business become more acute in any economic slowdown or recession. Periods of economic slowdown or recession may be accompanied by decreased demand for consumer credit and declining asset values. In the home equity mortgage and manufactured housing businesses, any material decline in real estate values reduces the ability of borrowers to use home equity to support borrowing and increases the loan-to-value ratios of loans previously made, thereby weakening collateral coverage and increasing the size of losses in the event of a default. Delinquencies, foreclosures and losses generally increase during economic slowdowns or recessions. Proposed changes to the federal bankruptcy laws applicable to individuals would make it more difficult for borrowers to seek bankruptcy protection, and the prospect of these changes may encourage certain borrowers to seek bankruptcy protection before the law changes become effective, thereby increasing delinquencies. For our finance customers, loss of employment, increases in cost-of-living or other adverse economic conditions would impair their ability to meet their payment obligations. Higher industry inventory levels of repossessed manufactured homes may affect recovery rates and result in future impairment charges and provision for losses. In addition, in an economic slowdown or recession, our servicing and litigation costs increase. Any sustained period of increased delinquencies, foreclosures, losses or increased costs would adversely affect our financial condition and results of operations. Loan originations in 2001 were $11.3 billion, down 33 percent from 2000. Loan originations in 2000 were $16.9 billion, down 33 percent from 1999. The primary reason for the decrease was our decision to no longer originate certain lines of business and to manage our growth consistent with our revised business plan. This strategy allowed us to enhance net interest margins, to reduce the amount of cash required for new loan originations, and to transfer cash to the parent company. Sales of finance receivables have decreased since 1999 as a result of the change in the structure of our securitizations. The sales of finance receivables in 2001 and 2000 are further explained below under "Gain on sale of finance receivables". Managed receivables include finance receivables recorded on our consolidated balance sheet and those managed by us but applicable to holders of asset-backed securities sold in securitizations structured in a manner that resulted in gain-on- sale revenue. Average managed receivables decreased to $44.4 billion in 2001, down 6.4 percent from 2000, and increased to $47.4 billion in 2000, up 14 percent over 1999. 10 Net investment income on finance receivables and other consists of: (i) interest earned on finance receivables; and (ii) interest income on short-term and other investments. Such income increased by 16 percent, to $2,260.2 million, in 2001 and by 201 percent, to $1,945.0 million, in 2000, consistent with the increases in average on-balance sheet finance receivables following the September 8, 1999 change in the manner in which we structure our securitizations as described above. The weighted average yields earned on finance receivables and other investments were 12.8 percent, 13.0 percent and 11.1 percent during 2001, 2000 and 1999, respectively. As a result of the change in the structure of our securitizations, future interest earned on finance receivables should increase as our average on-balance sheet finance receivables increase. Net investment income on interest-only securities is the income recognized on the interest-only securities we retain after we sell finance receivables. Such income decreased by 52 percent, to $51.5 million, in 2001 and by 42 percent, to $106.6 million, in 2000. These fluctuations are consistent with the change in the average balance of interest-only securities. The weighted average yields earned on interest-only securities were 13.2 percent, 13.4 percent and 14.6 percent during 2001, 2000 and 1999, respectively. As a result of the change in the structure of our securitizations, our securitizations are accounted for as secured borrowings and we do not recognize gain-on-sale revenue or additions to interest-only securities from such transactions. Accordingly, future investment income accreted on the interest-only security will decrease, as cash remittances from the prior gain-on-sale securitizations reduce the interest-only security balances. In addition, the balance of the interest-only securities was reduced by $533.8 million in 1999, $504.3 million in 2000 (including $70.2 million due to the accounting change described in note 1 to the accompanying consolidated financial statements) and $264.8 million in 2001 due to impairment charges. Impairment charges are further explained below. Gain on sales of finance receivables resulted from various loan sale transactions in 2001 and 2000. During 2001, we sold $1.6 billion of finance receivables which included: (i) our $802.3 million vendor services loan portfolio (which was marked-to-market in the fourth quarter of 2000 and no additional gain or loss was recognized in 2001); (ii) $568.4 million of high-loan-to-value mortgage loans; and (iii) $269.0 million of other loans. These sales resulted in net gains of $26.9 million. The Company entered into a servicing agreement on the high-loan-to-value mortgage loans sold. Pursuant to the servicing agreement, the servicing fees payable to the Company are senior to all other payments of the trust which purchased the loans. The Company also holds a residual interest in certain other cash flows of the trust. The Company did not provide any guarantees with respect to the performance of the loans sold. In 2000, we sold approximately $147.1 million of finance receivables in whole-loan sales resulting in net gains of $7.5 million. Gain on sales of finance receivables in 2000 excludes the gain realized on the sale of our bankcard portfolio which is included in special charges. During 1999, the Company sold $9.7 billion of finance receivables in securitizations structured as sales and recognized gains of $550.6 million. During 2001 and 2000, we recognized no gain on sale related to securitized transactions. Fee revenue and other income includes servicing income, commissions earned on insurance policies written in conjunction with financing transactions and other income from late fees. Such income decreased by 11 percent, to $345.0 million, in 2001 and increased by 3.5 percent, to $385.7 million, in 2000. The decrease in 2001 is primarily due to: (i) decreases in commission income as a result of reduced origination activities; (ii) the termination of sales of single premium credit life insurance; and (iii) a decrease of $16.7 million related to fee revenue earned on net assets which were returned to Conseco in the second quarter of 2000. In addition, as a result of the change in the structure of our securitizations, we no longer record an asset for servicing rights at the time of our securitizations, nor do we record servicing fee revenue; instead, the entire amount of interest income is recorded as investment income. The amount of servicing income, (which is net of the amortization of servicing assets and liabilities) was $115.3 million in 2001, $108.2 million in 2000 and $165.3 million in 1999. However, we expect servicing income to decline in future periods as the managed receivables in these securitizations are paid down. In 2000, the decrease in servicing income was partially offset by higher commissions and late fee income. Provision for losses increased by 59 percent, to $563.6 million, in 2001 and by 175 percent, to $354.2 million, in 2000. These amounts relate to our on-balance sheet receivables. The increase is principally due to the increase in loans held on our balance sheet and an increase in delinquencies. In 2001, on-balance sheet finance receivables increased 9.2 percent to $18.0 billion as compared to 2000. At December 31, 2001 and 2000, the 60-days-and-over delinquencies as a percentage of on-balance sheet finance receivables were 2.19 percent and 1.48 percent, respectively. Under the portfolio method, we estimate an allowance for credit losses based upon our assessment of current and historical loss experience, loan portfolio trends, the value of collateral, prevailing economic and business conditions, and other relevant factors. Increases in our allowance for credit losses are recognized as expense based on our current assessments of such factors. For loans previously recorded as sales, the anticipated discounted credit losses over the expected life of the loans were reflected through a reduction in the gain-on-sale revenue recorded at the time of securitization. 11 Our credit losses as a percentage of related loan balances for our on-balance sheet portfolio have been increasing over the last several quarters (1.69 percent, 1.96 percent, 2.25 percent, 2.39 percent and 2.50 percent for the quarters ended December 31, 2000, March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001, respectively). We believe such increases reflect: (i) the natural increase in delinquencies in some of our products as they age into periods at which we have historically experienced higher delinquencies; (ii) the increase in retail credit receivables which typically experience higher credit losses; (iii) economic factors which have resulted in an increase in defaults; and (iv) a decrease in the recovery rates when repossessed properties are sold given current industry levels of repossessed assets. At December 31, 2001, the Company had a total of 24,131 unsold properties (15,531 of which relate to our off- balance sheet securitizations) in repossession or foreclosure, compared to 20,110 properties at December 31, 2000. We reduce the value of repossessed property to our estimate of net realizable value upon foreclosure. With respect to our managed manufactured housing portfolio, we liquidated 25,750 units at an average loss severity rate (the ratio of the loss realized, to the principal balance of the foreclosed loan) of 57 percent in 2001 compared to 23,861 units at an average loss severity rate of 54 percent in 2000. The loss severity rate related to our on-balance sheet manufactured housing portfolio was 49 percent in 2001, compared to 48 percent in 2000. We believe the higher average severity rate in 2001 related to our on-balance sheet manufactured housing portfolio is consistent with the aging of such portfolio. The higher industry levels of repossessed manufactured homes which we believe exist in the marketplace at December 31, 2001, may adversely affect recovery rates, specifically wholesale severity, as other lenders (including lenders who have exited the manufactured home lending business) have acted to more quickly dispose of repossessed manufactured housing inventory. Additionally, the higher levels of repossessed inventory that currently exists in the marketplace may make it more difficult for us to liquidate our inventory at or near historical recovery rates. In order to maintain recovery levels, we may decide to hold inventory longer potentially causing our repossessed inventory level to temporarily grow. We believe that our severity rates are positively impacted by our use of retail channels to dispose of repossessed inventory (where the repossessed units are sold through: (i) Company-owned sales lots; or (ii) our dealer network). We currently liquidate approximately 70 percent of our repossessed units through the retail channel; thus, we rely less on the wholesale channel (through which recovery rates are typically lower). We intend to continue to focus on the retail channel in an effort to maximize our recovery rates. The Company believes that its historical loss experience has been favorably affected by various loss mitigation policies. Under one such policy, the Company works with the defaulting obligor and its dealer network to find a new buyer who meets our underwriting standards and is willing to assume the defaulting obligor's loan. Under other loss mitigation policies, the Company may permit qualifying obligors (obligors who are currently unable to meet the obligations under their loans, but are expected to be able to meet them in the future under modified terms) to defer scheduled payments or the Company may reduce the interest rate on the loan, in an effort to avoid loan defaults. Due to the prevailing economic conditions in 2001, the Company increased the use of the aforementioned mitigation policies. Based on past experience, we believe these policies will reduce the ultimate losses we recognize. If we apply loss mitigation policies, we generally reflect the customer's delinquency status as not being past due. Accordingly, the loss mitigation policies favorably impact our delinquency ratios. We attempt to appropriately reserve for the effects of these loss mitigation policies when establishing loan loss reserves. These policies are also considered when we determine the value of our retained interests in securitization trusts (including interest-only securities). Loss mitigation policies were applied to 8.8 percent of average managed accounts in 2001 compared to 7.0 percent in 2000. Such loss mitigation policies were applied to 1.3 percent, 1.5 percent, 2.9 percent and 3.1 percent of average managed accounts during the first, second, third and fourth quarters of 2001, respectively. Interest expense increased by 7.1 percent, to $1,234.4 million, in 2001 and by 238 percent, to $1,152.4 million, in 2000. Such fluctuations were the net result of: (i) increased borrowings to fund the increased finance receivables; and (ii) different average borrowing rates. Our average borrowing rate was 7.0 percent, 7.7 percent and 5.8 percent during 2001, 2000 and 1999, respectively. The decrease in average borrowing rates in 2001 as compared to 2000 is primarily due to the decrease in the general interest rate environment between periods. Under the portfolio method, we recognize interest expense on the securities issued to investors in the securitization trusts. These securities typically have higher interest rates than our other debt. However, the decrease in the average borrowing rate in 2001 was favorably impacted by the decrease in the general interest rate environment. The average borrowing rate during 1999 was favorably impacted by the use of relatively lower rate borrowings from the parent company to fund finance receivables. (Given the liquidity needs of our parent, its inability to access lower interest rate borrowings, and bank loan restrictions, our parent was unable to loan additional amounts to us during most of 2000 and 2001). Other operating costs and expenses include the costs associated with servicing our managed receivables, and non- deferrable costs related to originating new loans. Such expense decreased by 17 percent, to $642.4 million, in 2001 and 12 increased by 11.0 percent, to $770.8 million, in 2000. In 2001, we began to realize the cost savings from the previously announced restructuring of the Company. In 2000, such costs increased consistent with the prior business plans for the Company, partially offset by cost savings from our restructuring activities. Other operating costs and expenses decreased $62.5 million to $345.5 million in the second half of 2000, as compared to the first half of 2000. Impairment charges represent reductions in the value of our retained interests in securitization trusts (including interest-only securities and servicing rights) recognized as a loss in the statement of operations. We carry interest-only securities at estimated fair value, which is determined by discounting the projected cash flows over the expected life of the receivables sold using current prepayment, default, loss and interest rate assumptions. We consider any potential payments related to the guarantees of certain lower rated securities issued by the securitization trusts in the projected cash flows used to determine the value of our interest-only securities. When declines in value considered to be other than temporary occur, we reduce the amortized cost to estimated fair value and recognize a loss in the statement of operations. The assumptions used to determine new values are based on our internal evaluations and consultation with external advisors having significant experience in valuing these securities. Under current accounting rules (pursuant to EITF 99-20) which we adopted effective July 1, 2000, declines in the value of our interest-only securities are recognized when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security. When both occur, the security is written down to fair value. We recognized an impairment charge of $264.8 million in 2001. During 2001, our interest-only securities did not perform as well as anticipated. In addition, our expectations regarding future economic conditions changed. Accordingly, we increased our default and severity assumptions related to the performance of the underlying loans to be consistent with our expectations. We also recognized a $122.1 million increase in the valuation allowance related to our servicing rights as a result of the changes in assumptions. Such assumptions reflect that the service fees are subordinate to other cash flows in certain of our securitization transactions. We carry our servicing rights at the lower of carrying value or estimated fair value. During 2000, actual default and loss trends were worse than our previous estimates. In light of these trends, management analyzed the assumptions used to determine the estimated fair value of the interest-only securities and made changes to the credit loss assumptions and the discount rate used to determine the value of our securities. These changes also reflected other economic factors and further methodology enhancements made by the Company. As a result, the expected future cash flows from interest-only securities changed adversely from previous estimates. Pursuant to the requirements of EITF 99-20, the effect of these changes was reflected immediately in earnings as an impairment charge. The effect of the impairment charge and adjustments to the value of our interest-only securities and servicing rights totaled $515.7 million ($324.9 million after the income tax benefit) for 2000 (in addition to the cumulative effect of adopting EITF 99-20 of $70.2 million, or $45.5 million after the income tax benefit). In addition, during 1999 and early 2000, the Company reevaluated its interest-only securities and servicing rights, including the underlying assumptions, in light of loss experience exceeding previous expectations. The principal change in the revised assumptions resulting from this process was an increase in expected future credit losses, relating primarily to reduced assumptions as to future housing price inflation, recent loss experience and refinements to the methodology of the valuation process. The effect of this change was offset somewhat by a revision to the estimation methodology to incorporate the value associated with the cleanup call rights held by the Company in securitizations. We recognized a $554.3 million impairment charge ($349.2 million after tax) in 1999 to reduce the book value of the interest-only securities and servicing rights. Special charges for 2001 include: (i) the loss related to the sale of certain finance receivables of $11.2 million; (ii) severance benefits, litigation reserves and other restructuring charges of $12.8 million; (iii) a $7.5 million charge related to the decision to discontinue the sale of certain types of life insurance in conjunction with lending transactions; and (iv) a $10.0 million benefit due to the reduction in the value of the warrant held by Lehman Brothers, Inc. and its affiliates (collectively "Lehman") to purchase five percent of the Company, which was caused by a decrease in the value of the Company. Special charges recorded in 2000 include: (i) the $103.3 million reduction in the value of finance receivables identified for sale; (ii) the $53.0 million loss on the sale of asset-based loans; (iii) $29.5 million of costs related to closing offices and streamlining businesses; (iv) $35.8 million related to the abandonment of computer processing systems; (v) $30.3 million of fees paid to Lehman including a $25.0 million fee paid in conjunction with the sale of $1.3 billion of finance receivables to Lehman; (vi) the issuance of a warrant valued at $48.1 million related to the modification of the Lehman master repurchase financing facilities; (vii) the $51.0 million loss on sale of transportation loans and vendor services financing business; (viii) a $48.0 million increase in the allowance for loan losses at our bank subsidiary; and (ix) 13 $4.7 million of net gains related to the sale of certain lines of business, net of other items. These charges are described in greater detail in the note to the accompanying financial statements entitled "Special Charges". 14 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index to Consolidated Financial Statements
Page Report of Independent Accountants......................................................................................16 Consolidated Balance Sheet at December 31, 2001 and 2000...............................................................17 Consolidated Statement of Operations for the years ended December 31, 2001, 2000 and 1999...................................................................................18 Consolidated Statement of Shareholder's Equity for the years ended December 31, 2001, 2000 and 1999...............................................................19 Consolidated Statement of Cash Flows for the years ended December 31, 2001, 2000 and 1999...................................................................................21 Notes to Consolidated Financial Statements.............................................................................22
15 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholder of Conseco Finance Corp. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, shareholder's equity and cash flows present fairly, in all material respects, the financial position of Conseco Finance Corp. (formerly Green Tree Financial Corporation prior to its name change in November 1999) and subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in note 1 to the consolidated financial statements, the Company adopted EITF Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" in 2000. /s/ PricewaterhouseCoopers LLP ---------------------------------- PricewaterhouseCoopers LLP Minneapolis, Minnesota March 29, 2002 16 CONSECO FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2001 and 2000 (Dollars in millions) ASSETS
2001 2000 ---- ---- Retained interests in securitization trusts: Actively managed fixed maturities at fair value (amortized cost: 2001 - $704.9; 2000 - $716.8)................................................................... $ 528.5 $ 494.6 Interest-only securities at fair value (amortized cost: 2001 - $131.3; 2000 - $431.2) 141.7 432.9 --------- --------- Total retained interests in securitization trusts................................ 670.2 927.5 --------- --------- Cash and cash equivalents............................................................... 394.5 665.5 Cash held in segregated accounts for investors in securitizations....................... 550.2 551.3 Cash held in segregated accounts related to servicing agreements and securitization transactions......................................................... 994.6 866.7 Finance receivables..................................................................... 3,810.7 3,865.0 Finance receivables - securitized....................................................... 14,198.5 12,622.8 Receivables due from Conseco, Inc....................................................... 358.0 349.9 Income tax assets....................................................................... 267.2 208.6 Goodwill................................................................................ - 28.8 Other assets............................................................................ 984.1 751.9 --------- --------- Total assets.................................................................. $22,228.0 $20,838.0 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Investor payables.................................................................... $ 550.2 $ 551.3 Liabilities related to certificates of deposit....................................... 1,790.3 1,873.3 Other liabilities.................................................................... 566.3 583.7 Preferred stock dividends payable to Conseco, Inc.................................... 86.1 18.6 Notes payable: Related to securitized finance receivables structured as collateralized borrowings. 14,484.5 12,100.6 Master repurchase agreements....................................................... 1,691.8 1,802.4 Credit facility collateralized by retained interests in securitizations............ 507.3 590.0 Due to Conseco, Inc................................................................ 249.5 786.7 Other borrowings................................................................... 352.5 442.2 --------- --------- Total liabilities............................................................. 20,278.5 18,748.8 --------- --------- Shareholder's equity: Preferred stock...................................................................... 750.0 750.0 Common stock and additional paid-in capital.......................................... 1,209.4 1,209.4 Accumulated other comprehensive loss (net of applicable deferred income tax benefit: 2001 - $63.8; 2000 - $81.6)............................................... (108.6) (139.1) Retained earnings.................................................................... 98.7 268.9 --------- --------- Total shareholder's equity.................................................... 1,949.5 2,089.2 --------- --------- Total liabilities and shareholder's equity.................................... $22,228.0 $20,838.0 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 17 CONSECO FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS for the years ended December 31, 2001, 2000 and 1999 (Dollars in millions)
2001 2000 1999 ---- ---- ---- Revenues: Net investment income: Finance receivables and other..................................... $ 2,260.2 $1,945.0 $ 647.1 Interest-only securities.......................................... 51.5 106.6 185.1 Gain on sale: Securitization transactions....................................... - - 550.6 Whole-loan sales.................................................. 26.9 7.5 - Servicing income.................................................... 115.3 108.2 165.3 Fee revenue and other income........................................ 229.7 277.5 207.4 --------- -------- --------- Total revenues.................................................. 2,683.6 2,444.8 1,755.5 --------- -------- --------- Expenses: Provision for losses................................................ 563.6 354.2 128.7 Interest expense.................................................... 1,234.4 1,152.4 341.3 Other operating costs and expenses.................................. 642.4 770.8 697.2 Impairment charges.................................................. 386.9 515.7 554.3 Special charges..................................................... 21.5 394.3 - --------- -------- --------- Total expenses.................................................... 2,848.8 3,187.4 1,721.5 --------- -------- --------- Income (loss) before income taxes, cumulative effect of accounting change and extraordinary gain (loss) on extinguishment of debt.......................................... (165.2) (742.6) 34.0 Income tax benefit..................................................... (56.4) (262.8) (16.4) --------- -------- --------- Income (loss) before cumulative effect of accounting change and extraordinary gain (loss) on extinguishment of debt ........ (108.8) (479.8) 50.4 Extraordinary gain (loss) on extinguishment of debt, net of income taxes........................................................... 6.1 - (2.5) Cumulative effect of accounting change, net of income taxes............ - (45.5) - --------- -------- --------- Net income (loss)................................................. (102.7) (525.3) 47.9 Preferred stock dividends.............................................. 67.5 18.6 - -------- -------- --------- Net income (loss) applicable to common stock...................... $ (170.2) $ (543.9) $ 47.9 ========= ======== =========
The accompanying notes are an integral part of the consolidated financial statements. 18 CONSECO FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY, continued for the years ended December 31, 2001, 2000 and 1999 (Dollars in millions)
Common stock Accumulated other Preferred and additional comprehensive Retained Total stock paid-in capital income (loss) earnings ----- ----- --------------- ------------- -------- Balance, January 1, 1999......................... $2,292.2 $ - $1,338.3 $ (11.0) $964.9 Comprehensive income (loss), net of tax: Net income.................................... 47.9 - - - 47.9 Change in minimum pension liability adjustment (net of applicable income tax expense of $2.6 million)................ 4.2 - - 4.2 - Change in unrealized depreciation of actively managed fixed maturity investments and interest-only securities (net of applicable income tax benefit of $7.6).................................... (12.0) - - (12.0) - -------- Total comprehensive income.............. 40.1 - Issuance of common stock...................... 299.4 - 299.4 - - Tax benefit related to issuance of shares under stock option plans.................... 3.3 - 3.3 - Dividends on common stock..................... (200.0) - - - (200.0) -------- ------ -------- ------- ------ Balance, December 31, 1999....................... 2,435.0 - 1,641.0 (18.8) 812.8 Comprehensive loss, net of tax: Net loss.................................... (525.3) - - - (525.3) Change in unrealized depreciation of actively managed fixed maturity investments and interest-only securities (net of applicable income tax expense of $70.6 million)............................ (120.3) - - (120.3) - -------- Total comprehensive loss................ (645.6) - Issuance of preferred stock................... 750.0 750.0 - - - Repurchase of shares of common stock.......... (126.0) - (126.0) - - Return of capital............................. (306.3) - (306.3) - - Dividends on preferred stock.................. (18.6) - - - (18.6) Other......................................... .7 - .7 - - -------- ------ -------- ------- ------ Balance, December 31, 2000....................... $2,089.2 $750.0 $1,209.4 $(139.1) $268.9
(continued on following page) The accompanying notes are an integral part of the consolidated financial statements. 19 CONSECO FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY for the years ended December 31, 2001, 2000 and 1999 (Dollars in millions)
Common stock Accumulated other Preferred and additional comprehensive Retained Total Stock paid-in capital income (loss) earnings ----- ----- --------------- ------------- -------- Balance, December 31, 2000 (carried forward from prior page).............................. $2,089.2 $750.0 $1,209.4 $(139.1) $268.9 Comprehensive income (loss), net of tax: Net loss...................................... (102.7) - - - (102.7) Change in minimum pension liability adjustment (net of applicable income tax benefit of $2.3 million)................ (3.9) - - (3.9) - Change in unrealized depreciation of actively managed fixed maturity investments and interest-only securities (net of applicable income tax expense of $21.7)........................... 34.4 - - 34.4 - -------- Total comprehensive loss................ (72.2) - Dividends on preferred stock.................. (67.5) - - - (67.5) -------- ------ -------- ------- ------ Balance, December 31, 2001....................... $1,949.5 $750.0 $1,209.4 $(108.6) $ 98.7 ======== ====== ======== ======= ======
The accompanying notes are an integral part of the consolidated financial statements. 20 CONSECO FINANCE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS for the years ended December 31, 2001, 2000 and 1999 (Dollars in millions)
2001 2000 1999 ---- ---- ---- Cash flows from operating activities: Net investment income............................................................... $ 2,141.2 $ 1,994.6 $ 1,009.0 Points and origination fees......................................................... - - 390.0 Fee revenue and other income........................................................ 301.4 401.3 383.1 Interest expense.................................................................... (1,212.3) (1,038.7) (293.5) Special charges..................................................................... (3.1) (44.8) (20.9) Other operating costs............................................................... (686.6) (757.0) (655.7) Taxes............................................................................... (23.9) (72.8) (188.0) --------- --------- --------- Net cash provided by operating activities......................................... 516.7 482.6 624.0 --------- --------- --------- Cash flows from investing activities: Cash received from the sale of finance receivables, net of expenses................. 867.2 2,501.2 9,516.6 Principal payments received on finance receivables.................................. 8,611.3 8,490.1 7,487.2 Finance receivables originated...................................................... (12,320.3) (18,515.9) (24,650.5) Sale of vendor services financing business.......................................... 407.2 - - Other............................................................................... (111.3) (262.3) (120.0) --------- --------- --------- Net cash used by investing activities ............................................ (2,545.9) (7,786.9) (7,766.7) --------- --------- --------- Cash flows from financing activities: Cash contributed by parent resulting from asset transfer............................ - - 18.2 Issuance of liabilities related to deposit products................................. 1,872.4 2,168.8 1,128.8 Payments on liabilities related to deposit products................................. (1,961.1) (1,166.0) (288.3) Issuance of notes payable and commercial paper...................................... 11,755.6 20,452.1 22,220.3 Payments on notes payable and commercial paper...................................... (9,666.9) (13,202.8) (15,321.3) Change in cash held in restricted accounts for settlement of collateralized borrowings........................................................................ (241.8) (689.7) (76.8) Repurchase of shares of common stock................................................ - (126.0) - Common stock dividends paid ........................................................ - - (200.0) --------- --------- --------- Net cash provided by financing activities......................................... 1,758.2 7,436.4 7,480.9 --------- --------- --------- Net increase (decrease) in cash and cash equivalents.............................. (271.0) 132.1 338.2 Cash and cash equivalents, beginning of year........................................... 665.5 533.4 195.2 --------- --------- --------- Cash and cash equivalents, end of year................................................. $ 394.5 $ 665.5 $ 533.4 ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 21 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: Description of Business Conseco Finance Corp. ("we", "Conseco Finance", or the "Company", formerly Green Tree Financial Corporation prior to its name change in November 1999) is a financial services holding company that originates, securitizes and services manufactured housing, home equity, home improvement, retail credit and floorplan loans (references to loans made by the Company include both cash advances and purchases of obligations). Conseco Finance is a wholly owned subsidiary of Conseco, Inc. ("Conseco"), a financial services holding company. During the last two years, Conseco has taken a number of actions with respect to the Company, including: (i) the sale, closing or runoff of several business units (including asset-based lending, vendor leasing, bankcards, transportation and park construction); (ii) monetization of certain on-balance sheet financial assets through sales or as collateral for additional borrowings; and (iii) cost savings and restructuring of ongoing businesses such as the streamlining of loan origination operations in the manufactured housing and home equity lending divisions. These actions had a significant effect on the Company's operating results during 2001 and 2000. In early 2002, we announced our decision to reduce the size of our floorplan lending business. Basis of Presentation The following summary explains the significant accounting policies we use to prepare our financial statements. We prepare our financial statements in accordance with generally accepted accounting principles ("GAAP"). We follow the accounting standards established by the Financial Accounting Standards Board ("FASB"), the American Institute of Certified Public Accountants and the Securities and Exchange Commission. Our consolidated financial statements exclude the results of material transactions between us and our consolidated affiliates, or among our consolidated affiliates. We reclassified certain amounts in our 2000 and 1999 consolidated financial statements and notes to conform with the 2001 presentation. These reclassifications have no effect on net income (loss) or shareholder's equity. Retained Interests in Securitization Trusts Retained interests in securitization trusts represent the right to receive certain future cash flows from securitization transactions structured prior to our September 8, 1999 announcement (see "Revenue Recognition for Sales of Finance Receivables and Amortization of Servicing Rights" below). Such cash flows generally are equal to the value of the principal and interest to be collected on the underlying financial contracts of each securitization in excess of the sum of the principal and interest to be paid on the securities sold and contractual servicing fees. These interests include interests represented by: (i) actively managed fixed maturities of $528.5 million; and (ii) interest-only securities of $141.7 million. We carry these retained interests at estimated fair value. We determine fair value by discounting the projected cash flows over the expected life of the receivables sold using current prepayment, default, loss and interest rate assumptions. We determine the appropriate discount rate to value these securities based on our estimates of current market rates of interest for securities with similar yield, credit quality and maturity characteristics. The discount rate was 16 percent at December 31, 2001. We record any unrealized gain or loss determined to be temporary, net of tax, as a component of shareholder's equity. With the adoption of EITF Issue No. 99- 20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets" ("EITF 99-20") on July 1, 2000, declines in value are considered to be other than temporary when: (i) the fair value of the security is less than its carrying value; and (ii) the timing and/or amount of cash expected to be received from the security has changed adversely from the previous valuation which determined the carrying value of the security. When declines in value considered to be other than temporary occur, we reduce the amortized cost to estimated fair value and recognize a loss in the statement of operations. The assumptions used to determine new values are based on our internal evaluations and consultation with external advisors having significant experience in valuing these securities. See note 3 for additional discussion of gain on sale of receivables and interest-only securities. 22 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Cash and cash equivalents Cash and cash equivalents include commercial paper, invested cash and other investments purchased with original maturities of less than three months. We carry them at amortized cost, which approximates their estimated fair value. Finance Receivables Finance receivables include manufactured housing, home equity, home improvement, retail credit and floorplan loans. We carry finance receivables at amortized cost, net of an allowance for credit losses. We defer fees received and costs incurred when we originate finance receivables. We amortize deferred fees, costs, discounts and premiums over the estimated lives of the receivables. We include such deferred fees or costs in the amortized cost of finance receivables. We generally stop accruing investment income on finance receivables after three consecutive months of contractual delinquency. Finance receivables transferred to securitization trusts in transactions structured as securitized borrowings are classified as finance receivables - securitized. These receivables are held as collateral for the notes issued to investors in the securitization trusts. Finance receivables held by us that have not been securitized are classified as finance receivables. Provision for Losses The provision for credit losses charged to expense is based upon an assessment of current and historical loss experience, loan portfolio trends, prevailing economic and business conditions, and other relevant factors. In management's opinion, the provision is sufficient to maintain the allowance for credit losses at a level that adequately provides for losses inherent in the portfolio. We reduce the carrying value of finance receivables to net realizable value at the earlier of: (i) six months of contractual delinquency; or (ii) when we take possession of the property securing the finance receivable. Goodwill Goodwill is the excess of the amount we paid to acquire a company over the fair value of its net assets. We amortized goodwill on the straight-line basis generally over a 20-year period. The total accumulated amortization of goodwill was $12.0 million at December 31, 2000. The goodwill balance at December 31, 2000, of $28.8 million was a portion of the net assets of our vendor services financing business which was sold in the first quarter of 2001. The Company has no remaining goodwill as of December 31, 2001. See "Recently Issued Accounting Standards" below for a discussion of new accounting standards applicable to goodwill which are effective beginning on January 1, 2002. Liabilities Related to Certificates of Deposit These liabilities relate to the certificates of deposits issued by our bank subsidiaries. The liability and interest expense account are also increased for the interest which accrues on the deposits. At December 31, 2001 and 2000, the weighted average interest crediting rate on these deposits was 4.7 percent and 6.9 percent, respectively. Income Taxes Our income tax expense includes deferred income taxes arising from temporary differences between the tax and financial reporting bases of assets and liabilities and net operating loss carryforwards. In assessing the realization of deferred income tax assets, we consider whether it is more likely than not that the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets depends upon generating future taxable income during the periods in which temporary differences become deductible. If future income is not generated as expected, a valuation allowance will be established. 23 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Use of Estimates When we prepare financial statements in conformity with GAAP, we are required to make estimates and assumptions that significantly affect various reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting periods. For example, we use significant estimates and assumptions in calculating values for actively managed fixed maturities interest-only securities, servicing rights, goodwill, liabilities for deposit products, liabilities related to litigation, liabilities related to guarantees of securitized debt issued in conjunction with certain sales of finance receivables, gain on sale of finance receivables, allowance for credit losses on finance receivables and the reliance on generating adequate future taxable income to support deferred income tax assets. If our future experience differs materially from these estimates and assumptions, our financial statements would be affected. Revenue Recognition for Sales of Finance Receivables and Amortization of Servicing Rights Subsequent to September 8, 1999, we are using the portfolio method (the accounting method required for securitizations which are now structured as secured borrowings) to account for securitization transactions. Our securitizations are now structured in a manner that requires them to be accounted for under the portfolio method, whereby the loans and securitization debt remain on our balance sheet pursuant to Financial Accounting Standards Board Statement No. 140, "Accounting for the Transfer and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"). For securitizations structured prior to September 8, 1999, we accounted for the transfer of finance receivables as sales. In applying generally accepted accounting principles to our securitized sales, we recognized a gain, representing the difference between the proceeds from the sale (net of related sale costs) and the carrying value of the component of the finance receivable sold. We determined such carrying value by allocating the carrying value of the finance receivables between the portion we sold and the interests we retained (generally interest-only securities, servicing rights and, in some instances, other securities), based on each portion's relative fair values on the date of the sale. During 1999, the Company sold $9.7 billion of finance receivables in securitizations structured as sales and recognized gains of $550.6 million. The gains recognized were dependent in part on the previous carrying value of the finance receivables included in the securitization transactions, allocated between the assets sold and our retained interests based on their relative fair value at the date of transfer. To obtain fair values, quoted market prices were used if available. However, quotes were generally not available for retained interests, so we estimated the fair values based on the present value of future expected cash flows using our estimates of the key assumptions - credit losses, prepayment speeds, forward yield curves, and discount rates commensurate with the risks involved. We amortize the servicing rights we retain after the sale of finance receivables, in proportion to, and over the estimated period of, net servicing income. We evaluate servicing rights for impairment on an ongoing basis, stratified by product type and securitization period. To the extent that the recorded amount exceeds the fair value for any strata, we establish a valuation allowance through a charge to earnings. If we determine, upon subsequent measurement of the fair value of these servicing rights, that the fair value equals or exceeds the amortized cost, any previously recorded valuation allowance would be deemed unnecessary and restored to earnings. Fair Values of Financial Instruments We use the following methods and assumptions to determine the estimated fair values of financial instruments: Retained interests in securitization trusts. Such retained interests include actively managed fixed maturities and interest-only securities. The actively managed fixed maturities are valued by discounting the expected future cash flows using a current market rate appropriate for the yield, credit quality, and the maturity of the investment being priced. The interest-only securities are valued by discounting the future expected cash flows over the expected life of the receivables sold using current estimates of future prepayment, default, loss severity and interest rates. We consider any potential payments related to the guarantees of certain lower rated securities issued by the securitization trusts in the projected cash flows used to determine the value of our interest-only securities. Cash and cash equivalents. The carrying amount for these instruments approximates their estimated fair value. 24 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Finance receivables. The estimated fair value of finance receivables, including those that have been securitized, is determined based on general market transactions which establish values for similar loans. Liabilities related to certificates of deposit. We estimate the fair value of these liabilities using discounted cash flow analyses based on current crediting rates. Since crediting rates are generally not guaranteed beyond one year, market value approximates carrying value. Notes payable. For publicly traded debt, we use current market values. For other notes, we use discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements. Here are the estimated fair values of our financial instruments:
2001 2000 ------------------------ ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ------ ----- ------ ----- (Dollars in millions) Financial assets: Retained assets in securitization trusts: Actively managed fixed maturities.......................... $ 528.5 $ 528.5 $ 494.6 $ 494.6 Interest-only securities................................... 141.7 141.7 432.9 432.9 --------- --------- --------- ---------- Total retained interests in securitization trusts........ $ 670.2 $ 670.2 $ 927.5 $ 927.5 ========= ========= ========= ========== Cash and cash equivalents.................................... $ 394.5 $ 394.5 $ 665.5 $ 665.5 Finance receivables (including finance receivables - securitized)................................. 18,009.2 18,376.7 16,487.8 17,108.7 Financial liabilities: Liabilities related to certificates of deposit............... 1,790.3 1,790.3 1,873.3 1,873.3 Notes payable: Notes payable.............................................. 2,551.6 2,475.2 2,834.6 2,755.6 Notes payable due to Conseco............................... 249.5 249.5 786.7 786.7 Related to securitized finance receivables structured as collateralized borrowings............................. 14,484.5 14,774.3 12,100.6 12,323.8
Cumulative Effect of Accounting Change During the third quarter of 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board issued EITF 99-20, a new accounting requirement for the recognition of impairment on interest-only securities and other retained beneficial interests in securitized financial assets. Under the prior accounting rule, declines in the value of our interest-only securities and other retained beneficial interests in securitized financial assets were recognized in the statement of operations when the present value of estimated cash flows discounted at a risk-free rate using current assumptions was less than the carrying value of the interest-only security. Under the new accounting rule, declines in value are recognized when: (i) the fair value of the retained beneficial interests are less than their carrying value; and (ii) the timing and/or amount of cash expected to be received from the retained beneficial interests have changed adversely from the previous valuation which determined the carrying value of the retained beneficial interests. When both occur, the retained beneficial interests are written down to fair value. We adopted the new accounting rule on July 1, 2000. The cumulative effect of the accounting change for periods prior to July 1, 2000 was a charge to the statement of operations of $45.5 million (net of an income tax benefit of $24.7 million) related to interest-only securities. 25 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Impairment Charge During 2001 and 2000, our interest-only securities did not perform as well as anticipated. In addition, our expectations regarding future economic conditions changed. Accordingly, we changed various underlying assumptions (including default, severity, credit loss and discount rate assumptions) related to the future performance of the underlying loans to be consistent with our expectations. As a result, the expected future cash flows (including any potential payments related to the guarantees of certain lower rated securities issued by the securitization trusts) from interest-only securities changed adversely from previous estimates. Pursuant to the requirements of EITF 99-20 (described above under "Cumulative Effect of Accounting Change"), the effect of these changes was reflected immediately in earnings as an impairment charge. In 2001, we recognized an impairment charge of $264.8 million ($171.3 million after the income tax benefit) related to our interest-only securities. We also recognized a $122.1 million ($79.1 million after the income tax benefit) increase in the valuation allowance related to our servicing rights as a result of the changes in assumptions in 2001. In 2000, the effect of the impairment charge and adjustments to the value of our interest-only securities and servicing rights totaled $515.7 million ($324.9 million after the income tax benefit) in addition to the cumulative effect of adopting EITF 99-20 of $70.2 million ($45.5 million after the income tax benefit). In addition, during 1999 and early 2000, the Company reevaluated its interest-only securities and servicing rights, including the underlying assumptions, in light of loss experience exceeding previous expectations. The principal change in the revised assumptions resulting from this process was an increase in expected future credit losses, relating primarily to reduced assumptions as to future housing price inflation, recent loss experience and refinements to the methodology of the valuation process. The effect of this change was offset somewhat by a revision to the estimation methodology to incorporate the value associated with the cleanup call rights held by the Company in securitizations. We recognized a $554.3 million impairment charge ($349.2 million after tax) in 1999 to reduce the book value of the interest-only securities and servicing rights. Recently Issued Accounting Standards The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Long-Lived Assets" ("SFAS 144") in August 2001. This standard addresses the measurement and reporting for impairment of all long-lived assets. It also broadens the definition of what may be presented as a discontinued operation in the consolidated statement of operations to include components of a company's business segments. SFAS 144 requires that long-lived assets currently in use be written down to fair value when considered impaired. Long-lived assets to be disposed of are written down to the lower of cost or fair value less the estimated cost to sell. The Company is required to implement this standard beginning January 1, 2002. We do not expect that the adoption of this standard will have a material effect on our financial position or results of operations. The FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible Assets" in June 2001. Under the new rules, intangible assets with an indefinite life will no longer be amortized in periods subsequent to December 31, 2001, but will be subject to annual impairment tests (or more frequent under certain circumstances), effective January 1, 2002. As we currently have no goodwill, the new rules should not have a material impact on the earnings and financial position of the Company. SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method, and prospectively prohibits the use of the pooling-of-interests method. Conseco accounted for its 1998 acquisition of Green Tree Financial Corporation (subsequently renamed "Conseco Finance") using the pooling-of-interests method. The new rules do not permit us to change the method of accounting for previous acquisitions accounted for using the pooling-of-interests method. The FASB issued SFAS 140, which is a replacement for Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"; and a related implementation guide in September 2000. SFAS 140 and the implementation guide have changed the criteria that must be met for securitization transactions to be recorded under the portfolio method. We did not need to make any significant changes to our securitization structures to meet the new criteria which are effective for securitization transactions completed after March 31, 2001. We first adopted the SFAS 140 requirement for additional disclosures on securitization in our December 31, 2000, consolidated financial statements. 26 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), as amended by Statement of Financial Accounting Standards No. 137, "Deferral of the Effective Date of FASB Statement No. 133" and Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" ("SFAS 138") requires all derivative instruments to be recorded on the balance sheet at estimated fair value. Changes in the fair value of derivative instruments are to be recorded each period either in current earnings or other comprehensive income (loss), depending on whether a derivative is designated as part of a hedge transaction and, if it is, on the type of hedge transaction. We adopted SFAS 133 on January 1, 2001. The initial adoption of the new standard did not have a material impact on the Company's financial position or results of operations and there was no cumulative effect of an accounting change related to its adoption. Warrant for Five Percent of the Common Stock of Conseco Finance As partial consideration for a financing transaction, we issued a warrant which permits the holder to purchase 5 percent of the Company at a nominal price. The holder of the warrant or the Company may cause the warrant and any stock issued upon its exercise to be purchased for cash at an appraised value in May 2003. Additionally, until May 2003, the holder has the right (subject to certain terms and conditions) to convert the warrant into preferred stock of Conseco (see note 10). Since the warrant permits cash settlement at fair value at the option of the holder of the warrant, it has been included in other liabilities and is measured at fair value, with changes in its value reported in earnings. The estimated fair value of the warrant at December 31, 2001 was $38.1 million. The estimated value was determined based on discounted cash flow and market multiple valuation techniques. During 2001, we recognized a $10.0 million benefit as a result of the decreased value of the warrant (which was classified as a reduction to special charges - see note 7). 2. BUSINESS CONDITIONS AND LIQUIDITY CONSIDERATIONS: At December 31, 2001, we had $161.9 million par value of senior subordinated notes due in June 2002 and $186.0 million par value of medium term notes due in September 2002. We have a recent history of losses. We had net losses applicable to common stock of $170.2 million and $543.9 million for the years ended December 31, 2001 and 2000. Our parent, Conseco, also has significant debt service and other cash requirements and depends on cash flows from us to meet its liquidity needs. Our finance operations require cash to originate finance receivables. Our primary sources of cash are: (i) the collection of receivable balances; (ii) proceeds from the issuance of debt, certificates of deposit and securitization and sales of loans; and (iii) cash provided by operations. During 2001 and the last half of 2000, the finance segment significantly slowed the origination of finance receivables. This strategy allowed the finance segment to enhance net interest margins, to reduce the amount of cash required for new loan originations, and to transfer cash to the parent company. The liquidity needs of our finance operations could increase in the event of an extended economic slowdown or recession. Loss of employment, increases in cost-of-living or other adverse economic conditions could impair the ability of our customers to meet their payment obligations. Higher industry levels of repossessed manufactured homes may affect recovery rates and result in decreased cash flows. In addition, in an economic slowdown or recession, our servicing and litigation costs would probably increase. Any sustained period of increased delinquencies, foreclosures, losses or increased costs would have an adverse effect on our liquidity. The most significant source of liquidity for our finance operations has been our ability to finance the receivables we originate in the secondary markets through loan securitizations. Adverse changes in the securitization market could impair our ability to originate, purchase and sell loans or other assets on a favorable or timely basis. Any such impairment could have a material adverse effect upon our business and results of operations. The securitization market is sensitive to the credit ratings of Conseco Finance in connection with our securitization program. A negative change in the credit ratings of Conseco Finance could have a material adverse effect on our ability to access capital through the securitization market. Factors considered by the rating agencies in assigning such ratings include corporate guarantees, payment priority, current and anticipated credit enhancement levels, quality of the current and expected servicing, as well as additional factors associated with each distinct asset type. Market participants' concerns with Conseco Finance's limited financial flexibility, as reflected by the current senior unsecured ratings, may have an effect on liquidity in future securitization transactions. In addition, certain manufactured housing transactions have had ratings actions that have either lowered the original ratings or placed on credit watch certain debt classes. 27 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- These rating actions could have an effect on Conseco Finance's access to liquidity in the securitization market in the future. In addition, the securitization market for many types of assets is relatively undeveloped and may be more susceptible to market fluctuations or other adverse changes than more developed capital markets. Although we have alternative sources of funding, principally warehouse and bank credit facilities as well as loan sales, these alternatives may not be sufficient for us to continue to originate loans at our current origination levels. We have taken a number of actions designed to improve our liquidity and increase the efficiency of our business operations. These actions include: (i) the sale, closing or runoff of several business units (including asset-based lending, vendor leasing, bankcards, transportation and park construction); (ii) monetization of certain on-balance sheet financial assets through sales or as collateral for additional borrowings; and (iii) cost savings and restructuring of ongoing businesses such as the streamlining of credit origination operations in the manufactured housing and home equity lending divisions. In addition, we moved a significant number of jobs to India, where a highly-educated, low-cost, English-speaking labor force is available. These actions had a significant effect on the Company's operating results during 2000 and 2001. In early 2002, we announced our decision to reduce the size of our floorplan lending business. We have identified a number of cash flow generating initiatives, which we expect to complete during 2002. In March 2002, we completed a tender offer pursuant to which we purchased $75.8 million par value of our senior subordinated notes due June 2002. The purchase price was equal to 100 percent of the principal amount of the notes plus accrued interest. The remaining principal amount outstanding of the senior subordinated notes after giving effect to the tender offer and other debt repurchases completed prior to the tender offer is $58.4 million (of which $23.7 million is held by Conseco). Also, during the first quarter of 2002, we announced the tendering for all our remaining public debt - $167 million due in September 2002 and $4 million due in April 2003. (Such amounts reflect all 2002 debt repurchases completed prior to announcing the tender offer). Such offer expires on April 12, 2002. The tender offer price is equal to 100 percent of the principal amount of the notes plus accrued interest. In the first quarter of 2002, we entered into various transactions with Lehman which are described in note 10. We believe that the cash flows to be generated from operations and other transactions will be sufficient to allow us to meet our debt obligations in 2002. We have taken a number of actions over the past two years to increase the efficiency of our operations. However, our results for future periods beyond 2002 are subject to numerous uncertainties. We may not be able to improve or sustain positive cash flows from operations. Our liquidity could be significantly affected if improvements do not occur. Failure to generate sufficient cash flows from operations, asset sales or financing transactions would have a material adverse effect on our liquidity. 3. FINANCE RECEIVABLES AND RETAINED INTERESTS IN SECURITIZATION TRUSTS: Subsequent to September 8, 1999, we are using the portfolio method to account for securitization transactions. Our securitizations are now structured in a manner that requires them to be accounted for under the portfolio method, whereby the loans and securitization debt remain on our balance sheet, rather than as sales, pursuant to SFAS 140. We classify the finance receivables transferred to the securitization trusts and held as collateral for the notes issued to investors as "finance receivables-securitized". The average interest rate on these receivables was 12.5 percent and 12.2 percent at December 31, 2001 and 2000, respectively. We classify the notes issued to investors in the securitization trusts as "notes payable related to securitized finance receivables structured as collateralized borrowings". 28 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- The following table summarizes our finance receivables - securitized by business line and categorized as either: (i) a part of our continuing lines; or (ii) a part of the business units we have decided to sell, close or runoff (the "discontinued lines"):
December 31, --------------------- 2001 2000 ---- ---- (Dollars in millions) Continuing lines: Manufactured housing............................................................... $ 6,940.4 $ 5,602.1 Mortgage services.................................................................. 5,658.2 5,126.0 Retail credit...................................................................... 878.9 653.8 Consumer finance - closed-end...................................................... 580.8 247.3 Floorplan (a)...................................................................... 436.9 637.0 --------- --------- 14,495.2 12,266.2 Less allowance for credit losses................................................... 296.7 167.9 --------- --------- Net finance receivables - securitized for continuing lines....................... 14,198.5 12,098.3 --------- --------- Discontinued lines.................................................................... - 531.0 Less allowance for credit losses................................................... - 6.5 --------- --------- Net finance receivables - securitized for discontinued lines..................... - 524.5 --------- --------- Total finance receivables - securitized.......................................... $14,198.5 $12,622.8 ========= ========= - ------------------ (a) We have recently decided to reduce the size of our floorplan lending business.
The following table summarizes our other finance receivables by business line and categorized as either: (i) a part of our continuing lines; or (ii) a part of our discontinued lines:
December 31, --------------------- 2001 2000 ---- ---- (Dollars in millions) Continuing lines: Manufactured housing............................................................... $ 609.3 $ 263.0 Mortgage services.................................................................. 1,128.9 1,373.1 Retail credit...................................................................... 1,811.1 1,110.1 Consumer finance closed-end........................................................ 6.3 575.1 -------- -------- 3,555.6 3,321.3 Less allowance for credit losses................................................... 111.6 98.3 -------- -------- Net other finance receivables for continuing lines............................... 3,444.0 3,223.0 -------- -------- Discontinued lines.................................................................... 379.7 676.1 Less allowance for credit losses................................................... 13.0 34.1 -------- -------- Net other finance receivables for discontinued lines............................. 366.7 642.0 -------- -------- Total other finance receivables.................................................. $3,810.7 $3,865.0 ======== ========
29 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- The changes in the allowance for credit losses included in finance receivables were as follows:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Allowance for credit losses, beginning of year.................................. $306.8 $ 88.4 $ 43.0 Additions to the allowance: Provision for losses......................................................... 563.6 354.2 128.7 Provision for losses related to discontinued lines (included in special charges - see note 7).............................................. - 45.9 - Provision for losses related to regulatory changes related to our bank subsidiary (included in special charges - see note 7)...................... - 48.0 - Change in allowance due to purchases and sales of certain finance receivables........................................................ (.1) 24.7 - Credit losses................................................................... (449.0) (254.4) (83.3) ------ ------ ------ Allowance for credit losses, end of year........................................ $421.3 $306.8 $ 88.4 ====== ====== ======
The securitizations structured prior to September 8, 1999, met the applicable criteria to be accounted for as sales. At the time the loans were securitized and sold, we recognized a gain and recorded our retained interest represented by the interest-only security. The interest-only security represents the right to receive, over the life of the pool of receivables: (i) the excess of the principal and interest received on the receivables transferred to the special purpose entity over the principal and interest paid to the holders of other interests in the securitization; and (ii) contractual servicing fees. In some of those securitizations, we also retained certain lower-rated securities that are senior in payment priority to the interest-only securities. Together, the interest-only securities and the lower-rated securities (classified as actively managed fixed maturity securities) represent our retained interests in these securitization trusts. The total value of our retained interests was $670.2 million and $927.5 million at December 31, 2001 and 2000, respectively. Retained interests in securitization trusts totaled $670.2 million, $927.5 million and $1,599.3 million at December 31, 2001, 2000 and 1999, respectively. At December 31, 2001, 2000 and 1999, such interests were comprised of: (i) actively managed fixed maturity securities totaling $528.5 million, $494.6 million and $694.3 million, respectively; and (ii) interest-only securities totaling $141.7 million, $432.9 million and $905.0 million, respectively. We consider any estimated payments related to guarantees in determining the value of our interest-only securities. We completed various loan sale transactions in 2001 and 2000. During 2001, we sold $1.6 billion of finance receivables which included: (i) our $802.3 million vendor services loan portfolio (which was marked-to-market in the fourth quarter of 2000 and no additional gain or loss was recognized in 2001); (ii) $568.4 million of high-loan-to-value mortgage loans; and (iii) $269.0 million of other loans. These sales resulted in net gains of $26.9 million. The Company entered into a servicing agreement on the high-loan-to-value mortgage loans sold. Pursuant to the servicing agreement, the servicing fees payable to the Company are senior to all other payments of the trust which purchased the loans. The Company also holds a residual interest in certain other cash flows of the trust. In the future, the Company will sell this interest, if it can be sold at a reasonable price. The Company did not provide any guarantees with respect to the performance of the loans sold. In 2000, we sold approximately $147.1 million of finance receivables in whole-loan sales resulting in net gains of $7.5 million. During 1999, the Company sold $9.7 billion of finance receivables in securitizations structured as sales and recognized gains of $550.6 million. During 2001 and 2000, we recognized no gain on sale related to securitized transactions. The interest-only securities on our balance sheet represent an allocated portion of the cost basis of the finance receivables in the securitization transactions accounted for as sales related to transactions structured prior to September 8, 1999. Our interest-only securities and other retained interests in those securitization transactions are subordinate to the interests of other investors. Their values are subject to credit, prepayment, and interest rate risk on the securitized finance receivables. We determine the appropriate discount rate to value these securities based on our estimates of current market rates of interest for securities with similar yield, credit quality and maturity characteristics. We include the difference between estimated fair value and the amortized cost of the interest-only securities (after adjustments for impairments required to be recognized in earnings) in "accumulated other comprehensive loss, net of taxes." 30 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- As described in note 1 under the caption entitled "Impairment Charge", the Company adopted the requirements of EITF 99-20 effective July 1, 2000. During 2001 and 2000, our interest-only securities did not perform as well as anticipated. As a result, we changed various underlying assumptions (including default, severity, credit loss and discount rate assumptions) which are used to determine the value of the interest-only securities. These changes were made as a result of: (i) the adverse default and loss trends that were experienced; and (ii) our expectations regarding future economic conditions. As a result of these changes, the cash flows from interest-only securities changed adversely from previous estimates. Pursuant to the requirements of EITF 99-20, the effect of these changes were reflected immediately in earnings as an impairment charge. The effect of the impairment charge and adjustments to the value of our interest-only securities and servicing rights totaled $386.9 million ($250.4 million after the income tax benefit) for 2001 and $515.7 million ($324.9 million after the income tax benefit) for 2000 (in addition to the cumulative effect of adopting EITF 99-20 of $70.2 million ($45.5 million after the income tax benefit)). Increases in the estimated fair value of our interest-only securities which result from favorable changes in the expected timing and/or amount of cash flows from our previous valuation estimates are recognized as adjustments to shareholder's equity, which are recognized as a yield adjustment in income over the life of the interest-only security. Such favorable changes resulted in increases in unrealized appreciation of $8.7 million and $12.9 million during 2001 and 2000, respectively. The following table summarizes certain cash flows received from and paid to the securitization trusts during 2001 and 2000 (dollars in millions):
2001 2000 ------------- -------------- Servicing fees received......................................................... $ 71.7 $ 123.8 Cash flows from interest-only securities, net................................... 14.3 187.6 Cash flows from retained bonds.................................................. 82.8 69.9 Servicing advances paid......................................................... (677.0) (1,056.1) Repayment of servicing advances................................................. 665.2 1,063.5
We have projected that the adverse loss experience in 2001 will continue into 2002 and then improve over time. As a result of these assumptions, we project that payments related to all guarantees issued in conjunction with the sales of certain finance receivables will exceed the gross cash flows from the interest-only securities by approximately $90 million in 2002 and $60 million in 2003. We project the gross cash flows from the interest-only securities to exceed the payments related to guarantees issued in conjunction with the sales of certain finance receivables by approximately $5 million in 2004 and $15 million in 2005 and by approximately $580 million in all years thereafter. These projected payments are considered in the projected cash flows we use to value our interest-only securities. See note 6 for additional information about the guarantees. Effective September 30, 2001, we transferred substantially all of our interest-only securities into a trust. No gain or loss was recognized upon such transfer. In return, we received a trust security representing an interest in the trust equal to 85 percent of the estimated future cash flows of the interest-only securities held in the trust. Lehman Brothers, Inc. and affiliates (collectively "Lehman") purchased the remaining 15 percent interest. The value of the interest purchased by Lehman was $55.2 million at December 31, 2001. The Company continues to be the servicer of the finance receivables underlying the interest-only securities sold to the trust. Lehman has the ability to sell their interest back to the trust after a stated period. Until such time, Lehman is required to maintain a 15 percent interest in the estimated future cash flows of the trust. By aggregating the interest-only securities into one structure, the impairment test for these securities will be conducted on a single set of cash flows representing the Company's 85 percent interest in the trust. Accordingly, adverse changes in cash flows from one interest-only security may be offset by positive changes in another. The new structure will not avoid an impairment charge if sufficient positive cash flows in the aggregate are not available. Further, increases in cash flows above the adverse cash flows cannot be recognized in earnings. 31 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- At December 31, 2001, key economic assumptions used to determine the estimated fair value of our retained interests in securitizations and the sensitivity of the current fair value of residual cash flows to immediate 10 percent and 20 percent changes in those assumptions are as follows:
Home equity/ Interest Manufactured home Consumer/ held by housing improvement equipment others Total ------- ------------ --------- ------ ----- (Dollars in millions) Carrying amount/fair value of retained interests: Interest-only securities............................... $ 32.3 $155.8 $ 8.8 ($55.2) $141.7 Servicing assets (liabilities)......................... (22.2) 6.4 (1.9) - (17.7) Bonds.................................................. 274.8 233.7 20.0 - 528.5 ----- ------ ----- -------- ------ Total retained interests........................... $284.9 $395.9 $26.9 ($55.2) $652.5 ====== ====== ===== ====== ====== Cumulative principal balance of sold finance receivables............................................ $17,732.2 $4,947.4 $1,210.1 $23,889.7 Weighted average life in years.............................. 7.0 3.9 2.6 6.2 Weighted average stated customer interest rate on sold finance receivables............................ 9.8% 12.0% 10.6% 10.3% Assumptions to determine estimated fair value and impact of favorable and adverse changes: Expected prepayment speed as a percentage of principal balance of sold finance receivables (a)... 7.1% 17.4% 18.8% 9.8% Impact on fair value of 10 percent favorable change.... $10.9 $15.6 $.8 $27.3 Impact on fair value of 20 percent favorable change.... 20.5 34.8 1.7 57.0 Impact on fair value of 10 percent adverse change...... (5.7) (15.0) (.6) (21.3) Impact on fair value of 20 percent adverse change...... (12.7) (23.6) (1.2) (37.5) Expected future nondiscounted credit losses as a percentage of principal of related finance receivables (a)........................................ 11.7% 7.4% 6.1% 10.6% Impact on fair value of 10 percent favorable change.... $131.2 $30.3 $5.5 $167.0 Impact on fair value of 20 percent favorable change.... 230.4 73.2 11.1 314.7 Impact on fair value of 10 percent adverse change...... (122.5) (14.9) (4.1) (141.5) Impact on fair value of 20 percent adverse change...... (239.5) (29.2) (8.3) (277.0) Residual cash flow discount rate (annual)................... 16.0% 16.0% 16.0% 16.0% Impact on fair value of 10 percent favorable change.... $37.6 $28.1 $1.7 $67.4 Impact on fair value of 20 percent favorable change.... 81.7 59.7 3.4 144.8 Impact on fair value of 10 percent adverse change...... (29.6) (24.5) (1.5) (55.6) Impact on fair value of 20 percent adverse change...... (55.4) (46.2) (3.5) (105.1) 32 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- - -------------------- (a) The valuation of interest-only securities is affected not only by the projected level of prepayments of principal and net credit losses, but also by the projected timing of such prepayments and net credit losses. Should such timing differ materially from our projections, it could have a material effect on the valuation of our interest-only securities. Additionally, such valuation is determined by discounting cash flows over the entire expected life of the receivables sold.
These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10 percent variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities. The following table summarizes quantitative information about delinquencies, net credit losses, and components of managed finance receivables:
Principal balance 60 days or more Net credit Principal balance past due losses ----------------------- --------------------- ------ for the year ended at December 31, December 31, ---------------------------------------------- ----------------- 2001 2000 2001 2000 2001 2000 ---- ---- ---- ---- ---- ---- (Dollars in millions) Type of finance receivables Manufactured housing...................... $25,575.1 $26,314.4 $610.5 $569.3 $ 555.5 $413.9 Home equity/home improvement.............. 11,851.4 13,307.0 139.9 120.5 244.4 154.6 Consumer.................................. 4,198.8 3,887.4 112.6 76.4 225.5 181.0 Commercial................................ 1,377.0 3,077.1 16.2 35.2 38.3 95.5 --------- --------- ------ ------ -------- ------ Total managed receivables................. 43,002.3 46,585.9 879.2 801.4 1,063.7 845.0 Less finance receivables securitized...... 24,297.3 29,636.0 464.9 536.6 614.7 590.6 --------- --------- ------ ------ -------- ------ Finance receivables held on balance sheet before allowance for credit losses and deferred points and other, net......... 18,705.0 16,949.9 $414.3 $264.8 $ 449.0 $254.4 ====== ====== ======== ====== Less allowance for credit losses.......... 421.3 306.8 Less deferred points and other, net....... 274.5 155.3 --------- --------- Finance receivables held on balance sheet.......................... $18,009.2 $16,487.8 ========= =========
33 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Activity in the interest-only securities account during 2001, 2000 and 1999 is as follows:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Balance, beginning of year........................................................... $ 432.9 $ 905.0 $1,305.4 Additions resulting from securitizations during the year.......................... - - 393.9 Additions resulting from clean-up calls (a)....................................... 45.3 100.3 - Investment income................................................................. 51.5 106.6 185.1 Cash paid (received): Gross cash received............................................................. (89.2) (210.8) (442.6) Guarantee payments related to bonds held by others.............................. 32.7 22.3 - Guarantee payments related to retained bonds (included in actively managed fixed maturities)............................................................. 42.2 .9 - Impairment charge to reduce carrying value........................................ (264.8) (434.1) (533.8) Sale of securities related to a discontinued line................................. (12.4) - - Interest purchased by Lehman in conjunction with securitization transaction....... (55.2) - - Transfer to servicing rights in conjunction with securitization transaction....... (50.0) - - Cumulative effect of change in accounting principle............................... - (70.2) - Change in unrealized appreciation (depreciation) charged to shareholder's equity.. 8.7 12.9 (3.0) ------- ------- -------- Balance, end of year................................................................. $ 141.7 $ 432.9 $ 905.0 ======= ======= ======== - ------------------- (a) During 2001 and 2000, clean-up calls were exercised for certain securitizations that were previously recognized as sales. The interest-only securities related to these securitizations had previously been separately securitized with other interest-only securities in transactions recognized as sales. The repurchase of the collateral underlying these securitizations triggered a requirement for the Company to repurchase a portion of the interest-only securities and to deposit into the securitization trust additional cash in excess of the collateral amount.
4. INCOME TAXES: Our income tax expense includes deferred income taxes arising from temporary differences between the financial reporting and tax bases of assets and liabilities. These amounts are reflected in the balance of our income tax assets which totaled $267.2 million at December 31, 2001. In assessing the realization of our deferred income tax assets, we consider whether it is more likely than not that the deferred income tax assets will be realized. The ultimate realization of our deferred income tax assets depends upon generating future taxable income during the periods in which our temporary differences become deductible. We evaluate the realizability of our deferred income tax assets by assessing the need for a valuation allowance on a quarterly basis. If we determine that it is more likely than not that our deferred income tax assets will not be recovered, a valuation allowance will be established against some or all of our deferred income tax assets. This could have a significant effect on our future results of operations and financial position. The components of the Company's income tax assets and liabilities were as follows: 34 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements --------------------------
2001 2000 ---- ---- (Dollars in millions) Deferred tax assets (liabilities): Net operating loss carryforwards............................................................. $ - $ 6.3 Deductible timing differences: Interest-only securities.................................................................. (75.2) 32.2 Unrealized depreciation................................................................... 61.5 81.6 Allowance for loan losses................................................................. 148.2 116.6 Other..................................................................................... 110.8 (33.1) ------ ------ Total deferred tax assets.............................................................. 245.3 203.6 Current income taxes prepaid..................................................................... 21.9 5.0 ------ ------ Net income tax assets.................................................................. $267.2 $208.6 ====== ======
Income tax expense (benefit) was as follows:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Current tax provision..................................................................... $ 59.5 $ 60.6 $ 169.2 Deferred tax provision (benefit).......................................................... (115.9) (323.4) (185.6) ------- ------- ------ Income tax benefit......................................................... $ (56.4) $(262.8) $(16.4) ======= ======= ======
The income tax benefit differed from that computed at the applicable federal statutory rate (35 percent) for the following reasons:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Tax expense (benefit) on income (loss) before income taxes at statutory rate................. $(57.8) $(259.9) $ 12.0 Other ...................................................................................... .2 1.6 1.2 Settlement of tax issues related to revenue recognized as gain on sale of finance receivables....................................................................... - - (30.2) State taxes, net............................................................................. 1.2 (4.5) .6 ------ ------- ------ Income tax benefit.................................................................... $(56.4) $(262.8) $(16.4) ====== ======= ======
No valuation allowance has been provided on our deferred income tax assets at December 31, 2001, as we believe it is more likely than not that all such assets will be realized. We reached this conclusion after considering the availability of taxable income in prior carryback years, tax planning strategies, and the likelihood of future taxable income exclusive of reversing temporary differences. Differences between forecasted and actual future operating results could adversely impact our ability to realize our deferred income tax assets. At December 31, 2001, we did not have any net operating loss carryforwards. However, if our deferred income tax assets started to reverse into net operating losses, we would have 20 years to generate future taxable income and utilize these potential net operating losses before they would begin to expire under current tax law. In recent years, we have had losses before income taxes for financial reporting purposes. However, we believe that existing levels of income from our continuing operations coupled with changes in our operations that either have taken place or will take place are sufficient to generate the levels of taxable income needed to utilize our net deferred income tax assets. Such changes include: (i) various cost saving initiatives; (ii) the transfer of certain customer service and backroom operations to our India subsidiary; and (iii) restructuring our business to increase profitability such as stream lining our loan origination operations in the manufactured housing and home equity divisions. 35 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- The following chart reconciles our income (loss) before taxes for financial statement purposes to our taxable income (loss) for income tax purposes:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Income (loss) before income taxes, extraordinary gain (loss), and cumulative effect of accounting change............. $(165.2) $(742.6) $ 34.0 Adjustments to determine taxable income: Net investment income............................. (37.2) 81.0 257.5 Impairment charges ................................ 386.9 515.7 554.3 Gain on sale of finance receivables................ - - (550.6) Provision for losses............................... 114.6 99.8 45.4 Special charges.................................... - 211.2 - Extraordinary gain (loss) on extinguishment of debt........................................ 9.4 - (3.8) Cumulative effect of accounting change............. - 70.0 - Issuance of common shares for stock option and for employee benefit plans...................... - - (9.4) Other.............................................. (129.2) 8.1 142.6 ------- ------- ------- Taxable income for income tax purposes.......... $ 179.3 $ 243.2 $ 470.0 ======= ======= =======
Based on our projections of future financial reporting income and assuming that our deferred income tax assets and liabilities reverse to the extent of future projected financial reporting income, we expect to utilize all of our net deferred income tax assets of $245.3 million over the next three to four years. 36 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 5. NOTES PAYABLE: Notes Payable (excluding notes payable related to securitized finance receivables structured as collateralized borrowings) Notes payable (excluding notes payable related to securitized finance receivables structured as collateralized borrowings) at December 31, 2001 and 2000, were as follows (interest rates as of December 31, 2001):
2001 2000 ---- ---- (Dollars in millions) Master repurchase agreements due on various dates in 2002 and 2003 (2.7%)......... $1,679.0 $1,806.9 Credit facility collateralized by retained interests in securitizations due 2003 (3.9%)................................................................ 507.3 590.0 10.25% senior subordinated notes due June 2002.................................... 161.9 217.3 Medium term notes due September 2002 and April 2003 (6.54%)....................... 189.7 223.7 Note payable to Conseco (3.4%).................................................... 249.5 786.7 Other............................................................................. 22.5 3.2 -------- -------- Total principal amount....................................................... 2,809.9 3,627.8 Unamortized net discount and deferred fees........................................ (8.8) (6.5) -------- -------- Total notes payable.......................................................... $2,801.1 $3,621.3 ======== ========
Amounts borrowed under master repurchase agreements have decreased due to repayments using the proceeds received from various asset sales. At March 19, 2002, we had $4.0 billion (of which $2.1 billion is committed) in master repurchase agreements, commercial paper conduit facilities and other facilities with various banking and investment banking firms for the purpose of financing our consumer and commercial finance loan production. These facilities typically provide financing of a certain percentage of the underlying collateral and are subject to the availability of eligible collateral and, in some cases, the willingness of the banking firms to continue to provide financing. Some of these agreements provide for annual terms which are extended either quarterly or semi-annually by mutual agreement of the parties for an additional annual term based upon receipt of updated quarterly financial information. At December 31, 2001, we had borrowed $2.2 billion under these agreements, leaving $1.8 billion available to borrow (of which approximately $.4 billion is committed). One of our master repurchase agreements (with a committed capacity of $400.0 million) expires on May 3, 2002. As of December 31, 2001, we had $66.1 million outstanding under this facility. We are in the process of negotiating a renewal of this facility. During 2001, we repurchased $55.4 million par value of our 10.25% senior subordinated notes due June 2002 for $51.9 million (resulting in an extraordinary gain of $2.1 million, net of income taxes of $1.3 million). Also during 2001, we repurchased $34.0 million par value of our 6.5% medium term notes due September 2002 for $27.5 million (resulting in an extraordinary gain of $4.0 million, net of income taxes of $2.5 million). During 2000, the Company amended an agreement with Lehman related to certain master repurchase agreements and the collateralized credit facility. Such amendment significantly reduced the restrictions on intercompany payments from Conseco Finance to Conseco as required by the previous agreement. In conjunction with the amendment, Conseco agreed to convert $750 million principal balance of its intercompany note due from Conseco Finance to $750 million stated value of Conseco Finance 9% redeemable cumulative preferred stock (the "intercompany preferred stock"). During 2001, Conseco Finance made payments to Conseco totaling $537.2 million reducing the intercompany note balance to $249.5 million at December 31, 2001. Pursuant to the amended agreement, Conseco Finance may make the following payments to Conseco: (i) interest on the intercompany note; (ii) payments for products and services provided by Conseco; and (iii) intercompany tax sharing payments. Conseco Finance may also make the following payments to Conseco provided the minimum liquidity requirements defined in the amended agreement are met and the cash payments are applied in the order summarized: (i) unpaid interest on the intercompany note; (ii) prepayments of principal on the intercompany note or repayments of any increase to the intercompany 37 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- receivable balance; (iii) dividends on the intercompany preferred stock; (iv) redemption of the intercompany preferred stock; and (v) common stock dividends. The liquidity test of the amended agreement requires Conseco Finance to have minimum levels of liquidity both before and after giving effect to such payments to Conseco. Liquidity, as defined, includes unrestricted cash and may include up to $150 million of liquidity available at Conseco Finance's bank subsidiaries and the aggregate amount available to be drawn under Conseco Finance's credit facilities (where applicable, based on eligible excess collateral pledged to the lender multiplied by the appropriate advance rate). The minimum liquidity must equal or exceed $250 million, plus: (i) 50 percent of cash up to $100 million generated by Conseco Finance subsequent to September 21, 2000; and (ii) 25 percent of cash generated by Conseco Finance in excess of $100 million, provided the total minimum cash liquidity shall not exceed $350 million and the cash generated by Conseco Finance (used in the calculation to increase the minimum) will exclude operating cash flows and the net proceeds received from certain asset sales and other events listed in the amended agreement (which are consistent with the courses of actions we have previously announced). The amended agreement requires Conseco Finance to maintain various financial ratios, as defined in the agreement. These ratios include: (i) an adjusted tangible net worth of at least $1.95 billion (such amount was $2.04 billion at December 31, 2001); (ii) a fixed charge coverage ratio of not less than 1.0:1.0 for the year ending December 31, 2001, and defined periods thereafter (such ratio was 1.20:1.0 for the year ended December 31, 2001); (iii) a ratio of net worth to total managed receivables of not less than 4:100 (such ratio was 4.49:100 at December 31, 2001); and (iv) a ratio of total non-warehouse debt less finance receivables and certain other assets, as defined in the agreement, to net worth of less than 1.0:2.0 (such ratio was .28:2.0 at December 31, 2001). In early 2002, Conseco Finance entered into various new financing arrangements with Lehman which either amend or replace the prior arrangements. Also, in early 2002, Conseco Finance tendered for all its remaining public debt (i.e., its medium term notes due September 2002 and April 2003 and its 10.25% Senior Subordinated Notes due June 2002). Refer to note 10 for further discussion of such items. The note payable to Conseco is further described in note 6 under the caption "Related Party Transactions." During 1999, we repurchased $50.0 million par value of our 10.25% senior subordinated notes due 2002 for $53.5 million. We recognized an extraordinary charge of $2.5 million (net of a $1.5 million tax benefit) as a result of such repurchases. At both December 31, 2001 and 2000, $23.7 million of the 10.25% senior subordinated notes were held by Conseco. The maturities of notes payable (excluding notes payable related to securitized finance receivables structured as collateralized borrowings) at December 31, 2001, were as follows (dollars in millions):
Maturity date 2002.......................................................... $1,464.7 2003.......................................................... 1,345.0 2005.......................................................... .2 -------- Total par value at December 31, 2001.................. $2,809.9 ========
Notes Payable Related to Securitized Finance Receivables Structured as Collateralized Borrowings Notes payable related to securitized finance receivables structured as collateralized borrowings were $14,484.5 million and $12,100.6 million at December 31, 2001 and 2000, respectively. The principal and interest on these notes are paid using the cash flows from the underlying finance receivables which serve as collateral for the notes. Accordingly, the timing of the principal payments on these notes is dependent on the payments received on the underlying finance receivables which back the notes. In some instances, the Company is required to advance principal and interest payments even though the payments on the underlying finance receivables which back the notes have not yet been received. The average interest rate on these notes was 6.4 percent and 7.7 percent at December 31, 2001 and 2000, respectively. 38 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 6. OTHER DISCLOSURES: Leases The Company rents office space, equipment and computer software under noncancellable operating leases. Rental expense was $20.8 million in 2001, $28.2 million in 2000 and $21.8 million in 1999. Future required minimum rental payments as of December 31, 2001, were as follows (dollars in millions): 2002............................................................ $ 25.1 2003............................................................ 21.1 2004............................................................ 15.0 2005............................................................ 10.1 2006............................................................ 9.2 Thereafter...................................................... 23.4 ------ Total....................................................... $103.9 ======
Other operating costs and expenses were as follows:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Salaries and wages.................... $347.2 $428.9 $393.6 Cost of servicing..................... 189.2 159.6 98.7 Other................................. 106.0 182.3 204.9 ------ ------ ------ Total........................ $642.4 $770.8 $697.2 ====== ====== ======
39 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Pension Plans The Company has a qualified noncontributory defined benefit pension plan covering substantially all of its employees over 21 years of age. The plan's benefits are based on years of service and the employee's compensation. The plan is funded annually based on the maximum amount that can be deducted for federal income tax purposes. The assets of the plan are primarily invested in common stock, corporate bonds and cash equivalents. In addition, the Company maintains a nonqualified pension plan for certain key employees as designated by the Board of Directors. The following table sets forth the plan's funded status and amounts recognized in the Company's statement of financial position at December 31. Amounts related to such benefit plans were as follows:
2001 2000 ---- ---- (Dollars in millions) Benefit obligation, beginning of year.................................. $17.9 $20.6 Interest cost....................................................... 1.1 1.4 Actuarial loss...................................................... .6 1.8 Benefits paid....................................................... (4.8) (5.9) ----- ----- Benefit obligation, end of year........................................ $14.8 $17.9 ===== ===== Fair value of plan assets, beginning of year........................... $19.9 $18.8 Actual return on plan assets........................................ (1.4) (.4) Employer contributions.............................................. .5 6.9 Benefits paid....................................................... (4.8) (5.4) ----- ----- Fair value of plan assets, end of year................................. $14.2 $19.9 ===== ===== Funded status.......................................................... (.6) $ 2.0 Unrecognized net actuarial loss........................................ 6.5 4.6 ----- ----- Prepaid benefit cost.............................................. $ 5.9 $ 6.6 ===== =====
We used the following assumptions to calculate benefit obligations for our 2001 and 2000 valuations: postretirement discount rate of approximately 6.5 percent; preretirement discount rate of approximately 7.0 percent; and an expected return on plan assets of approximately 8.5 percent. Beginning in 2000, as a result of plan amendments, no assumption for compensation increases was required. 40 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Components of the cost we recognized related to pension plans are as follows:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Service cost............................................................. $ - $ - $ 7.3 Interest cost............................................................ 1.1 1.4 3.0 Expected return on plan assets........................................... (1.5) (1.7) (1.4) Settlement (gain) loss................................................... 1.3 (.3) - Recognized net actuarial loss............................................ .3 - 1.0 ----- ----- ----- Net periodic cost (benefit)......................................... $ 1.2 $ (.6) $ 9.9 ===== ====== =====
The Company has qualified defined contribution plans for which substantially all employees are eligible. Company contributions, which match certain voluntary employee contributions to the plan, totaled $1.9 million in 2001, $4.3 million in 2000 and $4.7 million in 1999. Matching contributions are required to be made either in cash or in Conseco common stock. Related Party Transactions In 1998, we entered into a $2 billion promissory note with Conseco. The note bore interest at LIBOR plus a margin of .35 percent and both the principal and interest were due on demand. On January 1, 2000, the promissory note was amended and restated to provide for borrowings up to $5 billion and quarterly interest payments at a rate of LIBOR plus a margin of 1.5 percent. In connection with the transaction with Lehman (as described in note 7 entitled "Special Charges"), the Company repaid $450.0 million of this note. In conjunction with amendments to its warehouse credit facilities, the Company converted $750.0 million principal balance of the promissory note due to Conseco to $750.0 million stated value of 9 percent redeemable cumulative preferred stock and repaid $544.6 million of this note. Pursuant to the amended agreement with Lehman, the Company made additional repayments on the promissory note to Conseco of $129.5 million in 2000 and $537.2 million in 2001. At December 31, 2001, the outstanding balance under the note was $249.5 million. Interest expense incurred under the note totaled $26.1 million, $153.9 million and $79.5 million in 2001, 2000 and 1999, respectively. As discussed in the previous paragraph, the Company converted $750.0 million principal balance of the note payable to Conseco to $750.0 million stated value of 9% redeemable cumulative preferred stock during 2000. Dividend payments are made pursuant to the amended agreement with Lehman. Cumulative unpaid dividends totaled $86.1 million and $18.6 million at December 31, 2001 and 2000, respectively. On December 31, 1999, Conseco transferred the following assets to the Company at Conseco's carrying value: (i) fixed maturity investments due from affiliates of Conseco with a carrying value of $104.6 million; (ii) other invested assets with a carrying value of $100.5 million; and (iii) two insurance marketing companies with net assets having a carrying value of $94.3 million. The carrying value of these assets approximated fair value. Such amounts were added to the common stock and paid- in capital of the Company. These assets were returned to Conseco in 2000 concurrently with the Lehman transaction. Such distribution is reflected as a return of capital in the consolidated statement of shareholder's equity at the book value of the assets transferred. In the first quarter of 2000, the Company repurchased shares of its common stock from Conseco for $126.0 million. The Company has entered into management and service agreements with subsidiaries of Conseco. Fees for such services (including data processing, executive management and investment management services) are based on Conseco's direct and allocable costs. Total fees incurred by the Company under such agreements were $21.8 million, $39.7 million and $43.0 million in 2001, 2000 and 1999, respectively. Litigation Conseco Finance was served with various related lawsuits filed in the United States District Court for the District of Minnesota. These lawsuits were generally filed as purported class actions on behalf of persons or entities who purchased common stock or options to purchase common stock of Conseco Finance during alleged class periods that generally run from July 1995 to January 1998. One action (Florida State Board of Admin. v. Green Tree Financial Corp., et. al, Case No. 98-1162) 41 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- was brought not on behalf of a class, but by the Florida State Board of Administration, which invests and reinvests retirement funds for the benefit of state employees. In addition to Conseco Finance, certain current and former officers and directors of Conseco Finance are named as defendants in one or more of the lawsuits. Conseco Finance and other defendants obtained an order consolidating the lawsuits seeking class action status into two actions, one of which pertains to a purported class of common stockholders (In re Green Tree Financial Corp. Stock Litig., Case No. 97-2666) and the other of which pertains to a purported class of stock option traders (In re Green Tree Financial Corp. Options Litig., Case No. 97-2679). Plaintiffs in the lawsuits assert claims under Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco Finance and the other defendants violated federal securities laws by, among other things, making false and misleading statements about the current state and future prospects of Conseco Finance (particularly with respect to prepayment assumptions and performance of certain loan portfolios of Conseco Finance) which allegedly rendered Conseco Finance's financial statements false and misleading. On August 24, 1999, the United States District Court for the District of Minnesota issued an order dismissing with prejudice all claims alleged in the lawsuits. The plaintiffs subsequently appealed the decision to the U.S. Court of Appeals for the 8th Circuit. A three judge panel issued an opinion on October 25, 2001, reversing the United States District Court's dismissal order and remanding the actions to the United States District Court. Pretrial discovery is expected to commence in all three lawsuits approximately in April 2002. The Company believes that the lawsuits are without merit and intends to continue to defend them vigorously. The ultimate outcome of these lawsuits cannot be predicted with certainty. Conseco Finance is a defendant in two arbitration proceedings in South Carolina (Lackey v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp. and Bazzle v. Green Tree Financial Corporation, n/k/a Conseco Finance Corp.) where the arbitrator, over Conseco Finance's objection, allowed the plaintiffs to pursue purported class action claims in arbitration. The two purported arbitration classes consist of South Carolina residents who obtained real estate secured credit from Conseco Finance's Manufactured Housing Division (Lackey) and Home Improvement Division (Bazzle) in the early and mid 1990s, and did not receive a South Carolina specific disclosure form relating to selection of attorneys and insurance agents in connection with the credit transactions. The arbitrator, in separate awards issued on July 24, 2000, awarded a total of $26.8 million in penalties and attorneys' fees. The awards were confirmed as judgments in both Lackey and Bazzle. These cases have been consolidated into one case which is currently on appeal before the South Carolina Supreme Court. Oral argument was heard on March 21, 2002. Conseco Finance has posted appellate bonds, including $20 million of cash, for these cases. Conseco Finance intends to vigorously challenge the awards and believes that the arbitrator erred by, among other things, conducting class action arbitrations without the authority to do so and misapplying South Carolina law when awarding the penalties. The ultimate outcome of this proceeding cannot be predicted with certainty. In addition, the Company and its subsidiaries are involved on an ongoing basis in other lawsuits (including purported class actions) related to their operations. The ultimate outcome of all of these other legal matters pending against the Company or its subsidiaries cannot be predicted, and, although such lawsuits are not expected to individually have a material adverse effect on the Company, such lawsuits could have, in the aggregate, a material adverse effect on the Company's consolidated financial condition, cash flows or results of operations. Guarantees In conjunction with certain sales of finance receivables, we have provided guarantees aggregating approximately $1.5 billion at December 31, 2001. We consider any potential payments related to these guarantees in the projected net cash flows used to determine the value of our interest-only securities. During 2001 and 2000, advances of interest and principal payments related to such guarantees on bonds held by others totaled $32.7 million and $22.3 million, respectively. 42 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 7. SPECIAL CHARGES: 2001 The following table summarizes the special charges incurred by the Company during 2001, which are further described in the paragraphs which follow (dollars in millions): Severance benefits, litigation reserves and other restructuring charges................... $ 20.3 Loss related to sale of certain finance receivables....................................... 11.2 Change in value of warrant................................................................ (10.0) ------ Special charges before income tax benefit............................................ $ 21.5 ======
Severance benefits, litigation reserves and other restructuring charges During 2001, Conseco developed plans to change the way it operates. Such changes are being undertaken in an effort to improve the Company's operations and profitability. The planned changes included moving a significant number of jobs to India, where a highly-educated, low-cost, English-speaking labor force is available. Pursuant to GAAP, the Company is required to recognize the costs associated with most restructuring activities as the costs are incurred. However, costs associated with severance benefits are required to be recognized when the costs are: (i) attributable to employees' services that have already been rendered; (ii) relate to obligations that accumulate; and (iii) are probable and can be reasonably estimated. Since the severance costs associated with our planned activities meet these requirements, we recognized a charge of $6.2 million in 2001 related to severance benefits and other restructuring charges. We also recognized charges of: (i) $7.5 million related to our decision to discontinue the sale of certain types of life insurance in conjunction with lending transactions; and (ii) $6.6 million related to certain litigation matters. Loss related to the sale of certain finance receivables During 2001, we recognized a loss of $2.2 million on the sale of $11.2 million of finance receivables. Also, during 2001, the purchaser of certain credit card receivables returned certain receivables pursuant to a return of accounts provision included in the sales agreement. Such returns and the associated losses exceeded the amounts we initially anticipated when the receivables were sold. We recognized a loss of $9.0 million related to the returned receivables. Change in value of warrant As partial consideration for a financing transaction, Conseco has a warrant which permits the holder to purchase 5 percent of Conseco Finance at a nominal price. The holder of the warrant or Conseco Finance may cause the warrant and any stock issued upon its exercise to be purchased for cash at an appraised value in May 2003. Additionally, until May 2003, the holder has the right (subject to certain terms and conditions) to convert the warrant into preferred stock of Conseco (see note 10). Since the warrant permits cash settlement at fair value at the option of the holder of the warrant, it has been included in other liabilities and is measured at fair value, with changes in its value reported in earnings. The estimated fair value of the warrant at December 31, 2001 was $38.1 million. The estimated value was determined based on discounted cash flow and market multiple valuation techniques. During 2001, we recognized a $10.0 million benefit as a result of the decreased value of the warrant (which was classified as a reduction to special charges - see note 1). 43 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 2000 The Company incurred significant special charges during 2000, primarily related to the restructuring of our debt, restructuring of our finance business and payments made pursuant to employment contracts. The following table summarizes the special charges, which are further described in the paragraphs which follow (dollars in millions): Lower of cost or market adjustment for finance receivables identified for sale.................................................... $103.3 Loss on sale of transportation loans and vendor services financing business..................................................... 51.0 Loss on sale of asset-based loans........................................... 53.0 Costs related to closing offices and streamlining businesses................ 29.5 Abandonment of computer processing systems.................................. 35.8 Transaction fees paid and warrant issued.................................... 78.4 Reserve methodology change at bank subsidiary............................... 48.0 Net gain on sale of certain loans and other items........................... (4.7) ------ Special charges before income tax benefit.......................... $394.3 ======
Lower of cost or market adjustment for finance receivables identified for sale On July 27, 2000, we announced several courses of action to restructure our business, including the sale or runoff of the finance receivables of several business lines. The carrying value of the loans held for sale has been reduced to the lower of cost or market, consistent with our accounting policy for such loans. The reduction in value of these loans of $103.3 million (including a $45.9 million increase to the allowance for credit losses) primarily relates to transportation finance receivables (primarily loans for the purchase of trucks and buses). These loans had experienced a significant decrease in value as a result of the adverse economic effect that increases in oil prices and competition had on borrowers in the transportation business during 2000. Loss on sale of transportation loans and vendor service financing business During the fourth quarter of 2000, we sold transportation loans with a carrying value of $566.0 million (after the market adjustment described above) in whole loan sale transactions. We recognized an additional loss of $30.7 million on the sale. During 2000, we recognized a special charge and reduced goodwill by $20.3 million, representing the difference between: (i) the carrying value of the net assets of the vendor services financing business; and (ii) the anticipated proceeds from the sale of such business, which was completed in the first quarter of 2001. Loss on sale of asset-based loans During the third quarter of 2000, we sold asset-based loans with a carrying value of $152.2 million in whole loan sale transactions. We recognized a loss of $53.0 million on these sales. Costs related to closing offices and streamlining businesses Our restructuring activities included the closing of several branch offices and streamlining our businesses. These activities included a reduction in the work force of approximately 1,700 employees. The Company incurred a charge of $6.9 million related to severance costs paid to terminated employees in 2000. The Company also incurred lease termination and direct closing costs of $12.3 million associated with the branch offices closed in conjunction with the restructuring activities. In addition, fixed assets and leasehold improvements of $10.3 million were abandoned when the branch offices were closed. Abandonment of computer processing systems We recorded a $35.8 million charge in 2000 to write off the carrying value of capitalized computer software costs for projects that have been abandoned in conjunction with our restructuring. These costs are primarily associated with: (i) 44 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- computer processing systems under development that would require significant additional expenditures to complete and that are inconsistent with our current business plan; and (ii) computer systems related to the lines of business discontinued by the Company and therefore are no longer required. Advisory fees and warrant paid and/or issued to Lehman and other investment banks In May 2000, we sold approximately $1.3 billion of finance receivables to Lehman and its affiliates for cash and a right to share in future profits from a subsequent sale or securitization of the assets sold. We paid a $25.0 million transaction fee to Lehman in conjunction with the sale, which was included in special charges. Such loans were sold to Lehman at a value which approximated net book value, less the fee paid to Lehman. During the second and third quarters of 2000, we repurchased a significant portion of the finance receivables sold to Lehman. These finance receivables were subsequently included in securitization transactions structured as financings. The cost of the finance receivables purchased from Lehman did not differ materially from the book value of the loans prior to their sale to Lehman. Lehman has also amended its master repurchase financing facilities with our finance operations to expand the types of assets financed. As partial consideration for the financing transaction, Lehman received a warrant, with a nominal exercise price, for five percent of the common stock of Conseco Finance. The initial $48.1 million estimated value of the warrant was recognized as an expense during the second quarter of 2000. The estimated fair value of the warrant did not change materially during 2000. We also paid Lehman $5.3 million in advisory fees related to the business and debt restructuring. Reserve Methodology Change at Bank Subsidiary During the fourth quarter of 2000, we increased the allowance for credit losses related to credit card receivables held by our bank subsidiary. We implemented a more conservative approach pursuant to a recent regulatory examination, which resulted in this special charge. Gain on sale of certain loans and other items During 2000, we sold substantially all of the finance receivables related to our bankcard (Visa and Mastercard) portfolio. We recognized a gain of $9.7 million on the sale. During 2000, we recognized $5.0 million of other costs related to the restructuring of the Company. 45 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 8. CONSOLIDATED STATEMENT OF CASH FLOWS: The following disclosures supplement our consolidated statement of cash flows:
2001 2000 1999 ---- ---- ---- (Dollars in millions) Additional non-cash items not reflected in the consolidated statement of cash flows: Tax benefit related to the issuance of common stock under employee benefit plans... $ - $ - $ 3.3 The following reconciles net income to net cash provided by operating activities: Cash flows from operating activities: Net income (loss)................................................................... $(102.7) $(525.3) $ 47.9 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Gain on sale of finance receivables............................................. (26.9) (7.5) (550.6) Points and origination fees received............................................ - - 390.0 Interest-only securities investment income...................................... (51.5) (106.6) (185.1) Cash received from interest-only securities, net................................ 14.3 187.6 442.6 Servicing income................................................................ (115.3) (108.2) (165.3) Cash received from servicing activities......................................... 71.7 123.8 175.7 Provision for losses............................................................ 563.6 354.2 128.7 Amortization and depreciation................................................... 6.1 24.9 52.3 Income taxes.................................................................... (76.3) (361.0) (205.9) Accrual and amortization of investment income................................... (58.0) (97.2) (80.7) Impairment charges.............................................................. 386.9 515.7 554.3 Special charges................................................................. 18.4 349.5 (20.5) Extraordinary (gain) loss on extinguishment of debt............................. (9.9) - 4.0 Change in accounting principle.................................................. - 70.2 - Other........................................................................... (103.7) 62.5 36.6 ------- ------- ------- Net cash provided by operating activities.................................... $ 516.7 $ 482.6 $ 624.0 ======= ======= =======
46 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- 9. QUARTERLY FINANCIAL DATA (UNAUDITED):
1st Qtr.(a)(b) 2nd Qtr.(a)(b) 3rd Qtr.(a)(b) 4th Qtr.(b) -------------- -------------- -------------- ----------- (Dollars in millions) 2001 Revenues...................................... $669.9 $662.4 $681.6 $669.7 Income (loss) before income taxes and extraordinary gain (loss) .................. 41.8 44.0 (273.2) 22.2 Net income (loss)............................. 25.9 27.4 (178.6) 22.6 2000 Revenues...................................... $530.6 $583.3 $645.8 $685.1 Income (loss) before income taxes and cumulative effect of accounting change...... 42.9 (43.9) (391.7) (349.9) Net income (loss)............................. 26.8 (28.5) (296.6) (227.0) - -------------------- (a) Included in the first, second and third quarters of 2001 are impairment charges of $7.9 million ($5.0 million after tax), $33.8 million ($21.0 million after tax) and $345.2 million ($224.4 million after tax), respectively. Also included in the first, second, third and fourth quarters of 2001 are special charges of $13.8 million ($8.7 million after tax), $2.4 million ($1.5 million after tax), $.5 million ($.3 million after tax) and $4.8 million ($3.1 million after tax), respectively. (b) Included in the first, second, third and fourth quarters of 2000 are impairment charges of $2.5 million ($1.6 million after tax), $9.6 million ($6.0 million after tax), $205.0 million ($129.2 million after tax) and $298.6 million ($188.1 million after tax), respectively. Also included in the second, third and fourth quarters of 2000 are special charges of $63.4 million ($41.2 million after tax), $226.6 million ($147.6 million after tax) and $104.3 million ($67.7 million after tax), respectively.
10. SUBSEQUENT EVENTS: Modifications to Borrowing Agreements In the first quarter of 2002, we entered into various transactions with Lehman and its affiliates pursuant to which Lehman extended the terms of our: (a) warehouse line from September 2002 to September 2003, (b) borrowings with respect to approximately $90 million of miscellaneous assets ("Miscellaneous Borrowings") from January 31, 2002 to June 2003, and (c) residual line from February 2003 to February 2004 under which financing is being provided on our interest-only securities, servicing rights and retained interests in other subordinated securities issued by the securitization trusts. We agreed to an amortization schedule by which the outstanding balance under the Miscellaneous Borrowings is required to be repaid by June 2003. We also entered into a revised agreement governing the movement of cash from Conseco Finance to the parent company. Conseco Finance and Lehman have agreed to amend the agreement such that Conseco Finance must maintain liquidity (i.e., cash and available borrowings, as defined) of at least: (i) $50 million until March 31, 2003; and (ii) $100 million from and after April 1, 2003. However, we no longer must meet a minimum liquidity requirement of $250 million before making interest, principal, dividend or redemption payments to the parent company. 47 CONSECO FINANCE CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements -------------------------- Pursuant to the new arrangements, Lehman may exchange their existing Warrant to purchase 5% of the common stock of Conseco Finance until May 2003 and receive in its place 500,000 shares of Series G Convertible Redeemable Preferred Stock of Conseco (the "Series G Preferred") at a $100 stated value per share, having the following general terms: (a) No dividend; (b) Convertible to Conseco common stock at $10 per share; (c) Voting rights on an as converted basis; (d) Mandatorily redeemable by Conseco in January 2012 at the stated value; (e) Pari passu with Conseco's Series F Common-Linked Convertible Preferred Stock (the "Series F Preferred") if, and only if, a majority of the holders of Conseco's Series E Preferred Stock ("Series E Preferred") and Series F Preferred consent, and otherwise pari passu with the Series E Preferred and junior to the Series F Preferred; and (f) The right to cause Conseco to register the Series G Preferred within one year after electing to surrender the Warrant in exchange for the Series G Preferred. Tender Offers to Purchase Outstanding Debt In March 2002, we completed a tender offer pursuant to which we purchased $75.8 million par value of our senior subordinated notes due June 2002. The purchase price was equal to 100 percent of the principal amount of the notes plus accrued interest. The remaining principal amount outstanding of the senior subordinated notes after giving effect to the tender offer and other debt repurchases completed prior to the tender offer is $58.4 million (of which $23.7 million is held by Conseco). Also, during the first quarter of 2002, we announced the tendering for all our remaining public debt - $167 million due in September 2002 and $4 million due in April 2003. (Such amounts reflect all 2002 debt repurchases completed prior to announcing the tender offer). Such offer expires on April 12, 2002. The tender offer price is equal to 100 percent of the principal amount of the notes plus accrued interest. Market for Repossessed Manufactured Homes On January 2, 2002, GreenPoint Financial Corp. ("GreenPoint"), a competitor, announced its intention to cease the origination of loans secured by manufactured homes. In conjunction with this announcement, GreenPoint indicated its objective to quickly liquidate its repossessed inventory at below market prices in the wholesale market. This announcement may have a significant impact on the wholesale market for manufactured homes through which the Company generally sells 30 percent of its manufactured housing repossessed inventory. We believe that our net recovery is maximized through a retail (resale either through Company owned sales lots or our dealer network) exit strategy. We generally liquidate approximately 70 percent of our repossessed units through the retail channel; thus, we are much less reliant on the wholesale channel. 48 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III The Registrant meets the conditions set forth in the General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore omitting the information otherwise required in Part III. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1. Financial Statements. See Index to Consolidated Financial Statements on page 15 for a list of financial statements included in this Report. 2. Financial Statement Schedules. All schedules are omitted, either because they are not applicable, not required, or because the information they contain is included elsewhere in the consolidated financial statements or notes. 3. Exhibits. See Exhibit Index immediately preceding the Exhibits filed with this report. (b) Reports on Form 8-K - None. 49 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 29th day of March, 2002. CONSECO FINANCE CORP. By: /s/ CHARLES H. CREMENS ---------------------------- Charles H. Cremens President and Chief Executive Officer (authorized officer and principal executive officer) By: /s/ NEAL S. COHEN ---------------------------- Neal S. Cohen Executive Vice President and Chief Financial Officer (authorized officer and principal financial officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title (Capacity) Date - --------- ---------------- ---- /s/ CHARLES H. CREMENS President, Chief Executive March 29, 2002 - ------------------------------ Officer and Director Charles H. Cremens (Principal Executive Officer) /s/ NEAL S. COHEN Executive Vice President and March 29, 2002 - ------------------------------ Chief Financial Officer Neal S. Cohen (Principal Financial Officer) /s/ JAMES S. ADAMS Senior Vice President and March 29, 2002 - ------------------------------ Chief Accounting Officer James S. Adams /s/ GARY C. WENDT Director March 29, 2002 - ------------------------------ Gary C. Wendt /s/ WILLIAM J. SHEA Director March 29, 2002 - ------------------------------ William J. Shea /s/ WILLIAM WESP Director March 29, 2002 - ------------------------------ William Wesp
50 CONSECO FINANCE CORP. EXHIBIT INDEX EXHIBIT NO. - ------ 3(a) Restated Certificate of Incorporation of Conseco Finance Corp. was filed with the Securities and Exchange Commission as Exhibit 3(a) to the Company's Report on Form 10-Q for the quarter ended September 30, 2000 and is incorporated herein by reference. 3(b) Merger of Green Tree Financial Corporation, as filed with the Delaware Secretary of State on June 30, 1995 (incorporated by reference to the Company's Registration Statement on Form S-1; File No. 33-60869). 3(c) Restated Bylaws of Conseco Finance Corp. were filed with the Securities and Exchange Commission as Exhibit 3.4 to the Company's Registration Statement on Form S-3/A (No. 333-85037) and are incorporated herein by reference. 3(d) Certificate of Designation of 9% Redeemable Cumulative Preferred Stock of Conseco Finance Corp. was filed with the Securities and Exchange Commission as Exhibit 3(d) to the Company's Report on Form 10-Q for the quarter ended September 30, 2000 and is incorporated herein by reference. 4(a) There have not been filed as exhibits to this Form 10-K certain long-term debt instruments, none of which relates to authorized indebtedness that exceeds 10% of the consolidated assets of the Registrant. The Registrant agrees to furnish the Commission upon its request a copy of any instrument defining the rights of holders of long- term debt of the Company and its consolidated subsidiaries. 10(a) Master Repurchase Agreement dated as of September 1, 1995 between Merrill Lynch Mortgage Capital, Inc. and Green Tree Financial Corporation (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1995; File No. 1-08916); as amended by Amendment to the Master Repurchase Agreement dated June 1, 1997 (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997; File No. 0-11652); as amended by Amendment to the Master Repurchase Agreement dated February 10, 1998 (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998, File No. 1-08916). 10(b) Amended and Restated Master Repurchase Agreement dated May 9, 2000 between Lehman Commercial Paper Inc. and Green Tree Finance Corp.-Five (filed herewith); and Amendment to the Warehouse Debt Facility, dated as of September 22, 2000, by and among Lehman Commercial Paper Inc. and Green Tree Finance Corp. - Five (filed herewith). 10(c) Asset Assignment Agreement dated as of February 13, 1998 between Green Tree Residual Finance Corp. I and Lehman Commercial Paper, Inc. (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998; File No. 1-08916); Amendment to the First Residual Facility, dated as of September 22, 2000, by and among Lehman ALI Inc. and Green Tree Residual Finance Corp. I (filed herewith). 10(d) Promissory Note dated September 22, 2000 issued by the Company to CIHC, Incorporated was filed with the Securities and Exchange Commission as Exhibit 4(c) to the Company's Report on Form 10-Q for the quarter ended September 30, 2000 and is incorporated herein by reference. 10(e) Warrant to Purchase Common Stock of Conseco Finance Corp. dated May 11, 2000, by and between Conseco Finance Corp. and Lehman Brothers Holdings Inc. is incorporated herein by reference to Exhibit 10.45 to the Form 10-Q of Conseco, Inc. for the period ended June 30, 2000. 10(f) Amended and Restated Agreement dated September 22, 2000, by and among Conseco, Inc., CIHC, Incorporated and Lehman Brothers Holdings Inc. is incorporated herein by reference to the Exhibit 10.46 to the Form 10-Q of Conseco, Inc. for the period ended September 30, 2000. 12 Computation of Ratio of Earnings to Fixed Charges (filed herewith). 23 Consent of PricewaterhouseCoopers LLP (filed herewith). EX-10.A MATERIAL CON 3 ex10a.txt EXHIBIT 10.A Exhibit 10.a Amended and Restated Master Repurchase Agreement September 1996 Version Dated as of April 5, 2001 Between: Merrill Lynch Mortgage Capital Inc. ("Buyer") And Green Tree Finance Corp. - Three ("Seller") 1. Applicability From time to time the parties hereto may enter into transactions in which one party ("Seller") agrees to transfer to the other ("Buyer") securities or other assets ("Securities") against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a "Transaction" and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex I hereto and in any other annexes identified herein or therein as applicable hereunder. 2. Definitions (a) "Act of Insolvency", with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment or election, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or election, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) the making by such party of a general assignment for the benefit of creditors, or (iv) the admission in writing by such party of such party's inability to pay such party's debts as they become due; (b) "Additional Purchased Securities", Securities provided by Seller to Buyer pursuant to Paragraph 4 (a) hereof; (c) "Buyer"s Margin Amount", with respect to any Transaction as of any date, the amount obtained by application of the Buyer's Margin Percentage to the Repurchase Price for such Transaction as of such date; (d) "Buyer's Margin Percentage', with respect to any Transaction as of any date, a percentage (which may be equal to the Seller's Margin Percentage) agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the Purchase Date for such Transaction; (e) "Confirmation", the meaning specified in Paragraph 3 (b) hereof, (f) "Income", with respect to any Security at any time, any principal thereof and all interest, dividends or other distributions thereon; (g) "Margin Deficit", the meaning specified in Paragraph 4 (a) hereof; (h) "Margin Excess", the meaning specified in Paragraph 4(b) hereof; (i) "Margin Notice Deadline", the time agreed to by the parties in the relevant Confirmation, Annex I hereto or otherwise as the deadline for giving notice requiring same-day satisfaction of margin maintenance obligations as provided in Paragraph 4 hereof (or, in the absence of any such agreement, the deadline for such purposes established in accordance with market practice); (j) "Market Value", with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to market practice for such Securities); (k) "Price Differential", with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction); 2 (l) "Pricing Rate", the per annum percentage rate for determination of the Price Differential; (m) "Prime Rate", the prime rate of U.S. commercial banks as published in The Wall Street Journal (or, if more than one such rate is published, the average of such rates); (n) "Purchase Date", the date on which Purchased Securities are to be transferred by Seller to Buyer; (o) "Purchase Price", (i) on the Purchase Date, the price at which Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter, except where Buyer and Seller agree otherwise, such price increased by the amount of any cash transferred by Buyer to Seller pursuant to Paragraph 4 (b) hereof and decreased by the amount of any cash transferred by Seller to Buyer pursuant to Paragraph 4 (a) hereof or applied to reduce Seller's obligations under clause (ii) of Paragraph 5 hereof; (p) "Purchased Securities", the Securities transferred by Seller to Buyer in a Transaction hereunder, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect to any Transaction at any time also shall include Additional Purchased Securities delivered pursuant to Paragraph 4 (a) hereof and shall exclude Securities returned pursuant to Paragraph 4(b) hereof; (q) "Repurchase Date", the date on which Seller is to repurchase the Purchased Securities from Buyer, including any date determined by application of the provisions of Paragraph 3 (c) or 11 hereof; (r) "Repurchase Price", the price at which Purchased Securities are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the Price Differential as of the date of such determination; (s) "Seller's Margin Amount", with respect to any Transaction as of any date, the amount obtained by application of the Seller's Margin Percentage to the Repurchase Price for such Transaction as of such date; (t) "Seller's Margin Percentage", with respect to any Transaction as of any date, a percentage (which may be equal to the Buyer's Margin Percentage) agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the Purchase Date for such Transaction. 3. Initiation; Confirmation; Termination (a) An agreement to enter into a Transaction may be made orally or in writing at the initiation of either Buyer or Seller. On the Purchase Date for the Transaction, the Purchased Securities shall be transferred to Buyer or its agent against the transfer of the Purchase Price to an account of Seller. 3 (b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as shall be agreed, shall promptly deliver to the other party a written confirmation of each Transaction (a "Confirmation"). The Confirmation shall describe the Purchased Securities (including CUSIP number, if any), identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction, and (v) any additional terms or conditions of the Transaction not inconsistent with this Agreement. The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the Transaction to which the Confirmation relates, unless with respect to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail. (c) In the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller, no later than such time as is customary in accordance with market practice, by telephone or otherwise on or prior to the business day on which such termination will be effective. On the date specified in such demand, or on the date fixed for termination in the case of Transactions having a fixed term, termination of the Transaction will be effected by transfer to Seller or its agent of the Purchased Securities and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against the transfer of the Repurchase Price to an account of Buyer. 4. Margin Maintenance (a) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions (a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such Transactions, at Seller's option, to transfer to Buyer cash or additional Securities reasonably acceptable to Buyer ("Additional Purchased Securities"), so that the cash and aggregate Market Value of the Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed such aggregate Buyer's Margin Amount (decreased by the amount of any Margin Deficit as of such date arising from any Transactions in which such Buyer is acting as Seller). (b) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at such time (a "Margin Excess"), then Seller may by notice to Buyer require Buyer in such Transactions, at Buyer's option, to transfer cash or Purchased Securities to Seller, so that the 4 aggregate Market Value of the Purchased Securities, after deduction of any such cash or any Purchased Securities so transferred, will thereupon not exceed such aggregate Seller's Margin Amount (increased by the amount of any Margin Excess as of such date arising from any Transactions in which such Seller is acting as Buyer). (c) If any notice is given by Buyer or Seller under subparagraph (a) or (b) of this Paragraph at or before the Margin Notice Deadline on any business day, the party receiving such notice shall transfer cash or Additional Purchased Securities as provided in such subparagraph no later than the close of business in the relevant market on such day. If any such notice is given after the Margin Notice Deadline, the party receiving such notice shall transfer such cash or Securities no later than the close of business in the relevant market on the next business day following such notice. (d) Any cash transferred pursuant to this Paragraph shall be attributed to such Transactions as shall be agreed upon by Buyer and Seller. (e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin Deficit or Margin Excess, as the case may be, exceeds a specified dollar amount or a specified percentage of the Repurchase Prices for such Transactions (which amount or percentage shall be agreed to by Buyer and Seller prior to entering into any such Transactions). (f) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a Margin Deficit or a Margin Excess, as the case may be, may be exercised whenever such a Margin Deficit or Margin Excess exists with respect to any single Transaction hereunder (calculated without regard to any other Transaction outstanding under this Agreement). 5. Income Payments Seller shall be entitled to receive an amount equal to all Income paid or distributed on or in respect of the Securities that is not otherwise received by Seller, to the full extent it would be so entitled if the Securities had not been sold to Buyer. Buyer shall, as the parties may agree with respect to any Transaction (or, in the absence of any such agreement, as Buyer shall reasonably determine in its discretion), on the date such Income is paid or distributed either (i) transfer to or credit to the account of Seller such Income with respect to any Purchased Securities subject to such Transaction or (ii) with respect to Income paid in cash, apply the Income payment or payments to reduce the amount, if any, to be transferred to Buyer by Seller upon termination of such Transaction. Buyer shall not be obligated to take any action pursuant to the preceding sentence (A) to the extent that such action would result in the creation of a Margin Deficit, unless prior thereto or simultaneously therewith Seller transfers to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit, or (B) if an Event of Default with respect to Seller has occurred and is then continuing at the time such Income is paid or distributed. 5 6. Security Interest Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all Income thereon and other proceeds thereof. 7. Payment and Transfer Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds. All Securities transferred by one party hereto to the other party (i) shall be in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as the party receiving possession may reasonably request, (ii) shall be transferred on the book-entry system of a Federal Reserve Bank, or (iii) shall be transferred by any other method mutually acceptable to Seller and Buyer. 8. Segregation of Purchased Securities To the extent required by applicable law, all Purchased Securities in the possession of Seller shall be segregated from other securities in its possession and shall be identified as subject to this Agreement. Segregation may be accomplished by appropriate identification on the books and records of the holder, including a financial or securities intermediary or a clearing corporation. All of Seller's interest in the Purchased Securities shall pass to Buyer on the Purchase Date and, unless otherwise agreed by Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Securities or otherwise selling, transferring, pledging or hypothecating the Purchased Securities, but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant to Paragraph 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5 hereof. 6 Required Disclosure for Transactions in Which the Seller Retains Custody of the Purchased Securities Seller is not permitted to substitute other securities for those subject to this Agreement and therefore must keep Buyer's securities segregated at all times, unless in this Agreement Buyer grants Seller the right to substitute other securities. If Buyer grants the right to substitute, this means that Buyer's securities will likely be commingled with Seller's own securities during the trading day. Buyer is advised that, during any trading day that Buyer's securities are commingled with Seller's securities, they [will] * [may] ** be subject to liens granted by Seller to [its clearing bank] * [third parties] ** and may be used by Seller for deliveries on other securities transactions. Whenever the securities are commingled, Seller's ability to resegregate substitute securities for Buyer will be subject to Seller's ability to satisfy [the clearing] * [any]** lien or to obtain substitute securities. * Language to be used under 17 C.F.R. (beta)403.4 (e) if Seller is a government securities broker or dealer other than a financial institution. ** Language to be used under 17 C.F.R. (beta)403.5(d) if Seller is a financial institution. 9. Substitution (a) Seller may, subject to agreement with and acceptance by Buyer, substitute other Securities for any Purchased Securities. Such substitution shall be made by transfer to Buyer of such other Securities and transfer to Seller of such Purchased Securities. After substitution, the substituted Securities shall be deemed to be Purchased Securities. (b) In Transactions in which Seller retains custody of Purchased Securities, the parties expressly agree that Buyer shall be deemed, for purposes of subparagraph (a) of this Paragraph, to have agreed to and accepted in this Agreement substitution by Seller of other Securities for Purchased Securities; provided, however, that such other Securities shall have a Market Value at least equal to the Market Value of the Purchased Securities for which they are substituted. 10. Representations Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing, in the form of an annex hereto or otherwise, in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it. 7 11. Events of Default In the event that (i) Seller fails to transfer or Buyer fails to purchase Purchased Securities upon the applicable Purchase Date, (ii) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon the applicable Repurchase Date, (iii) Seller or Buyer fails to comply with Paragraph 4 hereof, (iv) Buyer fails, after one business day's notice, to comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi) any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an "Event of Default"): (a) The nondefaulting party may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Act of Insolvency), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled). The nondefaulting party shall (except upon the occurrence of an Act of Insolvency) give notice to the defaulting party of the exercise of such option as promptly as practicable. (b) In all Transactions in which the defaulting party is acting as Seller, if the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's obligations in such Transactions to repurchase all Purchased Securities, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (a) of this Paragraph, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by the nondefaulting party and applied to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder, and (iii) the defaulting party shall immediately deliver to the nondefaulting party any Purchased Securities subject to such Transactions then in the defaulting party's possession or control. (c) In all Transactions in which the defaulting party is acting as Buyer, upon tender by the nondefaulting party of payment of the aggregate Repurchase Prices for all such Transactions, all right, title and interest in and entitlement to all Purchased Securities subject to such Transactions shall be deemed transferred to the nondefaulting party, and the defaulting party shall deliver all such Purchased Securities to the nondefaulting party. (d) If the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, the nondefaulting party, without prior notice to the defaulting party, may: 8 (i) as to Transactions in which the defaulting party is acting as Seller, (A) immediately sell, in a recognized market (or otherwise in a commercially reasonable manner) at such price or prices as the nondefaulting party may reasonably deem satisfactory, any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give the defaulting party credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder; and (ii) as to Transactions in which the defaulting party is acting as Buyer, (A) immediately purchase, in a recognized market (or otherwise in a commercially reasonable manner) at such price or prices as the nondefaulting party may reasonably deem satisfactory, securities ("Replacement Securities") of the same class and amount as any Purchased Securities that are not delivered by the defaulting party to the nondefaulting party as required hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing offer quotation from such a source. Unless otherwise provided in Annex I, the parties acknowledge and agree that (1) the Securities subject to any Transaction hereunder are instruments traded in a recognized market, (2) in the absence of a generally recognized source for prices or bid or offer quotations for any Security, the nondefaulting party may establish the source therefor in its sole discretion and (3) all prices, bids and offers shall be determined together with accrued Income (except to the extent contrary to market practice with respect to the relevant Securities). (e) As to Transactions in which the defaulting party is acting as Buyer, the defaulting party shall be liable to the nondefaulting party for any excess of the price paid (or deemed paid) by the nondefaulting party for Replacement Securities over the Repurchase Price for the Purchased Securities replaced thereby and for any amounts payable by the defaulting party under Paragraph 5 hereof or otherwise hereunder. (f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect of which the defaulting party is acting as Buyer shall not increase above the amount of such Repurchase Price for such Transaction determined as of the date of the exercise or deemed exercise by the nondefaulting party of the option referred to in subparagraph (a) of this Paragraph. 9 (g) The defaulting party shall be liable to the nondefaulting party for (i) the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction. (h) To the extent permitted by applicable law, the defaulting party shall be liable to the nondefaulting party for interest on any amounts owing by the defaulting party hereunder, from the date the defaulting party becomes liable for such amounts hereunder until such amounts are (i) paid in full by the defaulting party or (ii) satisfied in full by the exercise of the nondefaulting party's rights hereunder. Interest on any sum payable by the defaulting party to the nondefaulting party under this Paragraph 11 (h) shall be at a rate equal to the greater of the Pricing Rate for the relevant Transaction or the Prime Rate. (i) The nondefaulting party shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law. 12. Single Agreement Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. 13. Notices and Other Communications Any and all notices, statements, demands or other communications hereunder may be given by a party to the other by mail, facsimile, telegraph, messenger or otherwise to the address specified in Annex II hereto, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence. 10 14. Entire Agreement; Severability This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 15. Non-assignability; Termination (a) The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by either party without the prior written consent of the other party, and any such assignment without the prior written consent of the other party shall be null and void. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be terminated by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding. (b) Subparagraph (a) of this Paragraph 15 shall not preclude a party from assigning, charging or otherwise dealing with all or any part of its interest in any sum payable to it under Paragraph 11 hereof. 16. Governing Law This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof. 17. No Waivers, Etc. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Paragraph 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date. 18. Use of Employee Plan Assets (a) If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be used by either party hereto (the "Plan Party") in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed. 11 (b) Subject to the last sentence of subparagraph (a) of this Paragraph, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition. (c) By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i) to represent to Buyer that since the date of Seller's latest such financial statements, there has been no material adverse change in Seller's financial condition which Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any outstanding Transaction involving a Plan Party. 19. Intent (a) The parties recognize that each Transaction is a "repurchase agreement" as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a "securities contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended (except insofar as the type of assets subject to such Transaction would render such definition inapplicable). (b) It is understood that either party's right to liquidate Securities delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended. (c) The parties agree and acknowledge that if a party hereto is an "insured depository institution," as such term is defined in the Federal Deposit Insurance Act, as amended ("FDIA"), then each Transaction hereunder is a "qualified financial contract," as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable). (d) It is understood that this Agreement constitutes a "netting contract" as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a "covered contractual payment entitlement" or "covered contractual payment obligation", respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a "financial institution" as that term is defined In FDICIA). 12 20. Disclosure Relating to Certain Federal Protections The parties acknowledge that they have been advised that: (a) in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission ("SEC") under Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 ("SIPA") do not protect the other party with respect to any Transaction hereunder; (b) in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and 13 (c) in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable. Merrill Lynch Mortgage Capital Inc. Green Tree Finance Corp. -- Three By: /s/ James B. Cason By: /s/ Phyllis a. Knight ------------------------------- ---------------------------- Title: Director Title: Senior Vice Pres & Treas. ---------------------------- ------------------------- Date: 4/5/01 Date: 4/5/01 ----------------------------- -------------------------- Conseco Finance Corp., solely for purposes of confirming its obligations under Paragraphs 19 and 23 of Annex I By: /s/ Phyllis A. Knight ------------------------------- Title: Senior Vice Pres. & Treas. ---------------------------- Date: 4/5/01 ----------------------------- 14 ANNEX I SUPPLEMENTAL TERMS TO THIRD AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT, DATED AS OF APRIL 5, 2001, BETWEEN MERRILL LYNCH MORTGAGE CAPITAL INC. AND GREEN TREE FINANCE CORP.--THREE 1. APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to the Master Repurchase Agreement (the "Master Repurchase Agreement", and collectively with these Supplemental Terms, the "Agreement") modify the terms and conditions under which the parties hereto, from time to time, enter into Transactions. 2. ADDITIONAL DEFINITIONS. (a) Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Master Repurchase Agreement. (b) "Adjusted Tangible Net Worth" means, at any date, the sum of (a) GAAP Net Worth plus (b) the amount of intercompany Indebtedness converted to preferred stock effective September 22, 2000 (to the extent such preferred stock is not included in GAAP Net Worth), plus (c) writedowns on or after September 22, 2000 of all Interest Only Securities and capitalized servicing rights of Conseco Finance and its Subsidiaries, in an aggregate amount not to exceed $450,000,000, minus (d) any Indebtedness owing by Conseco Inc. or any of its Affiliates (other than Conseco Finance or any Subsidiary thereof) to Conseco Finance or any Subsidiary thereof as of such date, minus (e) any amount that would be included on the consolidated balance sheet of Conseco Finance as goodwill and deferred charges in accordance with GAAP. (c) "Affiliate", with respect to any Person, refers to a spouse of such Person, any relative (by blood, adoption or marriage) of such person within the third degree, any director, officer, employee or partner of such Person, and any other Person, directly or indirectly controlling, controlled by or under common control with such Person, and any Affiliate of any of the foregoing. The term "control" mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of the Person, whether through the ownership of securities, by contract or otherwise. (d) "Buyer" shall refer to Merrill Lynch Mortgage Capital Inc. (e) "Business Day" means any day other than (a) a Saturday or a Sunday or (b) another day on which banking institutions in the States of Minnesota or New York are authorized or obligated by law, executive order, or governmental decree to be closed; all references to "business day" in the Master Repurchase Agreement shall be deemed to be references to Business Day. (f) "Cash Equivalents" means (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations) which, at the time of acquisition, are rated at least "A-1" by Standard & Poor's Rating Services ("S&P") or "P-1" by Moody's Investors Services, Inc. ("Moody's"), (c) commercial paper of an issuer rated at least "A-1" by S&P or "P-1" by Moody's, and (d) shares of any money market fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) through (c) above, (ii) has net assets of not less than $500,000,000 and (iii) is rated at least "A-1" by S&P or "P-1" by Moody's; provided, however, that the maturities of all obligations of the type specified in clauses (a) through (c) above shall not exceed 180 days. (g) "Change of Control" means any acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act) of 30% or more, in the case of Conseco, Inc., 45% or more, in the case of Conseco Finance, and 100% in the case of Seller, of the outstanding shares of voting stock of the applicable entity (other than an acquisition by any Person or Persons who are officers or directors of the subject entity on the date hereof or any Affiliate thereof controlled by the relevant officer or director). (h) "Chattel Paper" refers to a MH Contract that does not constitute a Land-and-Home Contract. (i) "Conseco Finance" refers to Conseco Finance Corp. (j) "Custodial Agreement" shall refer to the amended and restated reverse repurchase tri-party custodial agreement dated as of even date herewith, between the parties having ownership interests in the related Securities and the party named as custodian therein, providing for the maintenance of ownership records relating to the Securities. (k) "Custodian" refers to the party named as custodian in the Custodial Agreement, or any permitted successor thereto. (l) "Electronic Ledger" refers to the electronic master record of installment sale contracts of the Seller. (m) "Exchange Act" means the Securities Exchange Act of 1934 and the regulations promulgated thereunder. (n) "FHA" shall refer to the Federal Housing Administration of HUD. (o) "Fiscal Quarter" means any fiscal quarter of a Fiscal Year. 2 (p) "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31. (q) "Fixed Charge Coverage Ratio" means, for any period, the ratio of (a) Pre Tax Operating Income for such period to (b) Interest Expense for such period. (r) "GAAP" means generally accepted accounting principles consistently applied. (s) "GAAP Net Worth" means, at any date, the stockholders' equity that would be reflected on a consolidated balance sheet of Conseco Finance and its Subsidiaries at such date prepared in accordance with GAAP, inclusive of preferred stock, to the extent such preferred stock is not included in stockholders' equity in accordance with GAAP. (t) "Guarantor" shall refer to Conseco Finance. (u) "Guaranty" shall refer to the guaranty by Guarantor of the obligations of Seller under the Agreement in the form of Exhibit E hereto. (v) "High LTV HELOC Loans" shall refer to Home Equity Loans having a loan-to-value ratio of not greater than 115% and a minimum FICO score of 670. (w) "Home Equity Loans" shall refer to the home equity loans secured by first or second liens on single family residential real property (including, without limitation, condominiums and planned unit developments), the ownership of which is evidenced by a Trust Receipt. (x) "Home Improvement Loans" refers to home improvement installment loan contracts and promissory notes, the ownership of which is evidenced by a Trust Receipt. Each Home Improvement Loan shall be secured by a first, second or third lien on single family residential real property (including, without limitation, condominiums and planned unit developments). (y) "HUD" shall refer to the Department of Housing and Urban Development. (z) "Indebtedness" of Conseco Finance means Conseco Finance's (a) obligations for borrowed money, (b) obligations representing the deferred purchase price of property (whether real or personal, tangible or intangible) or services (other than accounts payable arising in the ordinary course of such Conseco Finance's business payable on terms customary in the trade), (c) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by Conseco Finance, (d) obligations which are evidenced by notes, acceptances, or similar instruments, (e) capitalized lease obligations, (f) rate hedging obligations, (g) contingent obligations of any type, (h) obligations for which Conseco Finance is obligated pursuant to or in respect of a letter of credit or similar instrument and (i) repurchase obligations or liabilities of Conseco Finance with respect to accounts or notes receivable and chattel paper sold by such Person. 3 (aa) "Interest Expense" means, for any period, all interest paid or accrued during such period by Conseco Finance and its Subsidiaries on a consolidated basis, determined in accordance with GAAP. (bb) "Interest Only Security" means any interest retained by Seller or its Affiliate relating to the sale or securitization of loans, leases, receivables or installment contracts, which constitutes an interest only security asset in accordance with GAAP. (cc) "Land-and-Home Contract" refers to a MH Contract that is secured by a mortgage or deed of trust on real estate on which the related manufactured home is situated, and which manufactured home is considered or classified as part of the real estate under the laws of the jurisdiction in which it is located. (dd) "List of Home Equity Loans" shall mean a detailed listing of Home Equity Loans provided by Seller to Buyer. (ee) "List of Home Improvement Loans" shall mean a detailed listing of Home Improvement Loans provided by Seller to Buyer. (ff) "List of MH Contracts" shall mean a detailed listing of MH Contracts provided by Seller to Buyer. (gg) "Loan File" shall have the meaning set forth in the Custodial Agreement. (hh) "Market Value" shall, in addition to the definition set forth in the Master Repurchase Agreement, provide that: (i) the Market Value of any Security shall be determined solely by Buyer; (ii) the Market Value of a Security shall be determined by valuing such Security net of any applicable servicing fee; (iii) except as otherwise agreed to by Buyer in its sole discretion, a value of zero shall be assigned to: (1) any Security is more than thirty (30) days past its due date; (2) any Wet Security other than Wet Chattel Paper with respect to which the related Loan File has not been delivered to the Custodian within ten (10) Business Days of the Purchase Date thereof with respect to the first $100,000,000 of Wet Securities outstanding and seven (7) Business Days for all Wet Securities in excess of such $100,000,000 threshold; (3) any Wet Chattel Paper with respect to which the Loan File has not been delivered to the Custodian within twenty-one (21) days of the Purchase Date thereof; 4 (4) any Security that remains subject to this Agreement for more than 270 days, unless such Security is subject to a forward purchase commitment by a third-party purchaser and in a form acceptable to Buyer in its sole discretion, shall have a Market Value of zero; (5) any Security that was originated more than 180 days prior to its initial Purchase hereunder other than as provided in Paragraph 12 (i) hereof; (6) any Security determined by Buyer in its reasonable business judgment not to be eligible for whole loan sale or securitization in a transaction consistent with prevailing standards in the asset sale and securitization industry; (7) any Security would, in the reasonable judgment of Buyer, be classified as "predatory" under applicable consumer lending laws or would cause Buyer to violate any order, agreement or other contractual arrangement to which Buyer is subject to or is a party to; and (iv) in no event shall the Market Value of a Security exceed the outstanding principal amount thereof. (ii) "MH Contract" refers to a first lien manufactured housing conditional sales contract, including any Land-and-Home Contract and Chattel Paper, the ownership of which is evidenced by a Trust Receipt. (jj) "Net Income" means, for any period, with respect to Conseco Finance and its Subsidiaries on a consolidated basis (other than any Subsidiary which is prohibited from declaring or paying dividends or otherwise advancing funds to its parent whether by contract or otherwise), cumulative net income earned during such period as determined in accordance with GAAP. (kk) "Non-Warehouse Debt" means, at any time, all Indebtedness of Conseco Finance for borrowed money (including without limitation all liabilities in respect of deposit products, notes payable, notes payable to Conseco Inc. (net of receivables due from Conseco Inc.), bonds and other Indebtedness) less the sum of Unrestricted Cash and Cash Equivalents at such time plus the book value of all finance receivables and plus 85% of servicing advance receivables. (ll) "Operating Cash Flow" means, for any period, cash flow from the operations of Conseco Finance for such period (as reported under "Cash Flow From Operations" in Conseco Finance's statements of cash flow filed with the Securities and Exchange Commission) for such period. (mm) "Owner" shall have the meaning set forth in the Custodial Agreement. 5 (nn) "Person" refers to a corporation, association, partnership, organization, business, trust, individual, a government or political subdivision thereof, any governmental agency or any other entity. (oo) "Pre Tax Operating Income" means, for any period, Net Income for such period, plus (a) income and franchise taxes paid or accrued during such period, (b) Interest Expense, (c) losses derived from discontinued operations of Conseco Finance and its Subsidiaries during such period and (d) extraordinary losses and non-recurring losses of Conseco Finance and its Subsidiaries in an amount with respect to Interest Only Securities and capitalized servicing rights of Conseco Finance and its Subsidiaries not to exceed $450,000,000 in the aggregate minus (a) income derived from discontinued operations of Conseco Finance and its subsidiaries during such period and (b) extraordinary gains and non-recurring gains of Conseco Finance and its Subsidiaries. (pp) "Purchase Agreement" means the form of purchase agreement attached hereto as Exhibit E. (qq) "Securities" shall refer to MH Contracts, Home Improvement Loans and Home Equity Loans; provided, however, that such MH Contracts, Home Improvement Loans and Home Equity Loans shall not be deemed to be securities for any federal securities law or state blue sky law purposes; provided, further, that in the event Merrill Lynch Capital Markets is not selected to be, or has resigned as, the lead manager or a co-manager for the securitization of any of the MH Contracts, Home Improvement Loans or Home Equity Loans, such MH Contracts, Home Improvement Loans or Home Equity Loans shall, at the election of Buyer in its discretion, be deemed not to be eligible for purchase by Buyer hereunder. (rr) "Seller" shall refer to Green Tree Finance Corp.--Three. (ss) "Step-Up Rate Contract" shall refer to any MH Contract bearing interest during an initial period at a fixed rate that is lower than the fixed rate borne thereafter. (tt) "Structured Transaction" means an asset-backed or mortgage-backed securitization. (uu) "Subsidiary" means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by Conseco Finance or by one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. (vv) "Total Managed Receivables" means, for any period, the "averaged managed receivables", as such term is reported in the related filing with the Securities and Exchange Commission for such period. 6 (ww) "Transaction" shall, in addition to the definition set forth in the Master Repurchase Agreement, refer to deliveries of Securities or cash pursuant to Paragraph 4(a) of the Master Repurchase Agreement and substitutions pursuant to Paragraph 9 of the Master Repurchase Agreement. (xx) "Trust Receipt" means a receipt issued by the Custodian under the Custodial Agreement. (yy) "UCC" refers to the Uniform Commercial Code as in effect in the applicable jurisdiction. (zz) "Unrestricted Cash" means, at any date, all available cash on deposit in bank accounts of Conseco Finance, provided the accounts into which such cash is deposited are not subject to any lien, security interest or control agreement or otherwise encumbered (excluding customary rights of set-off) or restricted in any way. (aaa) "Wet Chattel Paper" means Chattel Paper for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. (bbb) "Wet MH Contracts" means those Land-and-Home Contracts for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. (ccc) "Wet Home Equity Loans" means those Home Equity Loans for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. (ddd) "Wet Home Improvement Loans" means those Home Improvement Loans for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. (eee) "Wet Security" means a Wet Home Improvement Loan, Wet Home Equity Loan and/or Wet MH Contract. 3. CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto unless written notice of objection is given by the objecting party to the other party within two (2) business days after the objecting party's receipt of such Confirmation. 4. INCOME PAYMENTS. So long as no Event of Default shall have occurred and be continuing, Seller shall be entitled to all payments of principal and interest and principal prepayments payable to the holder of the Purchased Securities. 5. SECURITY INTEREST. (a) In the event, for any reason, any Transaction is construed by any court as a secured loan rather than a purchase and sale, the parties intend that Buyer shall have a perfected first priority security interest in all of the Purchased Securities. 7 (b) Seller shall pay all fees and expenses associated with perfecting such security interest including, without limitation, the cost of filing financing statements under the UCC. (c) In the event that Buyer elects to engage in repurchase transactions with the Purchased Securities or otherwise elects to pledge or hypothecate the Purchased Securities, Seller shall, at the request of Buyer and at the expense of Seller, provide Buyer's counterparty in such repurchase transaction with an opinion of counsel to the effect that such counterparty has either an ownership interest or a perfected first priority security interest in such Purchased Securities. 6. REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) Each party represents and warrants, and shall on and as of the Purchase Date of any Transaction be deemed to represent and warrant, as follows: (i) the execution, delivery and performance of the Agreement and the performance of each Transaction do not and will not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto) upon or with respect to any of its properties; and (ii) the Agreement is, and each Transaction when entered into under the Agreement will be, a legal, valid and binding obligation of it enforceable against it in accordance with the terms of the Agreement. (b) Seller represents and warrants to Buyer, and shall on and as of the Purchase Date of any Transaction be deemed to represent and warrant, as follows: (i) the documents disclosed by Seller to Buyer pursuant Section 18 of these Supplemental Terms are either original documents or genuine and true copies thereof; (ii) Seller is a separate and independent corporate entity from the custodian named in the Custodial Agreement or any sub-custodian for any Purchased Securities, Seller does not own a controlling interest in such custodian or any such sub-custodian either directly or through Affiliates and no director or officer of Seller is also a director or officer of such custodian or any such sub-custodian; (iii) Seller shall be at the time it delivers any Purchased Securities for any Transaction, and shall continue to be, through the Purchase Date relating to each such Transaction, the legal and beneficial owner of such Purchased Securities free and clear of any lien, security interest, option or encumbrance except for the security interest created by the Agreement; (iv) each Purchased Security was originated by Conseco Finance directly or through its correspondent network in its ordinary course of business and has not been purchased in any bulk transaction, unless otherwise expressly approved by Buyer in writing; 8 (v) each Purchased Security was underwritten in accordance with the written underwriting standards of Conseco Finance furnished by Seller to Buyer, and no material change to such underwriting standards has occurred since the date of the last written revision to such standards was furnished to Buyer by Seller; (vi) except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Purchased Securities for Transactions hereunder; (vii) since the date of the most recent financial statement of Seller, delivered by it pursuant to Paragraph 10 hereof, there has been no material adverse change in the financial condition or results or operations of Seller; (viii) Seller has capital in an amount at least equal to $1,000,000 in the form of cash or U.S. Treasury bills; (ix) Seller is in possession of a note of Conseco Finance, made payable to Seller in the amount of at least $1,000,000, which note is subordinated to all outstanding debt of Conseco Finance; and (x) the Purchased Securities conform to the type of Home Equity Loans, Home Improvement Loans and MH Contracts that are acceptable for securitization under prevailing market standards in Buyer's reasonable business judgment based upon, but not limited to, the criteria of loan to value ratio, combined loan to value ratio, debt to income ratio, note rate and credit score. (c) Seller makes the representations and warranties to Buyer concerning the MH Contracts, and shall as of the Purchase Date of any Transaction be deemed to make such representations and warranties, as are set forth at Exhibit A-1 hereto, with respect to those MH Contracts constituting Chattel Paper, and Exhibit A-2 hereto, with respect to those MH Contracts constituting Land-and-Home Contracts. Seller further represents and warrants to Buyer that the Exhibit A-1 and A-2 representations and warranties, as applicable, shall continue to be true for all MH Contracts through the Repurchase Date of the related Transaction. The representations and warranties set forth at Exhibits A-1 and A-2 hereto are incorporated herein in their entirety. (d) Seller makes the representations and warranties to Buyer concerning the Home Equity Loans, and shall as of the Purchase Date of any Transaction be deemed to make such representations and warranties, as are set forth at Exhibit B hereto. Seller further represents and warrants to Buyer that the Exhibit B representations and warranties shall continue to be true for all Home Equity Loans through the Repurchase Date of the related Transactions. The representations and warranties set forth at Exhibit B hereto are incorporated herein in their entirety. 9 (e) Seller makes the representations and warranties to Buyer concerning the Home Improvement Loans, and shall as of the Purchase Date of any Transaction be deemed to make such representations and warranties, as are set forth at Exhibit C hereto. Seller further represents and warrants to Buyer that the Exhibit C representations and warranties shall continue to be true for all Home Improvement Loans through the Repurchase Date of the related Transactions. The representations and warranties set forth at Exhibit C hereto are incorporated herein in their entirety. (f) Seller covenants and agrees to indemnify and hold harmless Buyer for all costs and expenses incurred by Buyer: (i) in the event that applicable law or regulations governing Transactions shall change so as to increase Buyer's transaction costs or impose taxes or any withholding requirement on Buyer; or (ii) in the event that Seller terminates any Transaction prior to its agreed upon Repurchase Date, which costs shall include, without limitation, (A) Buyer's actual cost (including all fees, expenses and commissions) of (i) entering into replacement transactions; (ii) entering into or terminating hedge transactions; and/or (ii) terminating transactions or substituting securities in like transactions with third parties in connection with or as a result of such substitution or termination, and (B) to the extent Buyer determines not to enter into replacement transactions, the loss incurred by Buyer directly arising or resulting from such termination. The foregoing amounts shall be solely determined and calculated by Buyer in good faith. 7. EVENTS OF DEFAULT. (a) The term "Event of Default" shall, in addition to the definition set forth in the Master Repurchase Agreement, include the following events: (i) any governmental or self-regulatory authority shall take possession of Buyer or Seller or its property or appoint any receiver, conservator or other official, or such party shall take any action to authorize any of the actions set forth in this clause (i); (ii) Buyer shall have reasonably determined that Seller is or will be unable to meet its commitments under the Agreement, shall have notified Seller of such determination and Seller shall not have responded with appropriate information to the contrary to the satisfaction of Buyer within twenty-four (24) hours; 10 (iii) the Agreement shall for any reason cease to create either an ownership interest (which ownership interest shall be confirmed upon request of Buyer in an opinion of counsel provided by Seller) or a valid, first priority security interest in any of the Purchased Securities purported to be covered thereby; (iv) a final judgment by any competent court in the United States of America for the payment of money in an amount of at least $1,000,000 is rendered against the defaulting party, and the same remains undischarged for a period of 60 days during which execution of such judgment is not effectively stayed; (v) any representation or warranty made by Seller or Buyer in the Agreement or the Custodial Agreement shall have been incorrect or untrue when made or repeated or when deemed to have been made or repeated or, in the case of continuing representations, shall be untrue in any material respect during the term of any Transaction under the Agreement; (vi) The capitalization of Seller shall at any time fail to comply with the structure set forth in Sections 6(b)(viii) and (ix) herein; (vii) Seller, Conseco Finance, Conseco, Inc. or CIHC Inc. (the "Conseco Entities") shall have caused an Event of Default (as defined therein) under (a) the Agreement, (b) any swap, hedge or International Swap Dealers Association agreement (an "ISDA" Agreement) with the Buyer or any Affiliate of the Buyer which results in a net settlement payment (on a contract -by-contract basis) payable by any Conseco Entity of $10,000,000 or more, or (c) the Conseco, Inc. Bank Facilities, each dated as of September 22,2000; provided however, that a breach of the financial covenants under the agreements described in subclause (a) and (c) shall not constitute an Event of Default hereunder unless there is a failure on the part of such Conseco Entity to repay indebtedness or to make a net settlement payment (on a contract-by-contract basis) under such swap, hedge or ISDA Agreement with a party other than Buyer or an Affiliate of Buyer of, in each case, at least $50,000,000; (viii) The Guarantor shall no longer be a duly organized and validly existing corporation in good standing under the laws of the state of its incorporation with the power and authority to enter into and perform its obligations under the Guaranty; (ix) The Guaranty is no longer in full force and effect; and (x) Conseco Finance shall fail to maintain on a consolidated basis: (1) minimum Adjusted Tangible Net Worth of at least $1,950,000,000; 11 (2) GAAP Net Worth to Total Managed Receivables of not less than 4:100; (3) a ratio of Non-Warehouse Debt to GAAP Net Worth of not more than 1:2 as measured on a quarterly basis; (4) for the six-month period ending on the last day of the Fiscal Quarter ending March 31, 2001, the nine-month period ending on the last day of the Fiscal Quarter ending June 30, 2001, the twelve-month period ending on the last day of the Fiscal Quarter ending September 30, 2001, and the twelve-month period ending on the last day of each subsequent Fiscal Quarter, a Fixed Charge Coverage Ratio of not less than 1.0:1.0; and (5) for the six-month period ending on the last day of the Fiscal Quarter ending March 31, 2001, the nine-month period ending on the last day of the Fiscal Quarter ending June 30, 2001, the twelve-month period ending on the last day of the Fiscal Quarter ending September 30, 2001, and the twelve-month period ending on the last day of each subsequent Fiscal Quarter, a positive Operating Cash Flow. (b) Upon the occurrence and during the continuance of an Event of Default by Seller: (i) all rights of Seller to receive payments which it would otherwise be authorized to receive pursuant to Section 4 of these Supplemental Terms shall cease, and all such rights shall thereupon become vested in Buyer, which shall thereupon have the sole right to receive such payments and apply them to the aggregate unpaid Repurchase Prices owed by Seller; (ii) all payments which are received by Seller contrary to the provisions of the preceding clause (i) shall be received in trust for the benefit of Buyer and shall be segregated from other funds of Seller; (iii) if requested by Buyer, Seller shall establish a lock-box account for receipt of payments on the Purchased Securities; and (iv) Buyer shall have the right but not the obligation to purchase under the Purchase Agreement or other mutually agreeable document the Purchased Securities from Seller for a price net of amounts owed to Buyer hereunder. (c) Any sale of Purchased Securities under Paragraph 11 of the Master Repurchase Agreement shall be conducted in a commercially reasonable manner. (d) Expenses incurred in connection with an Event of Default shall include without limitation those costs and expenses incurred by the nondefaulting party as a result of the early termination of any repurchase agreement or reverse repurchase agreement entered into by the nondefaulting party in connection with the Transaction then in default. 12 8. ADDITIONAL EVENTS OF TERMINATION. (a) At the option of Buyer, exercised by written notice to Seller and Conseco Finance, the Repurchase Date for each Transaction under the Agreement shall be deemed to immediately occur in the event that: (i) in the judgment of Buyer a material adverse change shall have occurred in the business, operations, properties, prospects or condition (financial or otherwise) of Conseco Finance or Seller; provided, however, that this event shall cause the Repurchase Dates to immediately occur only for Transactions that were not the subject of a pre-existing written commitment between Buyer and Seller; (ii) Buyer shall request written assurances as to the financial well-being of Conseco Finance or Seller and such assurances shall not have been provided within twenty-four (24) hours of such request; (iii) The senior debt obligations or short-term debt obligations of Merrill Lynch & Co., Inc. shall be rated below the four highest grades by any nationally recognized statistical rating organization; (iv) A Change of Control of Conseco Finance shall occur; or (v) A Change of Control of Conseco, Inc. shall occur. (b) The events specified in Section 8(a) of these Supplemental Terms which may, at the option of Buyer, cause an acceleration of the Repurchase Date for each Transaction shall be in addition to any other rights of Buyer to cause such an acceleration under the Agreement. 9. SUBSTITUTION. Paragraph 9 of the Master Repurchase Agreement is amended by adding at the end of the last subparagraph the following subparagraphs (c) and (d): (c) In the case of any Transaction for which the Repurchase Date is other than the business day immediately following the Purchase Date and with respect to which Seller does not have any existing right to substitute substantially the same Securities for the Purchased Securities (securities shall be deemed to be substantially the same as Purchased Securities only if they are of the same or higher credit quality as the Purchased Securities, unless otherwise agreed to by the Buyer), Seller shall have the right, subject to the proviso to this sentence, upon ten (10) business days' prior written notice to Buyer, which notice shall be given at or prior to 10:00 a.m. (New York time), to substitute substantially the same Securities for any Purchased Securities; provided, however, that Buyer may elect not to accept such substitution. In the event such substitution is accepted by Buyer, such substitution shall be made by Seller's transfer to Buyer of such other Securities and Buyer's transfer to Seller of such Purchased Securities, and after substitution, the substituted Securities shall be deemed to be Purchased Securities. In the event Buyer elects not to accept such substitution, Buyer shall offer Seller the right to terminate the Transaction subject to subparagraph (d) below. 13 (d) In the event Seller exercises its right to substitute or terminate under sub-paragraph (c), Seller shall be obligated to pay to Buyer, by the close of the business day of such substitution or termination, as the case may be, an amount equal to (A) Buyer's actual cost (including all fees, expenses and commissions) of (i) entering into replacement transactions; (ii) entering into or terminating hedge transactions; (iii) terminating transactions or substituting securities in like transactions with third parties in connection with or as a result of such substitution or termination; and/or (iv) performing due diligence with respect to substituted Securities, and (B) to the extent Buyer determines not to enter replacement transactions, the loss incurred by Buyer directly arising or resulting from such substitution or termination. The foregoing amounts shall be solely determined and calculated by Buyer in good faith. 10. FINANCIAL STATEMENTS. Seller shall cause Conseco Finance to furnish to Buyer the following: (a) Monthly. (i) As soon as available but not later than 30 days after the end of each month commencing with March 2001 financial information regarding Conseco Finance consisting of consolidated unaudited balance sheets as of the close of such month and the related statements of income and cash flow for such month, in each case certified by the chief executive officer, chief operating officer, chief financial officer or treasurer, or any other officer having substantially the same authority and responsibility, including any vice president with responsibility for or knowledge of financial matters (a "Responsible Officer"), of Conseco Finance as fairly presenting the consolidated financial position of Conseco Finance and its subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination ("GAAP"); (ii) as soon as available but not later than 15 days after the end of each month commencing with March 2001, a budget forecast for cash use by Conseco Finance for the two month period then commencing, setting forth sources and uses of such cash by Conseco Finance for such period, certified by a Responsible Officer of Conseco Finance; (iii) as soon as available but not later than 15 days after the end of each month commencing March 2001, a certificate of a Responsible Officer of Conseco Finance stating that, to the best knowledge of such officer, no Default or Event of Default has occurred and is continuing, or if a Default or an Event of Default has occurred and is continuing, stating the nature thereof and the action which Conseco Finance proposes to take with respect thereto; and (iv) as soon as available but not later than the 20th day in each calendar month commencing with March 2001, an analysis of the aging (or other applicable measurement as agreed to by the parties) by each category of asset for all Purchased Securities; 14 (b) Quarterly. (i) As soon as available but not later than 60 days after the end of each fiscal quarter of each of the first three fiscal quarters of each fiscal year, (A) financial information regarding Conseco Finance and its subsidiaries consisting of consolidated unaudited balance sheets as of the close of such quarter and the related statements of income and cash flow for such quarter and that portion of the fiscal year ending as of the close of such quarter, setting forth in comparative form the figures for the corresponding period in the prior year, in each case certified by a Responsible Officer of Conseco Finance as fairly presenting the consolidated financial position of Conseco Finance and its subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP, (B) forecasts prepared by management of Conseco Finance for each of the succeeding months for a twelve month period setting forth in reasonable detail the projected origination level, operating cost and estimate of the net interest margin assumptions and resulting cash flow, balance sheet and income statement as at the end of each such month and such twelve-month period, together with a statement of all the material assumptions on which such forecasts are based; and (C) a compliance certificate of a Responsible Officer of Conseco Finance setting forth in reasonable detail the calculations used in determining the financial covenants set forth in Paragraph 7 and demonstrating compliance with all such financial covenants; (c) Annual. As soon as available but not later than 120 days after the end of each fiscal year of Conseco Finance, (i) copies of the audited consolidated balance sheet of Conseco Finance and its subsidiaries and the unaudited consolidated balance sheet of Conseco Finance and its subsidiaries as at the end of such year and the related consolidated statements of earnings, shareholders' equity and cash flows for such year, setting forth in the case of the audited consolidated statements in comparative form the figures for the previous fiscal year, and accompanied by an opinion of PricewaterhouseCoopers or another nationally recognized independent accounting firm which report shall state such audited consolidated financial statements present fairly the financial positions and result of operations of Conseco Finance and its subsidiaries for the periods indicated in conformity with GAAP applied on a basis consistent with prior years, except as stated therein, (such opinion shall not be qualified or limited because of a restricted or limited examination by such auditors of any material portion of Conseco Finance's or any subsidiary's records); and (ii) a compliance certificate of a Responsible Officer of Conseco Finance setting forth in reasonable detail the calculations used in determining the financial covenants set forth in Paragraph 7 and demonstrating compliance with all such financial covenants for all applicable periods during such fiscal year. 11. USE OF PROCEEDS. Seller represents, warrants and covenants that the Purchase Price for any Purchased Securities will only be used for expenses directly related to Seller's core business. 15 12. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS. The parties hereto agree and acknowledge that Transactions hereunder will be entered into by Buyer in its sole discretion and that Buyer is under no obligation to enter into any Transaction with Seller except to the extent otherwise provided in a written agreement between Buyer and Seller. With respect to any Transaction and without limiting the discretion of Buyer referred to in the foregoing sentence and in Paragraph 17 of these Supplemental Terms: (a) the minimum amount of any Transaction under this Agreement shall have a Purchase Price of $5,000,000; (b) the aggregate outstanding Purchase Price for all Purchased Securities shall not exceed $1,250,000,000 at any one time; (c) the aggregate outstanding Purchase Price for Purchased Securities that are Home Equity Loans shall not exceed $750,000,000 at any one time; (d) the aggregate outstanding Purchase Price for Purchased Securities that are MH Contracts shall not exceed $500,000,000 at any one time; (e) the aggregate outstanding Purchase Price for all Purchased Securities that are Home Improvement Loans shall not exceed $750,000,000; (f) the aggregate outstanding Purchase Price for all Purchased Securities that are Home Improvement Loans that are third lien positions shall not exceed $25,000,000; (g) the aggregate outstanding Purchase Price for all Purchased Securities that are Wet MH Contracts, Wet Home Equity Loans and Wet Home Improvement Loans shall not exceed $250,000,000; provided, however, that in no event shall such Purchase Price exceed 30% of the aggregate outstanding Purchase Price for all Purchased Securities for a period of more than ten (10) consecutive business days; (h) the aggregate outstanding Purchase Price for all Purchased Securities that have been re-purchased pursuant to clean-up calls under Structured Transactions shall not exceed $50,000,000; (i) the aggregate outstanding Purchase Price for all second lien Home Equity Loans and all second lien Home Improvement Loans at any time shall not exceed 20% of aggregate outstanding Purchase Price for all Home Equity Loans and Home Improvement Loans; (j) the aggregate outstanding Purchase Price for all Wet Chattel Paper shall not exceed $300,000,000; and (k) the aggregate outstanding Purchase Price for all High LTV HELOC Loans shall not exceed $20,000,000; and (l) the aggregate outstanding Purchase Price for all loans subject to Section 226.32 of Regulation Z shall not exceed $62,500,000, with the first $31,250,000 at any time counted against the Committed Amount. 16 13. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date shall include that portion of the Price Differential that has accrued but has not been paid. The Price Differential shall accrue and be calculated on a daily basis for each Purchased Security (such calculation to be made on the basis of a 360-day year and the actual number of days elapsed). The Price Differential shall be payable weekly in arrears to Buyer with respect to each Purchased Security on the earlier of Friday of each week or the termination date for the related Transaction. The Price Differential for any Purchased Security shall be equal to the product of (i) the Purchase Price and (ii) the prevailing overnight rate on Federal funds (as reported on Page 5 of Telerate) existing at the opening of business on the date of calculation. Payment of the Price Differential to Buyer shall be made by wire transfer in immediately available funds. 14. ADDITIONAL INFORMATION. (a) At any reasonable time, Seller shall permit Buyer, its agents or attorneys, to inspect and copy any and all documents and data in their possession pertaining to each Purchased Security that is the subject of such Transaction. Such inspection shall occur upon the request of Buyer at a mutually agreeable location during regular business hours and on a date not more than two (2) business days after the date of such request. (b) Seller agrees to provide Buyer from time to time with such information concerning Seller of a financial or operational nature as Buyer may request. (c) Seller shall provide Buyer with copies of all filings made by or on behalf of Seller or its parent with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, promptly upon making such filings. (d) Seller shall, upon Buyer's request, provide Buyer with up to date performance data on all Securities owned by Seller in such detail as Buyer shall reasonably request. 15. TERMINATION. Notwithstanding Paragraph 15 of the Master Repurchase Agreement and except as otherwise agreed in writing, this Agreement and all Transactions outstanding hereunder shall terminate automatically without any requirement for notice on the date occurring one year after the date as of which this Agreement is entered into; provided, however, that this Agreement and any Transaction outstanding hereunder may be extended by mutual agreement of Buyer, Seller and Conseco Finance; and provided further, however, that no such party shall be obligated to agree to such an extension. 16. MARGIN MAINTENANCE. (a) Paragraph 4(a) of the Master Repurchase Agreement is hereby modified to provide that if the notice to be given by Buyer to Seller under such paragraph is given at or prior to 10:00 a.m. New York City time, Seller shall transfer the Additional Purchased Securities or cash to Buyer prior to the close of business in New York City on the date of such notice, and if such notice is given after 10:00 a.m. New York City time, Seller shall transfer the Additional Purchased Securities or cash prior to the close of business in New York City on the business day following the date of such notice. 17 (b) Additional Purchased Securities that are transferred by Seller to Buyer pursuant to Paragraph 4(a) of the Master Repurchase Agreement shall be transferred to the Custodian for the benefit of Buyer pursuant to the provisions of the Custodial Agreement. Any cash transferred by Seller to Buyer shall be sent via wire transfer in immediately available funds to the account designated by Buyer. 17. TRANSACTIONS OPTIONAL. Except as otherwise agreed in writing, Buyer shall be under no obligation to enter into Transactions with Seller and the initiation of each Transaction is subject to the approval of Buyer in its sole discretion. 18. ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction under this Agreement, Seller shall cause each of the following conditions to occur: (a) A Custodial Agreement relating to the Securities, in form and substance satisfactory to Buyer, shall have been executed and delivered by the parties thereto; (b) Seller shall have disclosed information satisfactory to Buyer with respect to the scheduled maturities and termination provisions of all outstanding credit facilities and debt of Seller; (c) Seller shall, on the Purchase Date of the first Transaction hereunder and, upon the request of Buyer, on the Purchase Date of any subsequent Transaction, cause to be delivered to Buyer, with reliance thereon permitted as to any person or entity that purchases the Securities from Buyer in a repurchase transaction, an opinion of counsel, in form and substance satisfactory to Buyer and its counsel, concerning (i) the authorization and authority of Seller to enter into the Agreement and the Custodial Agreement and Transactions thereunder, (ii) the ownership interest or perfected security interest of Buyer or its agent in the Purchased Securities and (iii) such other matters as Buyer may reasonably require; (d) Seller shall deliver to Buyer a fully executed Guaranty; (e) A copy of Conseco Finance's underwriting guidelines, current as of the date hereof; and (f) A copy of Seller's articles of incorporation certified by the Secretary of State of the State of Minnesota as of a recent date. 18 19. SERVICING ARRANGEMENTS. (a) The parties hereto agree and acknowledge that, notwithstanding the purchase and sale of the Securities contemplated hereby, Seller shall cause Conseco Finance or an Affiliate of Conseco Finance to continue to service the Securities for the benefit of Buyer and, if Buyer shall exercise its rights to sell the Securities pursuant to this Agreement prior to the related Repurchase Date, Buyer's assigns; provided, however, that the obligation of Conseco Finance, or its Affiliate, to service the Securities for the benefit of Buyer as aforesaid shall cease upon the payment to Buyer of the Repurchase Price therefor. (b) Conseco Finance, or its Affiliate, shall provide servicing reports to Buyer on a monthly basis or with such greater frequency as Buyer may require. (c) Conseco Finance, or its Affiliate, shall service the Securities and shall enforce its rights and the rights of the beneficial owner thereunder in accordance with the standards of a prudent lender in the manufactured housing industry, the home equity loan industry and the consumer finance industry, as applicable. (d) Conseco Finance, or its Affiliate, shall service all FHA/VA MH Contracts and all FHA/VA Home Equity and Home Improvement Loans in a manner such that such insurance or guarantee will not be impaired and will remain in full force and effect. (e) Buyer may, in its sole discretion if an Event of Default (or any breach of a representation, warranty or covenant that does not constitute an event of default), shall have occurred and be continuing, without payment of any termination fee or any other amount to any party and after the expiration of a cure period of 10 days, (i) sell its right to the Securities on a servicing released basis or (ii) terminate Conseco Finance, or its Affiliate, as servicer of the Securities with or without cause. 20. TRANSFERS TO THIRD PARTIES. Buyer and Seller agree that, notwithstanding any provision of the Agreement or the Custodial Agreement to the contrary, Buyer may engage in repurchase transactions with the Purchased Securities and may otherwise pledge or hypothecate the Purchased Securities, provided that no such transaction shall relieve Buyer of its obligations under the Agreement. 21. SINGLE AGREEMENT. Paragraph 12 of the Master Repurchase Agreement is amended by adding at the end thereof the following: "Buyer and Seller agree that, upon an Act of Insolvency by Buyer, on the one hand, or Seller or any of its Affiliates, on the other hand, or the default by Buyer, on the one hand, or Seller or any of its Affiliates, on the other hand, under any transaction with the other party hereto (the party to which such Act of Insolvency or default relates being herein referred to as "Party A" and the other party being referred to herein as "Party B"), Party B may: (a) liquidate any transaction between Party A and Party B, (b) reduce any amounts due and owing to Party A under this or any other transactions between Party A and Party B by setting off against such amounts any amounts due and owing to Party B by Party A, and (c) treat all security for any transactions between Party A and Party B as security for all transactions between Party A and Party B. 19 22. NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Buyer and Seller hereby agree to submit to the courts of the State of New York in any action or proceeding arising out of this Agreement. Buyer and Seller each hereby waives the right of trial by jury in any litigation arising hereunder. 23. CROSS-COLLATERALIZATION; RIGHT OF SET-OFF. Buyer may, in its sole discretion upon the occurrence and during the continuation of an Event of Default hereunder, proceed against any assets of Seller held by Buyer or any Affiliate under any agreement and shall have a right of set-off against any amounts owed by Buyer or any Affiliate to Seller under any agreement. In addition, the parties agree that Buyer may, in its sole discretion upon the occurrence and during the continuation of an event of default under any other agreement to which Seller and Buyer or any of its Affiliates are parties, proceed against any assets held by Buyer hereunder and shall have a right of set-off against any amounts owed by Buyer to Seller. 24. EXPENSES. Seller shall pay its own expenses and all reasonable out-of-pocket costs and expenses (including fees and disbursements of counsel) of Buyer incident to: (1) the preparation and negotiation of the Agreement, the Custodial Agreement, any documents relating thereto, any amendments or waivers thereto, (2) the protection of the rights of Buyer thereunder, (3) Buyer's due diligence review of the Mortgage Loans and the books and records of Seller relating thereto; up to a maximum amount of $35,000 per calendar year, and (4) the enforcement of payment of amounts due under the Agreement or the Custodial Agreement, whether by judicial proceedings or otherwise, including, without limitation, in connection with bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar proceedings involving Seller. Seller agrees to pay the fees and expenses of Buyer's counsel by wire transfer in immediately available funds simultaneously with the effectiveness of the Agreement in an amount equal to $75,000. The parties agree that the Agreement shall not become effective until the condition set forth in the preceding sentence is satisfied. Notwithstanding any provision hereof to the contrary, the obligations of Seller under this Section 24 shall be effective and enforceable whether or not any Transaction remains outstanding and shall survive payment of all other obligations owed by Seller to Buyer. 25. ASSIGNMENT. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any rights or other obligations hereunder may be assigned by Seller without prior written consent of Buyer or by Buyer without the consent of the Seller and any attempted or purported assignment hereof or thereof shall be void. Notwithstanding the foregoing, Buyer may, subject to the applicable law, assign any or all of its rights, but not its obligations hereunder, without consent of Seller, to an Affiliate of Buyer. In addition, nothing in this Paragraph 25 shall be construed to limit Buyer's right to pledge its interest in the Purchased Securities pursuant to Paragraph 20 without the consent of Seller provided that such right shall at all times remain subject to applicable law. 20 26. CONFIDENTIALITY. Seller and Conseco Finance each acknowledge that the Agreement, the Custodial Agreement and all related documents are confidential in nature and each agrees that, unless otherwise directed by a court of competent jurisdiction or as may be required by federal or state law (which determination as to federal or state law shall be based upon written advice of counsel), it shall limit the distribution of such documents to its officers, employees, attorneys, accountants and agents as required in order to conduct its business with Buyer. 27. BINDING TERMS. All of the covenants, stipulations, promises and agreements in the Agreement shall bind the successors and assigns of the parties hereto, whether expressed or not. 28. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument. 29. INCORPORATION OF TERMS. The Master Repurchase Agreement as supplemented by this Annex I and by Exhibits A-1, A-2, B, C and D and E shall be read, taken and construed as one and the same instrument. 30. OPINIONS OF COUNSEL. Seller shall, on the date of the first Transaction hereunder and, upon the request of Buyer, on the date on any subsequent Transaction, cause to be delivered to Buyer, with reliance thereon permitted as to any person or entity that purchases the Contracts from Buyer in a repurchase transaction, opinions of counsel relating to this Agreement and the Guaranty reasonably satisfactory to Buyer. EXHIBIT A-1 Representations with respect to Chattel Paper For purposes of this Exhibit A-1, references to MH Contracts shall be deemed to be references to Chattel Paper. A. Payments. The scheduled payment of principal and interest for the most recent Due Date was made by or on behalf of the obligor (without any advance from Conseco Finance or any Person acting at the request of Conseco Finance) or was not delinquent for more than 30 days. B. No Waivers. The terms of the MH Contract have not been waived, altered or modified in any respect, except by instruments or documents identified in the MH Contract file. C. Binding Obligation. The MH Contract is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights general. D. No Defenses. The MH Contract is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the MH Contract or the exercise of any right thereunder will not render the MH Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. E. Insurance. Conseco Finance or its agent has monitored the existence of a hazard insurance policy with respect to the manufactured home securing a MH Contract and if the Conseco Finance has determined that no such policy exists, Conseco Finance has arranged for such insurance and has billed the related obligor through its loan account. F. Origination. Each MH Contract was originated by a manufactured housing dealer or Conseco Finance in the regular course of its business and, if originated by a manufactured housing dealer, was purchased by Conseco Finance in the regular course of its business. G. Lawful Assignment. The MH Contract was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the MH Contract to the Custodian or the ownership of the MH Contracts by the Owner unlawful. H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws, applicable to the MH Contract have been complied with and such compliance is not affected by the holding of the MH Contracts by the Custodian or the Owner's ownership of the MH Contracts, and Conseco Finance shall maintain in its possession, available for the Buyer's inspection, and shall deliver to the Buyer upon demand, evidence of compliance with all such requirements. 22 I. MH Contract in Force. The MH Contract has not been satisfied or subordinated in whole or in part or rescinded, and the manufactured home securing the MH Contract has not been released from the lien of the MH Contract in whole or in part. J. Valid Security Interest. Each MH Contract creates a valid and enforceable perfected first priority security interest in favor of Conseco Finance in the manufactured home covered thereby as security for payment of the outstanding principal balance of such MH Contract and all other obligations of the obligor under such MH Contract. Each such security interest has been assigned by Conseco Finance to the Custodian, and the Custodian has and will, on behalf of the Owners of the MH Contracts, have a valid and perfected and enforceable first priority security interest in such manufactured home. K. Capacity of Parties. All parties to the MH Contract had capacity to execute the MH Contract. L. Good Title. In the case of a MH Contract purchased from a manufactured housing dealer, Conseco Finance purchased the MH Contract for fair value and took possession thereof in the ordinary course of its business, without knowledge that the MH Contract was subject to a security interest. Conseco Finance has not sold, assigned or pledged the MH Contract to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the MH Contract and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such MH Contract. Conseco Finance has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Conseco Finance's knowledge, no liens or claims which have been filed for work, labor or materials affecting the manufactured home securing the MH Contract which are or may be liens prior to, or equal or coordinate with, the lien of the MH Contract. O. Equal Installments. The MH Contract either has a fixed rate or is a Step-Up Rate Contract and provides for level monthly payments which fully amortize the loan over its term. P. Enforceability. The MH Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. Q. One Original. There is only one original executed MH Contract, which is held by the Custodian. 23 R. Loan-to-Value Ratio. At the time of its origination each MH Contract had a Loan-to-Value Ratio not greater than 100%; if the related manufactured home was new at the time such MH Contract was originated, the original principal balance of such MH Contract was not in excess of that permitted by Conseco Finance's underwriting guidelines in effect at the time the MH Contract was originated. S. Primary Resident. At the time of origination of the MH Contract the obligor was the primary resident of the related manufactured home or the primary resident was the child of the obligor. T. Not Real Estate. The related manufactured home is not considered or classified as part of the real estate on which it is located under the laws of the jurisdiction in which it is located and such manufactured home is, to the best of Conseco Finance's knowledge, free of damage and in good repair. U. Notation of Security Interest. If the related manufactured home is located in a state in which notation of a security interest on the title document is required or permitted to perfect such security interest, the title document shows, or if a new or replacement title document with respect to such manufactured home is being applied for such title document will be issued within 180 days and will show, Conseco Finance as the holder of a first priority security interest in such manufactured home. If the related manufactured home is located in a state in which the filing of a financing statement under the UCC is required to perfect a security interest in manufactured housing, such filings or recordings have been duly made and show Conseco Finance as secured party. In either case, the Custodian has the same rights as the secured party of record would have (if such secured party were still the owner of the MH Contract) against all Persons claiming an interest in such manufactured home. V. Qualified Mortgage for REMIC. Each MH Contract is a "qualified mortgage" under Section 860G(a)(3) of the Code, and the related manufactured home is "manufactured housing" within the meaning of Section 25(e)(10) of the Code. W. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the MH Contract has been serviced in accordance with the FHA/VA regulations, the insurance or guarantee of the MH Contract under FHA/VA regulations and related laws is in full force and effect, and no event has occurred which, with or without notice or lapse of time or both, would impair such insurance or guarantee. X. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the MH Contracts. Y. Origination and Servicing. Each MH Contract was originated or purchased by Conseco Finance and is serviced by Conseco Finance or an Affiliate of Conseco Finance. 24 EXHIBIT A-2 Representations with respect to Land-and-Home Contracts For purposes of this Exhibit A-2 references to MH Contracts shall be deemed to be references to Land-and-Home Contracts. A. Payments. The scheduled payment of principal and interest for the most recent Due Date was made by or on behalf of the obligor (without any advance from Conseco Finance or any Person acting at the request of Conseco Finance) or was not more than 30 days past due. B. No Waivers. The terms of the MH Contract have not been waived, altered or modified in any respect, except by instruments or documents identified in the MH Contract file. C. Binding Obligation. The MH Contract is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights general. D. No Defenses. The MH Contract is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the MH Contract or the exercise of any right thereunder will not render the MH Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. E. Insurance. Conseco Finance or its agent has monitored the existence of a hazard insurance policy with respect to the manufactured home securing a MH Contract and if the Conseco Finance has determined that no such policy exists, Conseco Finance has arranged for such insurance and has billed the related obligor through its loan account F. Origination. Each MH Contract was originated by a manufactured housing dealer or Conseco Finance in the regular course of its business and, if originated by a manufactured housing dealer, was purchased by Conseco Finance in the regular course of its business. G. Lawful Assignment. The MH Contract was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the MH Contract to the Custodian or the ownership of the MH Contracts by the Owner unlawful. H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws, applicable to the MH Contract have been complied with and such compliance is not affected by the holding of the MH Contracts by the Custodian or the Owner's ownership of the MH Contracts, and Conseco Finance shall maintain in its possession, available for the Buyer's inspection, and shall deliver to the Buyer upon demand, evidence of compliance with all such requirements. 25 I. MH Contract in Force. The MH Contract has not been satisfied or subordinated in whole or in part or rescinded, and the manufactured home securing the MH Contract has not been released from the lien of the MH Contract in whole or in part. J. Interest in Real Property. Each mortgage related to a MH Contract is a valid first lien in favor of Conseco Finance on real property securing the amount owed by the obligor under the related MH Contract subject only to (i) the lien of current real property taxes and assessments, (ii) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such mortgage, such exceptions appearing of record being acceptable to mortgage lending institutions generally in the area wherein the property subject to the mortgage is located or specifically reflected in the appraisal obtained in connection with the origination of the related MH Contract obtained by Conseco Finance and (iii) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such Mortgage. Conseco Finance has assigned all of its right, title and interest in such MH Contract and related mortgage, including the security interest in the manufactured home covered thereby, to the Custodian. The Custodian has and will have a valid and perfected and enforceable first priority security interest in such MH Contract. The MH Contract creates a valid and enforceable perfected first priority security interest in favor of Conseco Finance in the manufactured home covered thereby (to the extent such manufactured home is not considered real property) as security for payment of the outstanding principal balance of such MH Contract and all other obligations of the obligor under such MH Contract; such security interest has been assigned by Conseco Finance to the Custodian, and the Custodian has and will, on behalf of the Owners of the MH Contracts, have a valid and perfected and enforceable first priority security interest in such manufactured home. K. Capacity of Parties. All parties to the MH Contract had capacity to execute the MH Contract. L. Good Title. In the case of a MH Contract purchased from a manufactured housing dealer, Conseco Finance purchased the MH Contract for fair value and took possession thereof in the ordinary course of its business, without knowledge that the MH Contract was subject to a security interest. Conseco Finance has not sold, assigned or pledged the MH Contract to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the MH Contract and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such MH Contract. Conseco Finance has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Conseco Finance's knowledge, no liens or claims which have been filed for work, labor or materials affecting the manufactured home securing the MH Contract which are or may be liens prior to, or equal or coordinate with, the lien of the MH Contract. 26 O. Equal Installments. The MH Contract either has a fixed rate or is a Step-Up Rate Contract and provides for level monthly payments which fully amortize the loan over its term. P. Enforceability. The MH Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. Q. One Original. There is only one original executed MH Contract, which is held by Custodian. R. Loan-to-Value Ratio. At the time of its origination each MH Contract had a Loan-to-Value Ratio not greater than 100%; if the related manufactured home was new at the time such MH Contract was originated, the original principal balance of such MH Contract was not in excess of that permitted by Conseco Finance's underwriting guidelines in effect at the time the MH Contract was originated. S. Primary Resident. At the time of origination of the MH Contract the obligor was the primary resident of the related manufactured home or the primary resident was the child of the obligor. T. Good Repair. The related manufactured home is, to the best of Conseco Finance's knowledge, free of damage and in good repair. U. Qualified Mortgage for REMIC. Each MH Contract is a "qualified mortgage" under Section 860G(a)(3) of the Code, and the related manufactured home is "manufactured housing" within the meaning of Section 25(e)(10) of the Code. V. FHA/VA MH Contracts. If the MH Contract is a FHA/VA MH Contract, the MH Contract has been serviced in accordance with the FHA/VA regulations, the insurance or guarantee of the MH Contract under FHA/VA regulations and related laws is in full force and effect, and no event has occurred which, with or without notice or lapse of time or both, would impair such insurance or guarantee. W. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the MH Contracts. X. Origination and Servicing. Each MH Contract was originated by Conseco Finance and is serviced by Conseco Finance or an Affiliate of Conseco Finance and such related MH Contract is owned by Conseco Finance or an Affiliate of Conseco Finance. 27 EXHIBIT B Representations with respect to Home Equity Loans ----------------------- A. Payments. The scheduled payment of principal and interest due under the Home Equity Loan with respect to the prior Due Date was made on or before such Due Date by or on behalf of the obligor (without any advance from Conseco Finance or any Person acting at the request of Conseco Finance) or was not delinquent for more than 30 days after such Due Date. B. No Waivers. The terms of the Home Equity Loan have not been waived, altered or modified in any respect, except by instruments or documents identified in the Home Equity Loan File. All costs, fees and expenses incurred in making, closing and perfecting the lien and/or security interest, as applicable, of the Home Equity Loan have been paid. C. Binding Obligation. The Home Equity Loan is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights generally. Conseco Finance has delivered, or caused to be delivered, to the Custodian the original Mortgage, with evidence of recording thereon, or if the original Mortgage has not yet been returned from the recording office, a true copy of the Mortgage which has been delivered for recording in the appropriate recording office of the jurisdiction in which the real property is located. D. No Defenses. The Home Equity Loan is not subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the Home Equity Loan or the exercise of any right thereunder will not render the Home Equity Loan unenforceable in whole or in part or subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and no such right of rescission, set off, counterclaim or defense has been asserted with respect thereto. E. Insurance. All improvements on the related real property are covered by a hazard insurance policy. All premiums due on such insurance have been paid in full. F. Origination. The Home Equity Loan was originated by a home equity lender or Conseco Finance in the regular course of its business and, if originated by a home equity lender, was purchased by Conseco Finance in the regular course of its business. G. Lawful Assignment. The Home Equity Loan was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the Home Equity Loan to Custodian or the ownership of the Home Equity Loans by the Owner thereof unlawful or make the Home Equity Loan unenforceable. 28 H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws, applicable to the Home Equity Loan have been complied with and such compliance is not affected by the holding of the Home Equity Loans by Custodian or the Owners' ownership of the Home Equity Loans, and Conseco Finance shall for at least the period of this Agreement, maintain in its possession, available for Custodian's inspection, and shall deliver to Custodian upon demand, evidence of compliance with all such requirements. I. Home Equity Loan in Force. The Home Equity Loan has not been satisfied or subordinated in whole or in part or rescinded, and the real property securing the Home Equity Loan has not been released from the lien of the Home Equity Loan in whole or in part. J. Valid Lien. The Home Equity Loan has been duly executed and delivered by the obligor and the related Mortgage is a valid and subsisting first or second lien on the property therein described; any related Mortgage has been assigned by Conseco Finance to Custodian, and Custodian has and will have, on behalf of the Owners of the Home Equity Loans, a valid and subsisting lien on the property therein described. Conseco Finance has full right to sell and assign the Home Equity Loans to Custodian. K. Capacity of Parties. All parties to the Home Equity Loan had capacity to execute the Home Equity Loan. L. Good Title. Prior to transfer to Custodian, Conseco Finance is the sole owner of the Home Equity Loan and has the authority to sell, transfer and assign the Home Equity Loan. Conseco Finance has not sold, assigned or pledged the Home Equity Loan to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Home Equity Loan and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Home Equity Loan. Conseco Finance has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Conseco Finance's knowledge, no liens or claims which have been filed for work, labor or materials affecting the real property securing the Home Equity Loan which are or may be liens prior to, or equal or coordinate with, the lien of the Home Equity Loan. O. Equal Installments. The Home Equity Loan has a fixed rate and provides for level monthly payments which fully amortize the loan over its term. P. Enforceability. The Home Equity Loan contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security provided thereby. 29 Q. One Original. There is only one original executed Home Equity Loan note, and it has been delivered to the Custodian. R. Primary Resident. At the time of origination of the Home Equity Loan, the obligor was the primary resident of the related real property. S. Qualified Mortgage for REMIC. Each Home Equity Loan that is secured by a Mortgage on the property described therein is a "qualified mortgage" under Section 860G(a)(3) of the Code. T. Proceedings. There is no proceeding pending or, to Conseco Finance's knowledge, threatened for the total or partial condemnation of collateral securing a Home Equity Loan. U. Marking Records. Conseco Finance has caused the portions of the Electronic Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to indicate that such Home Equity Loans are owned by Custodian in accordance with the terms of the related Custodial Agreement. V. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Home Equity Loans. W. Real Property. Each mortgaged property is improved by a single family dwelling which constitutes real property under state law and is the principal residence of the obligor. 30 EXHIBIT C Representations with respect to Home Improvement Loans A. Payments. The scheduled payment of principal and interest due under the Home Improvement Loan with respect to the prior Due Date was made on or before such Due Date by or on behalf of the obligor (without any advance from Seller or any Person acting at the request of Seller) or was not delinquent for more than 30 days after such Due Date. B. No Waivers. The terms of the Home Improvement Loan have not been waived, altered or modified in any respect, except by instruments or documents identified in the Home Improvement Loan File (as defined in the Custodial Agreement). All costs, fees and expenses incurred in making, closing and perfecting the lien and/or security interest, as applicable, of the Home Improvement Loan have been paid. C. Binding Obligation. The Home Improvement Loan is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights generally. Seller has delivered, or caused to be delivered, to the Custodian the original Mortgage, with evidence of recording thereon, or if the original Mortgage has not yet been returned from the recording office, a true copy of the Mortgage which has been delivered for recording in the appropriate recording office of the jurisdiction in which the real property is located. D. No Defenses. The Home Improvement Loan is not subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the Home Improvement Loan or the exercise of any right thereunder will not render the Home Improvement Loan unenforceable in whole or in part or subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and no such right of rescission, set off, counterclaim or defense has been asserted with respect thereto. E. Insurance. In the case of Home Improvement Loans, all improvements on the related real property are covered by a hazard insurance policy. All premiums due on such insurance have been paid in full. F. Origination. The Home Improvement Loan was originated by a home improvement contractor or Seller in the regular course of its business and, if originated by a home improvement contractor, was purchased by Seller in the regular course of its business. G. Lawful Assignment. The Home Improvement Loan was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the Home Improvement Loan to Custodian or the ownership of the Home Improvement Loans by the Owner thereof unlawful or make the Home Improvement Loan unenforceable. 31 H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws and the FHA regulations, applicable to the Home Improvement Loan have been complied with and such compliance is not affected by the holding of the Home Improvement Loans by Custodian or the Owner's ownership of the Home Improvement Loans, and Seller shall for at least the period of this Agreement, maintain in its possession, available for Custodian's inspection, and shall deliver to Custodian upon demand, evidence of compliance with all such requirements. I. Home Improvement Loan in Force. The Home Improvement Loan has not been satisfied or subordinated (except for such subordination as may be allowed under FHA regulations) in whole or in part or rescinded, and the real property securing the Home Improvement Loan has not been released from the lien of the Home Improvement Loan in whole or in part. J. Valid Lien. The Home Improvement Loan has been duly executed and delivered by the obligor and either the related Mortgage is a valid and subsisting first, second or third lien on the property therein described or the Home Improvement Loan is an unsecured borrowing of the obligor; any related Mortgage has been assigned by Seller to Custodian, and Custodian has and will have, on behalf of the Owners of the Home Improvement Loans, a valid and subsisting lien on the property therein described. Seller has full right to sell and assign the Home Improvement Loans to Custodian. K. Capacity of Parties. All parties to the Home Improvement Loan had capacity to execute the Home Improvement Loan. L. Good Title. Prior to transfer to Custodian, Seller is the sole owner of the Home Improvement Loan and has the authority to sell, transfer and assign the Home Improvement Loan. Seller has not sold, assigned or pledged the Home Improvement Loan to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Home Improvement Loan and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Home Improvement Loan. Seller has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the real property securing the Home Improvement Loan which are or may be liens prior to, or equal or coordinate with, the lien of the Home Improvement Loan. O. Equal Installments. The Home Improvement Loan has a fixed rate and provides for level monthly payments which fully amortize the loan over its term. 32 P. Enforceability. The Home Improvement Loan contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security provided thereby. Q. One Original. There is only one original executed Home Improvement Loan contract and note, each of which has been delivered to the Custodian. R. Primary Resident. At the time of origination of the Home Improvement Loan, the obligor was the primary resident of the related real property. S. Qualified Mortgage for REMIC. Each Home Improvement Loan that is secured by a Mortgage on the property described therein is a "qualified mortgage" under Section 860G(a)(3) of the Code. T. Proceedings. There is no proceeding pending or, to Seller's knowledge, threatened for the total or partial condemnation of collateral securing a Home Improvement Loan. U. Marking Records. Seller has caused the portions of the Electronic Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to indicate that such Home Improvement Loans are owned by Custodian in accordance with the terms of the related Custodial Agreement. V. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Home Improvement Loans. 33 EXHIBIT D CONSECO FINANCE CORP. April __, 2001 Merrill Lynch Mortgage Capital Inc. Merrill Lynch World Headquarters World Financial Center North Tower New York, New York 10281 Ladies and Gentlemen: This letter will confirm that Conseco Finance Corp. ("Guarantor"), agrees to absolutely and unconditionally guaranty to Merrill Lynch Mortgage Capital Inc. ("Buyer"), and any of its assignees (together with Buyer, the "Beneficiary"), the full and prompt payment and performance of up to ten (10%) percent of all of the obligations, undertakings and liabilities of Green Tree Finance Corp. - Three ("Seller") arising under the terms and provisions of a Master Repurchase Agreement (the "Master Repurchase Agreement"), dated as of April __, 2001, as amended from time to time, by and between Seller and Buyer (such obligations, undertakings and liabilities are herein referred to as the "Guarantied Obligations"). Guarantor hereby expressly consents to any amendment to the Master Repurchase Agreement as may be agreed upon by Seller and Buyer and waives notice of any such amendment. Capitalized terms used and not otherwise defined herein shall have the meanings assigned in the Master Repurchase Agreement. Guarantor hereby represents and warrants to you that Seller is an indirect wholly-owned subsidiary of Guarantor. Guarantor hereby agrees that if Seller shall fail at any time to make due and punctual payment to the Beneficiary of any Guarantied Obligation or if Seller shall fail at any time to perform any other Guarantied Obligation to the Beneficiary, Guarantor will immediately forthwith pay such amount and perform such obligation upon verbal or written demand therefor. Guarantor covenants and agrees to immediately notify Buyer if a representation, warranty or covenant of Seller under the Master Repurchase Agreement has been breached or if an Event of Default shall have occurred. Guarantor hereby waives any requirement that the Beneficiary take legal action against Seller before enforcing this guaranty; agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Guarantied Obligations or the dissolution, liquidation, reorganization or other change regarding the Seller or the Seller seeking protection, or having a case or proceeding commenced against it, under any law for the protection of debtors or creditors; waives diligence, presentment, demand for payment or performance, protest or notice or other 34 formality of any kind whatsoever; waives filing of claims with any court in case of the insolvency, reorganization or bankruptcy of the Seller; waives any fact, event or circumstance that might otherwise constitute a legal or equitable defense to or discharge of Guarantor, including (but without typifying or limiting this waiver) failure by the Beneficiary to perfect a security interest in any collateral securing performance of any Guarantied Obligation and any delay by the Beneficiary in exercising any of its rights hereunder, Guarantor covenants that this guaranty will not be discharged except by full and final payment and performance to the Beneficiary of all Guarantied Obligations incurred while it is effective, and agrees that this guaranty shall continue to be effective or be reinstated (as the case may be) if at any time all or any part of any payment or interest thereon or other performance by Seller is avoided or must otherwise be restored by the Beneficiary. Guarantor hereby further consents to any renewal or modification of any Guarantied Obligation or any extension of the time within which such is to be performed and to any other indulgences, whether before or after the date of this guaranty. Guarantor agrees to pay on demand all reasonable out-of-pocket expenses (including legal fees and disbursements) incurred by the Beneficiary in connection with the enforcement and protection of its rights hereunder. This is a continuing guaranty and will remain in effect until thirty (30) days after written notice of termination is received by Merrill Lynch Mortgage Capital Inc., Merrill Lynch World Headquarters, World Financial Center, North Tower, 22nd Floor, New York, New York 10281, Attention: James B. Cason. Any such termination shall not affect or reduce Guarantor's obligations hereunder for any liability of Seller that arose prior to the expiration of said thirty-day period. This guaranty shall terminate and shall be of no further force or effect upon full payment of all amounts due to Buyer under the Master Repurchase Agreement. This guaranty shall inure to the benefit of any successor of the Beneficiary and be binding on any successor or Buyer of Guarantor. This guaranty shall be governed by and construed in accordance with the laws of the State of New York. Guarantor hereby agrees that (i) any dispute or controversy arising out of or relating to this guaranty, the Master Repurchase Agreement or the Note shall be submitted to arbitration before the American Arbitration Association, (ii) the arbitration proceedings shall be conducted in New York, New York and (iii) the decision of the arbitrators shall be final and judgment may be entered on the award. In the event that such arbitration is unavailable, Guarantor hereby submits to the jurisdiction of the United States Federal and New York State courts situated in the City, County, and State of New York and hereby agrees that any litigation arising out of or relating to this guaranty, the Master Repurchase Agreement or the Note shall be brought in such courts. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the non-enforceability of any such other provision or agreement. 35 Any demand by Buyer for payment or performance by Guarantor shall be by a written demand to Guarantor, which shall be deemed to have been duly given if made by facsimile transmission to Conseco Finance Corp., [ADDRESS], Attention: Cheryl Collins, Phone: (651) 293-3410, Fax: (651) 293-5696 or if personally delivered at or upon the fifth day after deposit in the mails, mailed by registered mail, postage prepaid, to Attention: Cheryl Collins. Very truly yours, CONSECO FINANCE CORP. By: ________________________________________ Name: ______________________________________ Title: _____________________________________ EX-10.B MATERIAL CON 4 ex10b.txt EXHIBIT 10.B Exhibit 10.b SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT Dated January 30, 2002 Between LEHMAN COMMERCIAL PAPER INC., as Buyer and GREEN TREE FINANCE CORP. - FIVE, as Seller 1. APPLICABILITY From time to time for the period from the date hereof until September 30, 2003, the parties hereto may, subject to the terms hereof, enter into transactions in which Green Tree Finance Corp.- Five ("Seller") agrees to transfer to Lehman Commercial Paper Inc. ("Buyer") certain Eligible Assets against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Eligible Assets at a date certain not later than September 30, 2003, as specified in the related Confirmation, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a "Transaction" and shall be governed by this Agreement and the related Confirmation, unless otherwise agreed in writing. Each Transaction shall be limited to a maximum of 30 days (unless otherwise specified by Confirmation), after which, subject to Section 20, Buyer and Seller may agree to roll such Transaction for a period of up to 30 days (unless otherwise specified by Confirmation). This Agreement amends and restates and supersedes in its entirety the Amended and Restated Master Repurchase Agreement dated as of May 9, 2000 between the parties hereto, as previously amended to the date hereof. Buyer has entered into this Agreement in consideration of the mutual agreements hereinafter set forth, the completion of the Exchange Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged. 2. DEFINITIONS "Act of Insolvency" means, with respect to any party and its Affiliates: (i) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (ii) the seeking the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of either; (iii) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (iv) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (v) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (vi) that any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates. "Additional Eligible Assets" has the meaning specified in Section 4(a). "Affiliate" means an affiliate of a party as such term is defined in the United States Bankruptcy Code in effect from time to time. "Agreement" means this Second Amended and Restated Master Repurchase Agreement between Buyer and Seller, as amended from time to time. "Applicable Margin" means (i) in respect of Home Equity Loans, 0.85% per annum, provided, however, that in respect of Home Equity Loans that are Wet Home Equity Loans such percentage shall be increased to 1.1% per annum; (ii) in respect of High LTV Home Equity Loans, 1.0% per annum, provided, however, that in respect of High LTV Home Equity Loans that are Wet High LTV Home Equity Loans such percentage shall be increased to 1.25% per annum; (iii) in respect of Home Improvement Loans, 0.85% per annum, provided, however, that in respect of Home Improvement Loans that are Wet Home Improvement Loans such percentage shall be increased to 1.1% per annum; (iv) in respect of Manufacturing Housing Contracts, 0.85% per annum; provided, however, that in respect of Manufacturing Housing Contracts that are Wet Manufacturing Housing Contracts such percentage shall be increased to 1.1% per annum; and (v) in respect of Esoteric Assets, 1.5 % per annum until and including June 30, 2002 and 3.0% per annum from and including July 1, 2002. "Asset Assignment Agreement" means the Asset Assignment Agreement, dated as of February 13, 1998, between Green Tree Residual and Lehman ALI Inc. (as the assignee of Buyer), as amended. "Business Day" means a day other than (i) a Saturday or Sunday, or (ii) a day on which Buyer or the New York Stock Exchange is authorized or obligated by law or executive order to be closed and, if the applicable Business Day related to notices, determinations, fundings and payments in connections with the LIBO Rate, a day on which dealings in U.S. dollar deposits are also carried on in the London interbank market. "Buyer" has the meaning specified in Section 1. 2 "Collateral Amount" means, with respect to any Transaction, the amount obtained by application of the applicable Collateral Amount Percentage to the Repurchase Price for such Transaction. "Collateral Amount Percentage" means the amount set forth in the Confirmation which, in any event, (i) shall not be less than 103% with respect to Home Equity Loans in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (ii) (a) shall not be less than 110% with respect to Insured Home Improvement Loans in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (b) shall not be less than 115% with respect to Uninsured Home Improvement Loans in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (iii) shall not be less than 110% with respect to loans arising under Retail Installment Contracts in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (iv) shall not be less than 115% with respect to High LTV Home Equity Loans in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (v) shall not be less than 105% with respect to Manufactured Housing Contracts in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (vi) shall not be less than 143% with respect to Vehicle Leases in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof, (vii) shall not be less than 161% with respect to Floor Plan Assets in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof and (viii) shall not be less than 110% with respect to HELOCs in determining whether a Collateral Deficit exists pursuant to the first sentence of Section 4(a) hereof. "Collateral Deficit" has the meaning specified in Section 4(a). "Confirmation" has the meaning specified in Section 3(a). "Conseco" refers to Conseco Finance Corp., formerly known as Green Tree Financial Corporation. "Consumer Products" refers to consumer goods consisting of motorcycles, marine products (including boats, boat trailers and outboard motors), pianos and organs, horse trailers, sport vehicles (including snowmobiles, personal watercraft and all-terrain vehicles), trucks, personal aircraft, recreational vehicles and any other asset as shall be acceptable to Buyer in its sole discretion, financed by Seller pursuant to a Retail Installment Contract. "Credit Card Agreement" means each credit card or credit line account agreement or other evidence of the terms and conditions pursuant to which credit is advanced, the ownership of which is evidenced by a Trust Receipt pursuant to the Custodial Agreement. "Credit Card Balances" means all amounts owing by the Obligors under a Credit Card Agreement from time to time, that are subject to a Transaction under this Agreement. "Custodial Agreement" means, collectively, the Amended and Restated Custodial Agreement that refers to Transactions under this Agreement, by and among Buyer, Seller and the Custodian, as the same may be amended, restated or 3 supplemented from time to time by Buyer and Seller and any other agreement acknowledged by Buyer in writing specifically as constituting "Custodial Agreements" hereunder. "Custodial Delivery" means the form executed by Seller in order to deliver the Loan File to Buyer or its designee (including the Custodian) pursuant to Section 7. "Custodian" means the custodian under the Custodial Agreement. The initial custodian is U.S. Bank National Association. "Effective Date" refers to the effective date of this Agreement which shall be January 30, 2002. "Electronic Ledger" means the electronic master record of loans of Seller. "Eligible Assets" means Home Improvement Loans, Home Equity Loans, Manufactured Housing Contracts, High LTV Home Equity Loans and, to the extent permitted under this Agreement, Esoteric Assets; provided, however, that "Eligible Assets" constituting "chattel paper" under the UCC (including but not limited to all Retail Installment Contracts) shall no longer constitute Eligible Assets if the related Loan Files have not been delivered to the Custodian within 60 days of the Purchase Date thereof. Notwithstanding any references herein, Credit Card Balances, Equipment Leases and Asset Based Lending Contracts shall not be Eligible Assets for any purposes hereunder from and after the Effective Date. "Equipment" means the equipment that is the subject of the related Equipment Lease. "Equipment Lease" means a lease of Equipment to an Obligor originated by Conseco in accordance with its underwriting guidelines, that is subject to a Transaction under this Agreement. "Esoteric Asset Maximum Purchase Price" means the following amount for each of the following dates: For Repurchase Dates occurring on or after January 30, 2002, but prior to March 1, 2002................$90,600,000 For Repurchase Dates occurring on or after March 1, 2002 but prior to April 1, 2002.................... 88,600,000 For Repurchase Dates occurring on or after April 1, 2002 but prior to May 1, 2002.......................86,600,000 For Repurchase Dates occurring on or after May 1, 2002 but prior to June 1, 2002........................84,600,000 For Repurchase Dates occurring on or after June 1, 2002 but prior to July 1, 2002.......................82,600,000 For Repurchase Dates occurring on or after July 1, 2002 but prior to August 1, 2002.....................80,600,000 For Repurchase Dates occurring on or after August 1, 2002 but prior to September 1, 2002................78,600,000 For Repurchase Dates occurring on or after September 1, 2002 but prior to October 1, 2002...............76,600,000 For Repurchase Dates occurring on or after October 1, 2002 but prior to November 1, 2002................74,600,000 For Repurchase Dates occurring on or after November 1, 2002 but prior to December 1, 2002...............72,600,000 For Repurchase Dates occurring on or after December 1, 2002 but prior to June 30, 2003.................$50,000,000 For Repurchase Dates occurring on or after June 30, 2003........................................................$0
"Esoteric Assets" means collectively Purchased Eligible Assets that are either Vehicle Leases, Retail Installment Contracts, Floorplan Assets or HELOCs and in each case that are listed on the Effective Date on Schedule A hereto. No additional assets that would otherwise meet the description of Esoteric Assets and that are not listed on Schedule A hereto on the Effective Date shall be Eligible Assets hereunder. 4 "Event of Default" has the meaning specified in Section 13. "Exchange Agreement" means the Exchange Agreement dated as of January 30, 2002, between Lehman Brothers Holdings Inc. and Conseco, Inc. "Fee Letter" means the Fee Letter dated January 30, 2002, among Lehman ALI, Inc., Conseco Finance Corp. and Lehman Brothers Holdings Inc., as amended from time to time. "FHA" means the Federal Housing Administration, an agency within HUD. "FHA Insurance" means the credit insurance provided by FHA pursuant to Title I of the National Housing Act, as evidenced by the Company's FHA contract of insurance. "Floor Plan Assets" refers to the floor plan certificates that are included in the Esoteric Assets listed on Schedule A hereto. "Green Tree Residual" means Green Tree Residual Finance Corp. I and any successor thereto. "Guarantor" means Conseco Finance Corp. and any successor thereto. "Hedge" means, with respect to any or all of the Eligible Assets, any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller, and reasonably acceptable to Buyer. "High LTV Home Equity Loans" means the fixed rate mortgage loans secured by first or second liens on single family residential real property (including, without limitation, condominiums and planned unit developments) that upon origination have a Loan-to-Value ratio greater than 95%, but not exceeding 125%. "Home Equity Line of Credit" or "HELOC" refers to the revolving, variable rate mortgage loans secured by first or second liens on single family residential property (including, without limitation, condominiums and planned unit developments) that are included in the Esoteric Assets listed on Schedule A hereto. "Home Equity Loan File" refers to the Loan File described in the Custodial Agreement. "Home Equity Loans" refers to the fixed rate mortgage loans secured by first or second liens on single family residential real property (including, without limitation, condominiums and planned unit developments). "Home Improvement Loan File" refers to the Loan File described in the Custodial Agreement. "Home Improvement Loans" refers to both Insured Home Improvement Loans and Uninsured Home Improvement Loans. 5 "HUD" means the United States Department of Housing and Urban Development. "Income" means, with respect to any Eligible Asset at any time, any principal thereof then payable and all interest, dividends or other distributions payable thereon less any related servicing fee(s) charged by the Servicer. "Indebtedness" means all amounts due to Buyer or any assignee thereof pursuant to this Agreement and all amounts due to Buyer or any Affiliate of Buyer, from Seller, Conseco or any Affiliate of Conseco under any agreement (including but not limited to the Asset Assignment Agreement, the Repurchase Facility (Residual Corp.), the NIMS Trust Agreement and the Fee Letter), and in each case whether constituting principal, interest, penalty amounts, fees, expenses or any other amounts due and payable to Buyer or any Affiliate of Buyer thereunder. "Insured Home Improvement Loans" means first, second and third lien or, to the extent permitted hereby, unsecured home improvement retail installment contracts, and related promissory notes, insured under the FHA's Title I Program, and including without limitation, all rights to receive payments which are due pursuant thereto and all other proceeds thereof (including any recourse rights against third persons) from and after the related Purchase Date, but excluding any rights to receive payments which are due prior to the related Purchase Date. "Land-and-Home Contract" refers to a Manufactured Housing Contract that is secured by a mortgage or deed of trust on real estate on which the related manufactured home is situated, and which manufactured home is considered or classified as part of the real estate under the laws of the jurisdiction in which it is located. "Land-and-Home Contract File" refers to the Loan File described in the Custodial Agreement. "Lease File" refers to the Loan File described in the Custodial Agreement. "LIBO Rate" means, with respect to any Purchase Date, and for each 30-day period thereafter, the rate determined by Buyer to be the offered rate for one-month deposits in United States dollars that appears on the Dow Jones Markets Telerate Page 3750 as of 11:00 a.m., London time, on the second full Business Day next preceding the first day of such Purchase Date or period. In the event that such rate does not appear on the Dow Jones Markets Telerate Page 3750 (or otherwise on the Dow Jones Markets screen), the LIBO Rate for the purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by Buyer. "Limited Guaranty" refers to the Amended and Restated Limited Guaranty provided in accordance with Section 15 and substantially in the form attached hereto as Exhibit X. "List of Contracts" means the list identifying each Purchased Eligible Asset sold hereunder, which list (a) identifies each Home Equity Loan, Home Improvement Loan, Manufactured Housing Contract, or Esoteric Asset and (b) sets forth as to each Purchased Eligible Asset (i) the principal balance, (ii) the amount of monthly payments due from the Obligor, (iii) the contract rate and (iv) the maturity date. 6 "Loan Files" means, collectively, the Home Equity Loan Files, the Home Improvement Loan Files, the Manufactured Housing Chattel Paper Contract Files, the Land-and-Home Contract Files and the Lease Files. "Manufactured Housing Chattel Paper Contract File" refers to the Loan File described in the Custodial Agreement. "Manufactured Housing Contracts" refer to sales contracts and loan agreements for manufactured housing that are subject to a Transaction under this Agreement. "Market Value" means as of any date with respect to any Eligible Assets, the price at which such Eligible Assets could readily be sold as determined by Buyer in its sole discretion pursuant to Section 4; provided, however, that Buyer shall not take into account, for purposes of calculating Market Value, any Eligible Asset (i) which has been subject to Transactions for more than 180 days (except in the case of Esoteric Assets), (ii) which fails to meet Seller's underwriting guidelines or with respect to which there is a breach of a representation, warranty or covenant made by Seller in this Agreement and which breach has not been cured, (iii) which is a Wet High LTV Home Equity Loan, a Wet Home Equity Loan, a Wet Home Improvement Loan or a Wet Manufactured Housing Contract with respect to which the related Loan File has not been delivered to the Custodian within 10 Business Days (or 21 calendar days in the case of a Wet Manufactured Housing Contract described in clause (ii) of the definition thereof) of the Purchase Date hereunder or (iv) which is more than 30 days delinquent. Without otherwise affecting Buyer's discretion to determine the Market Value of the Purchased Eligible Assets, in the event the floor plan business is sold, or the Floor Plan Assets are no longer owned by Conseco or one of its Affiliates or if Conseco or one of its Affiliates no longer services the Floor Plan Assets, the Market Value of the Floor Plan Assets will thereafter be deemed to be zero. "Material Adverse Change" means a material adverse change in or effect upon the condition (financial or otherwise), business, performance, operations, properties, profits or prospects of any specified Person, and, in the case of Seller, shall also include any such material adverse change or effect upon (i) the legality, validity or enforceability of this Agreement or the Custodial Agreement or (ii) the Purchased Eligible Assets. "Mortgage" means a mortgage, deed of trust, deed to secure debt or other instrument, creating a valid and enforceable first or second lien on or a first or second priority ownership interest in an estate in fee simple in real property and the improvements thereon, securing a mortgage note or similar evidence of indebtedness. "Mortgage Note" means a note or other evidence of indebtedness of a mortgagor secured by a Mortgage. "NIMS Trust Agreement" means the Trust Agreement, dated as of September 1, 2001, among Conseco Finance Net Interest Margin Finance Corp. I, Conseco Finance Net Interest Margin Finance Corp. II, Conseco Finance Corp. and Wilmington Trust Company. "Non-Esoteric Eligible Asset" refers, as of any date of determination, to all Eligible Assets then subject to Transactions other than the Esoteric Assets. 7 "Obligor" means a buyer of a Consumer Product or a home improvement or a borrower on a Home Equity Loan or a lessee and any other party obligated under the related Vehicle Lease or any other Person who is indebted under the related Eligible Asset. "Periodic Payment" has the meaning specified in Section 5(b). "Person" means an individual, partnership, corporation, joint stock company, trust or unincorporated organization or a governmental agency or political subdivision thereof. "Price Differential" means, with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the Repurchase Date (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction). "Pricing Rate" means in respect of Purchased Eligible Assets, the sum of the Applicable Margin and the LIBO Rate. "Prime Rate" means, as of any date, the rate of interest published by The Wall Street Journal, northeast edition, as the "prime rate" of Citibank, N.A. "Purchase Date" means the date on which Purchased Eligible Assets are transferred by Seller to Buyer or its designee (including the Custodian) as specified in the Confirmation. "Purchased Eligible Assets" means the Eligible Assets (including any Additional Eligible Assets) sold by Seller to Buyer in a Transaction, any Additional Eligible Assets and any Substituted Eligible Assets. "Purchase Price" means, on each Purchase Date, the price at which Purchased Eligible Assets are transferred by Seller to Buyer or its designee (including the Custodian); provided, however, that (i) the Purchase Price of any Home Equity Loan shall not in any event exceed 95% of the principal amount thereof, (ii) the Purchase Price of any High LTV Home Equity Loan shall not in any event exceed 85% of the principal amount thereof, (iii) the Purchase Price of any Insured Home Improvement Loan shall not in any event exceed 90% of the principal amount thereof, (iv) the Purchase Price of any Uninsured Home Improvement Loan shall not in any event exceed 90% of the principal amount thereof, (v) the Purchase Price of any Retail Installment Contract shall not in any event exceed 90% of the principal amount thereof, (vi) the Purchase Price of any Manufactured Housing Contract shall not in any event exceed 95% of the principal amount thereof, (vii) the Purchase Price of any Vehicle Lease shall not in any event exceed 70% of the net discounted present value determined at Buyer's reasonable discretion of all rents to be paid under such Vehicle Lease (without taking into account the residual value under such Vehicle Lease), (viii) the Purchase Price of any Floor Plan Asset shall not in any event exceed 62.5% of the principal amount thereof and (ix) the Purchase Price of any HELOC shall not exceed 90% of the principal amount thereof. "Replacement Eligible Assets" has the meaning specified in Section 14(b)(ii). 8 "Repurchase Facility (Residual Corp.)" means the Master Repurchase Agreement, dated as of September 29, 1999, between Green Tree Residual and Lehman Brothers Inc. and acknowledged and agreed to by Conseco, as amended. "Repurchase Date" means the date on which Seller is to repurchase the Purchased Eligible Assets from Buyer which initially will be the first Business Day of the next succeeding month, including any date determined by application of the provisions of Sections 3 or 13, as specified in the Confirmation; provided, however, that in no event shall such date be more than 30 days after the Purchase Date; provided, further, that the Repurchase Date in respect of Esoteric Assets shall be no later than June 30, 2003; and provided, further, that the Repurchase Date in respect of the Non-Esoteric Eligible Assets shall be no later than September 30, 2003. "Repurchase Price" means the price at which Purchased Eligible Assets are to be transferred from Buyer or its designee (including the Custodian) to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the Price Differential as of the date of such determination decreased by all cash, Income and Periodic Payments actually received by Buyer pursuant to Sections 4(a), 5(a) and 5(b), respectively (unless otherwise specified by Confirmation). "Retail Installment Contract" means any retail installment contract which finances a purchase of a Consumer Product, all rights to receive payments which are due pursuant thereto, and any "purchase money security interest" (as defined in the Uniform Commercial Code) created in favor of Seller in the Consumer Product financed thereunder, and that is subject to a Transaction under this Agreement. "Seller" has the meaning specified in Section 1. "Servicing Agreement" means the servicing obligations of Conseco set forth in Section 25. "Servicing Records" has the meaning specified in Section 25. "Substituted Eligible Assets" means any Eligible Assets substituted for Purchased Eligible Assets in accordance with Section 9 hereof. "Title I Program" means the Title I insurance program of the FHA. "Transaction" has the meaning specified in Section 1. "Trust Receipt" means a trust receipt issued by Custodian to Buyer confirming the Custodian's possession of certain asset files which are the property of and held by Custodian for the benefit of Buyer or the registered holder of such trust receipt. "UCC" means the Uniform Commercial Code, as in effect from time to time in the relevant jurisdiction. 9 "Umbrella Agreement" means the Amended and Restated Agreement dated as of January 30, 2002, by and among Conseco Finance Corp., Conseco, Inc., CIHC, Incorporated, Green Tree Residual, Seller and Lehman Brothers Holdings Inc. "Uninsured Home Improvement Loans" means first, second and third lien home improvement retail installment contracts, and related promissory notes (none of which are insured under the FHA's Title I Program) and including without limitation, all rights to receive payments which are due pursuant thereto and all other proceeds thereof (including any recourse rights against third persons) from and after the related Purchase Date, but excluding any rights to receive payments which are due prior to the related Purchase Date. "Vehicle" means a truck or other commercial vehicle that is the subject of the related Vehicle Lease. "Vehicle Lease" means an open-ended lease of a Vehicle to an Obligor originated by Conseco or an Affiliate of Conseco in accordance with Conseco's underwriting guidelines, that is subject to a Transaction under this Agreement and that is included in the Esoteric Assets listed on Schedule A hereto. Vehicle Leases may be held as Purchased Eligible Assets in the form of units of beneficial interest in a titling trust. "Wet High LTV Home Equity Loans" means those High LTV Home Equity Loans for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. "Wet Home Equity Loans" means those Home Equity Loans for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. "Wet Home Improvement Loans" means those Home Improvement Loans for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date. "Wet Manufactured Housing Contracts" means those Manufactured Housing Contracts: (i) that do not constitute "chattel paper" under the UCC for which the related Loan Files have not been delivered to the Custodian as of the Purchase Date; or (ii) that constitute "chattel paper" under the UCC and whose Purchase Date is on or after February 1, 2001, for which the related Loan Files have not been delivered to the Custodian within 10 Business Days after the Purchase Date. 3. INITIATION; CONFIRMATION; TERMINATION; MAXIMUM TRANSACTION AMOUNTS a. On the terms and subject to the conditions contained in this Agreement and upon receipt of a notice by Seller (a "Transaction Request"), Buyer agrees to enter into Transactions to purchase Non-Esoteric Eligible Assets during the period from the Effective Date to September 30, 2003 for a Purchase Price not to exceed in the aggregate for all Non-Esoteric Eligible Assets $500,000,000 minus the lesser of (x) the then current Esoteric Asset Maximum Purchase Price and (y) the aggregate outstanding Repurchase Price for all outstanding Esoteric Asset Transactions; provided, however, that Buyer shall not be committed to purchase Home Improvement Loans for a Purchase Price exceeding 10 $150,000,000 in the aggregate and shall not be committed to purchase High LTV Home Equity Loans for a Purchase Price exceeding in the aggregate the lesser of (x) $150,000,000 and (y) 20% of the aggregate outstanding Repurchase Price for all Transactions hereunder; provided, further, that an agreement to enter into a Transaction may be entered into orally or in writing at the initiation of either Buyer or Seller for Non-Esoteric Eligible Assets in amounts in excess of $500,000,000 minus the lesser of (x) the Esoteric Asset Maximum Purchase Price and (y) the aggregate outstanding Repurchase Price for all Esoteric Asset Transactions. Further, on the terms and subject to the conditions contained in this Agreement, Buyer agrees to enter into Transactions to purchase Esoteric Assets during the period from the Effective Date to June 1, 2003 for a Purchase Price not to exceed the then current Esoteric Asset Maximum Purchase Price in the aggregate for all Esoteric Assets. In any event, Buyer shall confirm the terms of each Transaction by issuing a written confirmation to Seller promptly after the parties enter into such Transaction in the form of Exhibit I attached hereto (a "Confirmation"). Such Confirmation and Transaction Request shall each describe the Purchased Eligible Assets, identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the applicable Collateral Amount Percentages with respect to such Eligible Assets and (v) in the case of the Confirmation, additional terms or conditions not inconsistent with this Agreement. Seller shall, subject to the provisions of subsection (c) below, sign the Confirmation and promptly return it to Buyer. The Purchase Price for any Transactions shall exceed $1,000,000. Each Transaction hereunder involving Esoteric Assets (an "Esoteric Asset Transaction") will include only Esoteric Assets (except to the extent provided for Additional Eligible Assets in Section 4(a)) and will be considered a separate Transaction from any others then outstanding involving other Eligible Assets. b. Any Confirmation by Buyer shall be deemed to have been received by Seller on the date actually received by Seller. c. Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby unless objected to in writing by Seller no more than two (2) Business Days after the date the Confirmation was received by Seller or unless a corrected Confirmation is sent by Buyer. An objection sent by Seller must state specifically that such writing is an objection, must specify the provision(s) being objected to by Seller, must set forth such provision(s) in the manner that Seller believes they should be stated, and must be received by Buyer no more than two (2) Business Days after the Confirmation was received by Seller. d. In the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller by telephone or otherwise (confirmed by fax), no later than 1:00 p.m. (New York City time) on the Business Day prior to the day on which such termination will be effective. e. On the Repurchase Date, termination of the Transaction will be effected by transfer to Seller or its designee of the Purchased Eligible Assets (and any Income in respect thereof received by Buyer not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Section 5) against the simultaneous transfer of the Repurchase Price to an account of Buyer. Seller is obligated to obtain the Loan Files related to the Transaction from Buyer or its designee (except for those held in trust by Seller in accordance with Section 7(h) hereof) at Seller's expense on the Repurchase Date. 11 f. With respect to all Transactions hereunder, the aggregate Purchase Price for all Purchased Eligible Assets at any one time subject to the outstanding Transactions shall not exceed $1,200,000,000; provided, however, that the aggregate Purchase Price for all Home Equity Loans subject to Transactions hereunder shall not exceed $750,000,000; the aggregate Purchase Price for all Wet High LTV Home Equity Loans, Wet Home Equity Loans, Wet Home Improvement Loans and Wet Manufactured Housing Contracts subject to Transactions hereunder shall not exceed the lesser of (x) $150,000,000 and (y) 30% of the aggregate outstanding Repurchase Price for all Transactions hereunder; the aggregate Purchase Price for all Insured Home Improvement Loans subject to Transactions hereunder shall not exceed $750,000,000; the aggregate Purchase Price for all Uninsured Home Improvement Loans subject to Transactions hereunder shall not exceed $300,000,000; the aggregate Purchase Price for all Manufactured Housing Contracts subject to Transactions hereunder shall not exceed $500,000,000; the aggregate Purchase Price for all High LTV Home Equity Loans subject to Transactions hereunder shall not exceed the lesser of (x) $150,000,000 and (y) 20% of the aggregate outstanding Repurchase Price for all Transactions hereunder; and the aggregate Purchase Price for all Esoteric Assets subject to Transactions hereunder shall not exceed $90,600,000 subject to the Esoteric Asset Maximum Purchase Price. g. At least two Business Days prior to any Purchase Date or any substitution of Eligible Assets pursuant to Section 9, Seller shall deliver to Buyer via electronic modem or computer tape the information related to the Eligible Assets to be so purchased or substituted. In the case of each Transaction, the portion of the Repurchase Price allocable to Esoteric Assets may be prepaid by Seller on any Business Day prior to the Repurchase Date set forth in the related Confirmation, upon 5 days' prior notice to Buyer. h. Seller shall use commercially reasonable efforts to obtain other committed warehouse facilities of equal aggregate size and containing terms and conditions similar to those in this Agreement. 4. COLLATERAL AMOUNT MAINTENANCE a. If at any time the aggregate Market Value of all Purchased Eligible Assets subject to all Transactions is less than the aggregate Collateral Amount for all such Transactions (a "Collateral Deficit"), then Buyer may by notice to Seller require Seller to transfer to Buyer or its designee (including the Custodian) Eligible Assets ("Additional Eligible Assets") or cash, so that the cash and aggregate Market Value of the Purchased Eligible Assets, including any such Additional Eligible Assets, will thereupon equal or exceed the aggregate Collateral Amount. In addition, a Collateral Deficit will exist at any time to the extent that the Market Value of all Esoteric Assets subject to Transactions is less than the aggregate Collateral Amount attributable to such Esoteric Assets and in such event Buyer may by notice to Seller require Seller to transfer to Buyer or its designee (including the Custodian) Additional Eligible Assets or cash, so that the cash and aggregate Market Value of the Esoteric Assets , plus any such Additional Eligible Assets, will thereupon equal or exceed the aggregate Collateral Amount attributable to such Esoteric Assets. b. Notice required pursuant to subsection (a) above may be given by any means of telecopier or telegraphic transmission. A notice for the payment or 12 delivery in respect of a Collateral Deficit received before 9:00 a.m. on a Business Day, local time of the party receiving the notice, must be met not later than 5:00 p.m. on the same Business Day, local time of the party receiving the notice. Any notice given on a Business Day after 9:00 a.m., local time of the party receiving the notice, shall be met not later than 2:00 p.m. (New York time) on the next Business Day. The failure of Buyer, on any one or more occasions, to exercise its rights under subsection (a) of this Section shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date. Buyer and Seller agree that a failure or delay to exercise its rights under subsection (a) of this Section shall not limit Buyer's rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller. c. In the event that Seller fails to comply with the provisions of this Section 4, Buyer shall not enter into any additional Transactions hereunder after the date of such failure. 5. INCOME PAYMENTS a. Where a particular Transaction's term extends over an Income payment date on the Purchased Eligible Assets subject to that Transaction such Income shall be the property of Buyer. Notwithstanding the foregoing, Seller shall be entitled to all Income with respect to Purchased Eligible Assets subject to Transactions; provided, that, at any time at the instruction of Buyer including upon the occurrence and continuance of an Event of Default, all Income with respect to Purchased Eligible Assets subject to Transactions shall be held in a segregated account established by the Custodian, or any other financial institution selected by Buyer, for the benefit of Buyer and shall be distributed to pay the Repurchase Price and other amounts due under this Agreement in the manner provided by Buyer. In addition, Seller shall within 60 days cause the certificates evidencing the Floor Plan Assets and the Vehicle Leases to be registered in the name of Buyer or its nominee and shall instruct the trustee or other paying agent to make all payments thereon to a segregated account established by the Custodian, or any other financial institution acceptable to Buyer, which account shall be under the control of Seller provided that Seller and Buyer shall enter into a customary control or blocked account agreement with the institution maintaining the account sufficient to provide Buyer with a perfected security interest therein. b. Notwithstanding that Buyer and Seller intend that the Transactions hereunder be sales to Buyer of the Purchased Eligible Assets, Seller shall pay by wire transfer to Buyer the accreted value of the Price Differential (less any amount of such Price Differential previously paid by Seller to Buyer)(each such payment, a "Periodic Payment") on the Repurchase Date. The Price Differential shall accrue, be calculated and be compounded on a daily basis for each Purchased Eligible Asset. c. Buyer shall offset against the Repurchase Price of each such Transaction all Income and Periodic Payments actually received by Buyer pursuant to Sections 5(a) and (b), respectively. On the Repurchase Date for each Esoteric Asset Transaction, Seller shall be required to repay in cash that portion of the Repurchase Price representing the excess of such Repurchase Price over the then current Esoteric Asset Maximum Purchase Price, and in no event will the amount represented by 13 such excess be rolled into new Transactions. In addition, and without in any way derogating from Seller's obligation to pay such amounts, commencing on October 1, 2002, all Income on the Esoteric Assets shall be applied to pay down the Repurchase Price of the outstanding Esoteric Asset Transactions as they become due and the Purchase Price applicable to the following rolled Transaction will be reduced by the amount of such paydown. Further, if at any time Seller desires to sell any Esoteric Assets to a third party it shall, as a condition to the release of such assets by Buyer, (x) if such sale occurs prior to October 1, 2002, pay down the portion of the Repurchase Price applicable to such assets in full so that after giving effect to such payment, the Market Value of the remaining Esoteric Assets subject to Transactions equals the Collateral Amount attributable thereto, or (y) if such sale occurs on or after October 1, 2002, it shall pay down the portion of the Repurchase Price equal to the greater of the amount set for in (x) and the net proceeds of such sale, and in either event the Purchase Price applicable to the following rolled Transaction will be reduced by the amount of such paydown. For clarity, in no event will the Purchase Price applicable to any Transaction exceed the amount determined by operation of the proviso in the definition of Purchase Price hereunder, applied to various asset classes included therein. 6. SECURITY INTEREST a. Buyer and Seller intend that the Transactions hereunder be sales to Buyer of the Purchased Eligible Assets and not loans from Buyer to Seller secured by the Purchased Eligible Assets. However, in order to preserve Buyer's rights under this Agreement in the event that a court or other forum recharacterizes the Transactions hereunder as loans, and as security for the performance by Seller of all of Seller's obligations to Buyer under this Agreement and the Transactions entered into pursuant to this Agreement, Seller grants to Buyer a continuing first priority security interest in the Purchased Eligible Assets. b. Seller shall pay all fees and expenses associated with perfecting Buyer's security interest in the Purchased Eligible Assets, including, without limitation, the cost of filing financing statements under the UCC and recording assignments of mortgage, as and when required by Buyer in its sole discretion. c. At the time Seller purchases a Hedge, Seller and Buyer shall enter into a mutually acceptable agreement, which provides for the pledge and collateral assignment of such Hedge to Buyer and provides for the netting of obligations of Seller by Buyer under the Hedge and this Agreement. Seller covenants to take such further actions as are necessary in order to perfect Buyer's first priority security interest in the Hedges. 7. PAYMENT, TRANSFER AND CUSTODY a. Unless otherwise mutually agreed in writing, all transfers of funds hereunder shall be in immediately available funds. b. On or before each Purchase Date, Seller shall deliver or cause to be delivered to Buyer or its designee the Custodial Delivery to the extent provided for in the Custodial Agreement or as otherwise required by Buyer. c. On the Purchase Date for each Transaction, ownership of the Purchased Eligible Assets shall be transferred to Buyer or its designee 14 (including the Custodian) against the simultaneous transfer of the Purchase Price to an account of Seller specified in the Confirmation. Seller, simultaneously with the delivery to Buyer or its designee (including the Custodian) of the Purchased Eligible Assets relating to each Transaction hereby sells, transfers, conveys and assigns to Buyer or its designee (including the Custodian) without recourse, but subject to the terms of this Agreement, all the right, title and interest of Seller in and to the Purchased Eligible Assets together with all right, title and interest in and to the proceeds of any related insurance policies. d. In connection with each sale, transfer, conveyance and assignment, on or prior to each Purchase Date with respect to each Eligible Asset, Seller shall deliver or cause to be delivered and released to the Custodian the related Loan File, or shall otherwise provide for the segregation and holding of such Loan File in such manner as Buyer and Seller may agree. e. In connection with each securitization or whole loan sale disposition of any Purchased Eligible Assets, the proceeds of such sale shall be used to pay down any outstanding Transactions. f. With respect to each Purchased Eligible Asset delivered by Seller to Buyer or its designee (including the Custodian), Seller shall execute an omnibus power of attorney substantially in the form of Exhibit II attached hereto irrevocably appointing Buyer its attorney-in-fact with full power to, in each case to the extent applicable, complete and record the assignment of the Mortgage, complete the endorsement of the Mortgage Note, complete and file UCC financing statements or Vehicle titles or assignments thereof and take such other steps as may be necessary or desirable to enforce Buyer's rights against such Purchased Eligible Assets, the related Loan Files and the Servicing Records. g. Buyer shall deposit the Loan Files related to the Purchased Eligible Assets with the Custodian to be maintained in accordance with the Custodial Agreement, except to the extent otherwise agreed to by Buyer. h. Any Loan Files not delivered to Buyer or its designee (including the Custodian) are and shall be held in trust by Seller or its designee for the benefit of Buyer as the owner thereof. Seller or its designee shall maintain a copy of the Loan File and the originals of the Loan File not delivered to Buyer or its designee. The possession of the Loan File by Seller or its designee is at the will of Buyer for the sole purpose of servicing the related Purchased Eligible Assets, and such retention and possession by Seller or its designee is in a custodial capacity only. The books and records (including, without limitation, any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the sale of the related Purchased Eligible Asset to Buyer. Seller or its designee (including the Custodian) shall release its custody of the Loan File only in accordance with written instructions from Buyer, unless such release is required as incidental to the servicing of the Purchased Eligible Assets or is in connection with a repurchase of any Purchased Eligible Asset by Seller. i. Buyer shall deliver to the Custodian all Loan Files of the Purchased Eligible Assets. 15 8. REHYPOTHECATION OR PLEDGE OF PURCHASED ELIGIBLE ASSETS Title to all Purchased Eligible Assets shall pass to Buyer and Buyer shall have free and unrestricted use of all Purchased Eligible Assets. Nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Eligible Assets or otherwise pledging, repledging, hypothecating, or rehypothecating the Purchased Eligible Assets, but no such transaction shall relieve Buyer of its obligations to transfer Purchased Eligible Assets to Seller pursuant to Section 3. Nothing contained in this Agreement shall obligate Buyer to segregate any Purchased Eligible Assets delivered to Buyer by Seller. 9. SUBSTITUTION a. Subject to Section 9(b), Seller may, with prior written consent of Buyer, with a copy to Custodian, substitute other Eligible Assets for any Purchased Eligible Assets. Such substitution shall be made by transfer to Buyer or its designee (including the Custodian) of the Loan File of such other Eligible Assets (except to the extent that Buyer otherwise agrees) together with a Custodial Delivery and transfer to Seller or its designee of the Purchased Eligible Assets requested for release. After substitution, the substituted Eligible Assets shall be deemed to be Purchased Eligible Assets subject to the same Transaction as the released Eligible Assets. b. Notwithstanding anything to the contrary in this Agreement, Seller may not substitute other Eligible Assets for any Purchased Eligible Assets (i) if after taking into account such substitution, a Collateral Deficit would occur or (ii) such substitution would cause a breach of any provision of this Agreement. 10. REPRESENTATIONS AND WARRANTIES a. Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance; (ii) it will engage in such Transactions as principal; (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf and upon execution this Agreement will create a legal, valid and binding obligation, enforceable in accordance with its terms; (iv) no approval, consent or authorization of the Transactions contemplated by this Agreement from any federal, state, or local regulatory authority having jurisdiction over it is required or, if required, such approval, consent or authorization has been or will, prior to the Purchase Date, be obtained; (v) the execution, delivery, and performance of this Agreement and the Transactions hereunder will not violate any law, regulation, order, judgment, decree, ordinance, charter, by-law, or rule applicable to it or its property or constitute a default (or an event which, with notice or lapse of time, or both would constitute a default) under or result in a breach of any agreement or other instrument by which it is bound or by which any of its assets are affected; (vi) it has received approval and authorization to enter into this Agreement and each and every Transaction actually entered into hereunder pursuant to its internal policies and procedures; and (vii) neither this Agreement nor any Transaction pursuant hereto are entered into in contemplation of insolvency or with intent to hinder, delay or defraud any creditor. b. Seller represents and warrants to Buyer that as of the Purchase Date for the purchase of any Purchased Eligible Assets by Buyer from Seller and as of 16 the date of this Agreement and any Transaction hereunder and at all times while this Agreement and any Transaction hereunder is in full force and effect: i. Organization. Seller is duly organized, validly existing and in good standing under the laws and regulations of the state of Minnesota and Seller, or a servicer on Seller's behalf, is duly licensed, qualified, and in good standing in every state where Seller transacts business and in any state where any mortgaged property is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by Seller therein. ii. No Litigation. There is no action, suit, proceeding, arbitration or investigation pending or threatened against Seller which, either in any one instance or in the aggregate, may result in any Material Adverse Change with respect to Seller, or in any material impairment of the right or ability of Seller to carry on its business substantially as now conducted, or in any material liability on the part of Seller, or which if adversely determined would affect the validity of this Agreement or any of the Purchased Eligible Assets or of any action taken or to be taken in connection with the obligations of Seller contemplated herein, or which would be likely to impair materially the ability of Seller to perform under the terms of this Agreement; iii. No Broker. Seller has not dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Eligible Assets pursuant to this Agreement; iv. Good Title to Collateral. Purchased Eligible Assets shall be free and clear of any lien, encumbrance or impediment to transfer, and Seller has good, valid and marketable title and the right to sell and transfer such Purchased Eligible Assets to Buyer; provided, that Vehicle Leases may be held as Purchased Eligible Assets in the form of units of beneficial interest in a titling trust. v. Delivery of Loan File. With respect to each Purchased Eligible Asset, the Loan File and any other documents required to be delivered under this Agreement and the Custodial Agreement have been delivered to the Custodian. Seller or its designee is in possession of a complete, true and accurate Loan File with respect to the Purchased Eligible Assets, except for such documents the originals of which have been delivered to the Custodian. vi. Selection Process. The Purchased Eligible Assets were selected from among the outstanding assets in Seller's portfolio as to which the representations and warranties set forth in this Agreement could be made and such selection was not made in a manner so as to affect adversely the interests of Buyer. vii. Approved Seller. Seller is a HUD approved Seller. There has been no material detrimental finding in a HUD or other investigation of Seller; viii. No Untrue Statements. Neither this Agreement nor any written statement made, or any report or other document issued or 17 delivered or to be issued or delivered by Seller pursuant to this Agreement or in connection with the transactions contemplated hereby contains any untrue statement of fact or omits to state a fact necessary to make the statements contained herein or therein not misleading; ix. Origination Practices. The origination practices with respect to each Eligible Asset (i) have been and are in all respects legal and proper in the mortgage origination business and consumer finance business and (ii) are in accordance with the underwriting guidelines previously supplied and approved by Buyer; x. Performance of Agreement. Seller does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement on its part to be performed; xi. Seller Not Insolvent. Seller is not, and with the passage of time does not expect to become, insolvent; and xii. No Event of Default. No Event of Default has occurred and is continuing hereunder. c. Seller represents and warrants to Buyer that each Purchased Eligible Asset sold hereunder and each pool of Purchased Eligible Assets sold in a Transaction hereunder, as of the related Purchase Date conform to the representations and warranties set forth in Exhibit IV, V, VI, VII, VIII or IX attached hereto, as applicable, and that each Eligible Asset delivered hereunder as Additional Eligible Assets or Substituted Eligible Assets, as of the date of such delivery, conforms to the representations and warranties set forth in Exhibit IV, V, VI, VII, VIII or IX attached hereto, as applicable. Seller further represents and warrants to Buyer that, as of the first Business Day of each month, the Computer Tape with respect to each Purchased Eligible Asset is complete, true and correct. It is understood and agreed that the representations and warranties set forth in Exhibit IV, V, VI, VII, VIII or IX attached hereto shall survive delivery of the respective Loan File to Buyer or its designee (including the Custodian). d. On the Purchase Date for any Transaction, Buyer and Seller shall each be deemed to have made all the foregoing representations with respect to itself as of such Purchase Date. 11. NEGATIVE COVENANTS OF SELLER On and as of the date of this Agreement and each Purchase Date and until this Agreement is no longer in force with respect to any Transaction, Seller covenants that it will not: a. take any action which would directly or indirectly impair or adversely affect Buyer's title to or the value of the Purchased Eligible Assets; b. pledge, assign, convey, grant, bargain, sell, set over, deliver or otherwise transfer any interest in the Purchased Eligible Assets to any person not a party to this Agreement nor will Seller create, incur or permit to exist any lien, encumbrance or security interest in or on the Purchased Eligible Assets except as described in Section 6 of this Agreement; 18 c. amend, alter, modify or change in any material way its underwriting guidelines without Buyer's consent; or d. commence a voluntary bankruptcy proceeding or similar insolvency proceeding under applicable laws, without a unanimous vote of the board of directors of Seller. 12. AFFIRMATIVE COVENANTS OF SELLER For so long as this Agreement is in effect: a. Seller covenants that it will promptly notify Buyer of any Material Adverse Change with respect to it or Conseco. b. Seller shall provide Buyer with copies of such documentation as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 10, including but not limited to resolutions evidencing the approval of this Agreement by Seller's board of directors or loan committee, copies of the minutes of the meetings of Seller's board of directors or loan committee at which this Agreement and the Transactions contemplated by this Agreement were approved, and evidence of Seller's status as an approved Seller/Servicer. c. Seller shall, at Buyer's request, take all action necessary to ensure that Buyer will have a first priority security interest in the Purchased Eligible Assets, including, among other things, filing such UCC financing statements, mortgages or other instruments as Buyer may reasonably request. d. Seller covenants that it will not create, incur or permit to exist any lien, encumbrance or security interest in or on any of the Purchased Eligible Assets without the prior express written consent of Buyer. e. Seller shall notify Buyer no later than one (1) Business Day after obtaining actual knowledge thereof, if any event has occurred that constitutes an Event of Default with respect to Seller or any event that with the giving of notice or lapse of time, or both, would become an Event of Default with respect to Seller. f. Seller covenants to provide Buyer with a copy of any material changes to Seller's underwriting guidelines prior to the effectiveness of any such change. g. Seller covenants, upon the reasonable request of Buyer after the occurrence of a Collateral Deficit, to enter into Hedges in order to protect adequately, in the reasonable judgment against interest rate risks. h. Seller covenants to provide Buyer on the 15th day of each month with respect to Purchased Eligible Assets, either by direct modem electronic transmission or via a computer diskette, the Computer Tape with respect to all Purchased Eligible Assets then subject to Transactions. i. Seller covenants to provide Buyer with the following financial and reporting information: upon request, within 30 days, copies of all proxy 19 statements, financial statements, and reports which Seller or Conseco sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements under the Securities Act of 1933, as amended, which it files with the Securities and Exchange Commission or any government authority which may be substituted therefor, or with any national securities exchange. j. Seller shall do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction and maintain all requisite authority to conduct its business in each jurisdiction in which Seller conducts business. k. So long as Buyer shall be committed to buy Eligible Assets hereunder, Conseco, on a consolidated basis with its subsidiaries, shall: i. at all times commencing March 31, 2002 maintain an Adjusted Tangible Net Worth of at least $1,500,000,000; ii. commencing March 31, 2002, for the twelve-month period ending on the last day of each fiscal quarter, maintain a Fixed Charge Coverage Ratio of not less than 1.0:1.0; iii. at all times commencing March 31, 2002 maintain a ratio of GAAP Net Worth to Total Managed Receivables of not less than 4:100; iv. for each fiscal quarter commencing with the fiscal quarter beginning January 1, 2002 maintain a ratio of Non-Warehouse Debt to GAAP Net Worth of not more than 1.0:2.0; v. for the twelve-month period ending on the last day of each fiscal quarter commencing March 31, 2002, maintain positive Operating Cash Flow; and vi. at all times commencing March 31, 2002 maintain Liquidity of at least (i) $50,000,000 until September 30, 2002, (ii) $75,000,000 from October 1, 2002 to June 30, 2003 and (iii) $100,000,000 from and after July 1, 2003. For purposes of this clause (k): "Adjusted Tangible Net Worth" means, at any date, the sum of (a) GAAP Net Worth plus (b) the amount of intercompany indebtedness converted to Preferred Stock (to the extent such Preferred Stock is not included in GAAP Net Worth), plus (c) writedowns of Conseco and its subsidiaries, of all IOs, capitalized servicing rights and other retained interests (i.e. "B-2s") from securitizations in an aggregate amount over all periods commencing on January 1, 2002 not to exceed $150,000,000, plus (d) realized losses from discontinued operations relating to floor plan financing, aircraft financing, vehicle leasing, manufactured housing communities and other operations relating to business units involved in the origination of the Esoteric Assets in an aggregate amount over all periods commencing on January 1, 2002 not to exceed $125,000,000 minus (e) any indebtedness owing to Conseco or any of its subsidiaries by Conseco, Inc., or any subsidiary thereof as of such date, minus (f) any amount that would be included on the consolidated balance sheet of Conseco as goodwill and deferred charges in accordance with GAAP. 20 "Cash Equivalents" means (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations) which, at the time of acquisition, are rated at least "A-1" by Standard & Poor's Rating Services ("S&P") or "P-1" by Moody's Investors Services, Inc. ("Moody's"), (c) commercial paper of an issuer rated at least "A-1" by S&P or "P-1" by Moody's, and (d) shares of any money market fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) through (c) above, (ii) has net assets of not less than $500,000,000 and (iii) is rated at least "A-1" by S&P or "P-1" by Moody's; provided, however, that the maturities of all obligations of the type specified in clauses (a) through (c) above shall not exceed 180 days. "Fixed Charge Coverage Ratio" means, for any period, the ratio of (a) Pre Tax Operating Income for such period to (b) Interest Expense for such period. "GAAP Net Worth" means, at any date, the stockholders' equity that would be reflected on a consolidated balance sheet of Conseco and its subsidiaries at such date prepared in accordance with GAAP, inclusive of Preferred Stock, to the extent such Preferred Stock is not included in stockholders' equity in accordance with GAAP. "Interest Expense" means, for any period, all interest paid or accrued during such period by Conseco and its subsidiaries on a consolidated basis, determined in accordance with GAAP. "IOs" means interest only securities. "Liquidity" means, on any date, the sum of Unrestricted Cash and Cash Equivalents plus the aggregate amount available to be drawn under all committed and uncommitted facilities to which Conseco, Green Tree Residual, Seller or any other Affiliate is a party. With respect to warehouse facilities, the aggregate amount available shall be calculated on the basis of eligible excess collateral pledged to the lender thereunder multiplied by the advance rate applied by such lender to such collateral). For purposes hereof, Liquidity shall be calculated as of any date by determining the average of Unrestricted Cash, Cash Equivalents and other such available amounts for the 30-day period ending on and including such date. "Net Income" means, for any period, with respect to Conseco and its subsidiaries on a consolidated basis (other than any subsidiary which is prohibited from declaring or paying dividends or otherwise advancing funds to its parent whether by contract or otherwise), cumulative net income earned during such period as determined in accordance with GAAP. "Non-Warehouse Debt" means, at any time, all indebtedness of Conseco for borrowed money (including without limitation all liabilities in respect of deposit products, notes payable, note payables to Conseco (net of receivables due from Conseco), bonds and other indebtedness) less the sum of Unrestricted Cash and Cash Equivalents at such time plus the book value of all finance receivables and plus 85% of servicing advance receivables. 21 "Operating Cash Flow" means, for any period, cash flow from the operations of Conseco for such period (as reported under "Cash Flow From Operations" in Conseco's statements of cash flow filed with the Securities and Exchange Commission) for such period. "Pre Tax Operating Income" means, for any period, Net Income for such period, plus (a) income and franchise taxes paid or accrued during such period, (b) Interest Expense, (c) losses derived from discontinued operations relating to floor plan financing, aircraft financing, vehicle leasing, manufactured housing communities and other operations relating to business units involved in the origination of the Esoteric Assets in an aggregate amount over all periods commencing on January 1, 2002 of Conseco and its subsidiaries during such period not to exceed $125,000,000 (d) losses of Conseco and its subsidiaries in an amount with respect to write-downs of IOs and capitalized servicing rights of Conseco and its subsidiaries not to exceed $450,000,000 for the quarter ended March 31, 2002, $450,000,000 for the quarter ended June 30, 2002, and $225,000,000 on a four quarter rolling basis thereafter, (e) losses of Conseco and its subsidiaries in an amount with respect to write-downs of other retained interests from securitizations (i.e., "B-2s") in the aggregate over all periods commencing on January 1, 2002 not to exceed $25,000,000 and (f) minus income derived from discontinued operations of Conseco and its subsidiaries during such period and minus extraordinary gains and non-recurring gains of Conseco and its subsidiaries. "Total Managed Receivables" means, for any period, the "averaged managed receivables", as such term is reported in the related filing with the Securities and Exchange Commission for such period. "Unrestricted Cash" means, at any date, all available cash on deposit in bank accounts of Conseco, provided the accounts into which such cash is deposited are not subject to any lien, security interest or control agreement or otherwise encumbered (excluding customary rights of set-off) or restricted in any way. No new borrowings after September 22, 2000 from Conseco, Inc. or its subsidiaries shall constitute Unrestricted Cash other than the amounts not to exceed $200,000,000 in the aggregate received pursuant to subsections (a)(i)(x) and (a)(ii) of Section 4.09 of the Five-Year Credit Agreement as in effect on September 22, 2000. Prior to March 31, 2002, the financial covenants in effect immediately prior to the Effective Date shall continue in effect. 13. EVENTS OF DEFAULT a. If any of the following events (each an "Event of Default") occur, Buyer shall have the rights set forth in Section 14, as applicable: i. Seller fails to satisfy or perform any material obligation or covenant under this Agreement; ii. An Act of Insolvency occurs with respect to Seller or Conseco; iii. Any representation made by Seller shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated; 22 iv. Seller shall admit its inability to, or its intention not to, perform any of its obligations hereunder; v. Any governmental, regulatory, or self-regulatory authority takes any action to remove, limit, restrict, suspend or terminate the rights, privileges, or operations of Seller or Conseco, including suspension as an issuer, lender or seller/servicer of mortgage loans or loans arising under consumer finance contracts, which suspension has a material adverse effect on the ordinary business operations of Seller or Conseco, and which continues for more than 24 hours; vi. Seller dissolves, merges or consolidates with another entity (unless (A) it is the surviving party or (B) the entity into which it merges has equity and a market value of at least that of Seller immediately prior to such merger and such entity expressly assumes the obligations of Seller at the time of such merger), or sells, transfers, or otherwise disposes of a material portion of its business or assets; vii. Buyer, in its good faith judgment, believes that there has been a Material Adverse Change with respect to Seller or Conseco or that Seller will not meet any of its obligations under any Transaction pursuant to this Agreement, or any other agreement between the parties; viii. Seller or Conseco is in default under any other agreement to which it is a party, provided, however, such a default shall not constitute an Event of Default if the exercise of such remedies as are available to Seller's or Conseco's counterparty with respect to such default would not result in a Material Adverse Change with respect to Seller or Conseco, as applicable; ix. A final judgment by any competent court in the United States of America for the payment of money in an amount of at least $1,000,000 is rendered against Seller, and the same remains undischarged or unpaid for a period of sixty (60) days during which execution of such judgment is not effectively stayed; x. This Agreement shall for any reason cease to create a valid, first priority security interest in any of the Purchased Eligible Assets purported to be covered hereby; xi. A Collateral Deficit occurs with respect to Seller, and is not eliminated within the time period specified in Section 4(b); xii. An "event of default" has occurred pursuant to the New Bank Facility Documents (as defined in the Umbrella Agreement) or a Hedge or the Residual Facility Documents (as defined in the Umbrella Agreement) or any party to the Umbrella Agreement (Other than Lehman Brothers Holdings Inc.) shall fail to comply with any terms, covenants or agreements contained in the Umbrella Agreement on its part to be performed or observed, or any representation or warranty made under or in connection with the Umbrella Agreement shall be incorrect in any material respect when made; xiii. (A) the Guaranty, dated as of September 22, 2000, made by CIHC, Incorporated for the benefit of Buyer shall cease to be valid, 23 binding and enforceable or CIHC, Incorporated or Conseco, Inc. or any subsidiary thereof shall so state in writing or (B) any "Subordinated Obligations" under and as defined in such guaranty shall cease, for any reason, to be validly subordinated to the obligations of CIHC under such guaranty as provided in the relevant provisions thereof of CIHC, Incorporated or Conseco, Inc. or any subsidiary thereof shall so state in writing; or xiv. Conseco, Inc. or Conseco shall enter into any agreement that prohibits, restricts or imposes additional conditions to, or otherwise modifies in any manner adverse to Lehman Brothers Holdings Inc. or any of its direct or indirect subsidiaries, the terms as in effect as of September 22, 2000 permitting Conseco, Inc. or any of its subsidiaries to made any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase of any capital stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or any other investment in, Conseco or any of its subsidiaries. b. In making a determination as to whether an Event of Default has occurred, Buyer shall be entitled to rely on reports published or broadcast by media sources believed by such party to be generally reliable and on information provided to it by any other sources believed by it to be generally reliable, provided that such party reasonably and in good faith believes such information to be accurate and has taken such steps as may be reasonable in the circumstances to attempt to verify such information. 14. REMEDIES a. If an Event of Default occurs with respect to Seller, the following rights and remedies are available to Buyer: i. At the option of Buyer, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed immediately to occur. ii. If Buyer exercises or is deemed to have exercised the option referred to in subsection (a)(i) of this Section, (A) Seller's obligations hereunder to repurchase all Purchased Eligible Assets in such Transactions shall thereupon become immediately due and payable, (B) to the extent permitted by applicable law, the Repurchase Price with respect to each such Transaction shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the date of the exercise or deemed exercise of such option to but excluding the date of payment of the Repurchase Price as so increased, (x) the greater of the Prime Rate or the Pricing Rate for each such Transaction to (y) the Repurchase Price for such Transaction as of the 24 Repurchase Date as determined pursuant to subsection (a)(i) of this Section (decreased as of any day by (I) any amounts actually in the possession of Buyer pursuant to clause (C) of this subsection, (II) any proceeds from the sale of Purchased Eligible Assets applied to the Repurchase Price pursuant to subsection (a)(xii) of this Section, and (III) any amounts applied to the Repurchase Price pursuant to subsection (a)(iii) of this Section), and (C) all Income actually received by Buyer or its designee (including the Custodian) pursuant to Section 5 shall be applied to the aggregate unpaid Repurchase Price owed by Seller. iii. After one Business Day's notice to Seller (which notice need not be given if an Act of Insolvency shall have occurred, and which may be the notice given under subsection (a)(i) of this Section), Buyer may (A) immediately sell, without notice or demand of any kind, at a public or private sale and at such price or prices Buyer may reasonably deem satisfactory any or all Purchased Eligible Assets subject to a Transaction hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Eligible Assets, to give Seller credit for such Purchased Eligible Assets in an amount equal to the Market Value of the Purchased Eligible Assets, and apply such amount, first, against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder and, second, against the other outstanding Indebtedness in such order as Buyer may elect. The proceeds of any disposition of Purchased Eligible Assets shall be applied first to the costs and expenses incurred by Buyer in connection with Seller's default; second to consequential damages, including but not limited to costs of cover and/or related hedging transactions; third to the aggregate unpaid Repurchase Price for all Transactions hereunder; and fourth to the payment of the other outstanding Indebtedness in such order as Buyer may elect. iv. The parties recognize that it may not be possible to purchase or sell all of the Purchased Eligible Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Eligible Assets may not be liquid. In view of the nature of the Purchased Eligible Assets, the parties agree that liquidation of a Transaction or the underlying Purchased Eligible Assets does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Eligible Asset and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Eligible Asset on the occurrence of an Event of Default or to liquidate all Purchased Eligible Assets in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer. However, in recognition of the parties' agreement that the Transactions hereunder have been entered into in consideration of and in reliance upon the fact that all Transactions hereunder constitute a single business and contractual relationship and that each Transaction has been entered into in consideration of the other Transactions, the parties further agree that Buyer shall use its best efforts to liquidate all Transactions hereunder upon the occurrence of an Event of Default as quickly as is prudently possible in the reasonable judgment of Buyer. v. Buyer shall, without regard to the adequacy of the security for Seller's obligations under this Agreement, be entitled to the 25 appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Purchased Eligible Assets or any portion thereof, and collect the payments due with respect to the Purchased Eligible Assets or any portion thereof. Seller shall pay all costs and expenses incurred by Buyer in connection with the appointment and activities of such receiver. vi. Seller agrees that Buyer may obtain an injunction or an order of specific performance to compel Seller to fulfill its obligations as set forth in Section 25, if Seller fails or refuses to perform its obligations as set forth therein. vii. Seller shall be liable to Buyer for the amount of all expenses, reasonably incurred by Buyer in connection with or as a consequence of an Event of Default, including, without limitation, reasonable legal fees and expenses and reasonable costs incurred in connection with hedging or covering transactions. viii. Buyer shall have all the rights and remedies provided herein, provided by applicable federal, state, foreign, and local laws (including, without limitation, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), in equity, and under any other agreement between Buyer and Seller. ix. Buyer may exercise one or more of the remedies available to Buyer immediately upon the occurrence of an Event of Default and, except to the extent provided in subsections (a)(i) and (iii) of this Section, at any time thereafter without notice to Seller. All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Buyer may have. x. In addition to its rights hereunder, Buyer shall have the right to proceed against any assets of Seller which may be in the possession of Buyer or its designee (including the Custodian) including the right to liquidate such assets and to set off the proceeds against monies owed by Seller to Buyer pursuant to this Agreement. Buyer may set off cash, the proceeds of the liquidation of the Purchased Eligible Assets, and all other sums or obligations owed by Seller to Buyer against all of Seller's obligations to Buyer, whether under this Agreement, under a Transaction, or under any other agreement between the parties, or otherwise, whether or not such obligations are then due, without prejudice to Buyer's right to recover any deficiency. Any cash, proceeds, or property in excess of any amounts due, or which Buyer reasonably believes may become due, to it from Seller shall be returned to Seller after satisfaction of all obligations of Seller to Buyer. xi. Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Purchased Eligible 26 Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm's length. xii. Buyer and Seller hereby agree that sales of the Purchased Eligible Assets shall be deemed to include and permit the sales of Purchased Eligible Assets pursuant to a securities offering. xiii. Notwithstanding the foregoing remedies, if the Event of Default (other than an Event of Default under Section 13(a)(xi)) arises from a breach of any representation or warranty set forth in Sections 10(b)(iii), (v) or (ix) or in Exhibit IV, V, VI, VII, VIII or IX attached hereto with respect to a Purchased Eligible Asset, then Seller may elect, subject to Buyer's written consent (which consent shall not be unreasonably withheld or delayed), to cure such default by repurchasing such Eligible Asset or substituting for such Eligible Asset within two (2) Business Days of such Event of Default, provided, however, that Seller shall not have the right to make the foregoing election if such breach causes a default with respect to Eligible Assets that in the aggregate represent ten percent (10%) or more of the aggregate Purchase Price of all Purchased Eligible Assets subject to then outstanding Transactions. The repurchase price for any such repurchase shall be the outstanding Repurchase Price of such Eligible Asset. Any such substitution shall be performed in accordance with Section 9 of this Agreement. xiv. At the option of Buyer, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency with respect to Seller or Conseco) declare that all or a portion of the commitments hereunder be terminated, whereupon the obligation of Buyer to purchase Eligible Assets shall immediately terminate in whole or in part, as the case may be. 15. ADDITIONAL CONDITION Seller shall, on the date of the initial Transaction hereunder and, upon the request of Buyer (but no more than once in any calendar year), on the date of any subsequent Transaction, cause to be delivered to Buyer, with reliance thereon permitted as to any Person that purchases the Purchased Eligible Assets from Buyer in a repurchase transaction, a favorable opinion or opinions of counsel with respect to the matters set forth in Exhibit III attached hereto. Additionally, prior to entering into the initial Transaction under this Agreement, Seller shall cause Conseco to have executed and delivered the Limited Guaranty. 16. SINGLE AGREEMENT Buyer and Seller acknowledge that, and have entered hereunto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and that each has been entered into in consideration of the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a 27 default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries, and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries, and other transfers may be applied against each other and netted; provided, however, that the parties hereto acknowledge and agree that each Purchased Eligible Asset is identified and unique and nothing in this Agreement should limit or reduce Buyer's obligation to deliver the Purchased Eligible Assets to Seller as and when provided herein. 17. NOTICES AND OTHER COMMUNICATIONS Unless another address is specified in writing by the respective party to whom any written notice or other communication is to be given hereunder, all such notices or communications shall be in writing or confirmed in writing and delivered at the respective addresses set forth in the Confirmation. 18. ENTIRE AGREEMENT; SEVERABILITY This Agreement together with the applicable Confirmation constitutes the entire understanding between Buyer and Seller with respect to the subject matter it covers and shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions involving Purchased Eligible Assets. By acceptance of this Agreement, Buyer and Seller acknowledge that they have not made, and are not relying upon, any statements, representations, promises or undertakings not contained in this Agreement. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 19. NON-ASSIGNABILITY The rights and obligations of the parties under this Agreement and under any Transaction may be assigned by Lehman Commercial Paper Inc. but shall not be assigned by Green Tree Finance Corp. - Five without the prior written consent of Lehman Commercial Paper Inc. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. Nothing in this Agreement express or implied, shall give to any person, other than the parties to this Agreement and their successors hereunder, any benefit or any legal or equitable right, power, remedy or claim under this Agreement. 20. TERMINABILITY This Agreement shall terminate in 180 days unless Buyer and Seller agree to extend this Agreement for a period of 180 days therefrom. Notwithstanding any such termination or the occurrence of an Event of Default, all of the representations and warranties hereunder (including those made in Exhibits IV, V, VI, VII, VIII or IX hereof) shall continue and survive. 28 21. GOVERNING LAW THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 22. CONSENT TO JURISDICTION AND ARBITRATION The parties irrevocably agree to submit to the personal jurisdiction of the United States District Court for the Southern District of New York, the parties irrevocably waiving any objection thereto. If, for any reason, federal jurisdiction is not available, and only if federal jurisdiction is not available, the parties irrevocably agree to submit to the personal jurisdiction of the Supreme Court of the State of New York, the parties irrevocably waiving any objection thereto. Notwithstanding the foregoing two sentences, at either party's sole option exercisable at any time not later than thirty (30) days after an action or proceeding has been commenced, the parties agree that the matter may be submitted to binding arbitration in accordance with the commercial rules of the American Arbitration Association then in effect in the State of New York and judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction thereof within the City, County and State of New York; provided, however, that the arbitrator shall not amend, supplement, or reform in any regard this Agreement or the terms of any Confirmation, the rights or obligations of any party hereunder or thereunder, or the enforceability of any of the terms hereof or thereof. Any arbitration shall be conducted before a single arbitrator who shall be reasonably familiar with repurchase transactions and the secondary mortgage market in the City, County, and State of New York. 23. NO WAIVERS, ETC. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Any such waiver or modification shall be effective only in the specific instance and for the specific purpose for which it was given. 24. INTENT The parties understand and intend that this Agreement and each Transaction hereunder constitute a "repurchase agreement" and a "securities contract" as those terms are defined under the relevant provisions of Title 11 of the United States Code, as amended. 25. SERVICING a. Notwithstanding the purchase and sale of the Purchased Eligible Assets hereby, Seller shall cause Conseco to service the Purchased Eligible Assets for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or hypothecate the Purchased Eligible Asset prior to the related Repurchase Date pursuant to Section 8, Buyer's assigns; provided, however, that the obligations of Seller to service the Purchased Eligible Assets shall cease upon the payment by Seller to Buyer of the Repurchase Price therefor. Seller 29 shall cause Conseco to service the Purchased Eligible Assets in accordance with the servicing standards maintained by other prudent mortgage, consumer finance and commercial lenders with respect to loans and leases similar to the Purchased Eligible Assets. b. Seller agrees that Buyer is the owner of all servicing records owned by Seller, including but not limited to any and all servicing agreements, files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Purchased Eligible Assets (the "Servicing Records"). Seller grants Buyer a security interest in all servicing fees and rights relating to the Eligible Assets and all Servicing Records to secure the obligation of Seller or its designee to service in conformity with this Section and any other obligation of Seller to Buyer. Seller covenants to safeguard such Servicing Records and to deliver them promptly to Buyer or its designee (including the Custodian) at Buyer's request. c. Upon the occurrence and continuance of an Event of Default, Buyer may, in its sole discretion, (i) sell its right to the Purchased Eligible Assets on a servicing released basis or (ii) terminate Seller or its nominee as servicer of the Purchased Eligible Assets with or without cause, in each case without payment of any termination fee. d. Seller shall not employ sub-servicers to service the Purchased Eligible Assets without the prior approval of Buyer. e. Seller shall cause any sub-servicer hereunder to execute a letter agreement with Buyer acknowledging Buyer's security interest and agreeing that, upon notice from Buyer (or the Custodian on its behalf) that an Event of Default has occurred and is continuing hereunder, it shall deposit all Income with respect to the Purchased Eligible Assets in the account specified in the third sentence of Section 5(a). 26. INDEMNIFICATION Seller hereby agrees to indemnify Buyer, Buyer's designees and each of its officers, directors, employees and agents ("Indemnified Parties") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (other than income taxes of Buyer), fees, costs, expenses (including reasonable attorneys fees and disbursements) or disbursements (all of the foregoing, collectively "Indemnified Amounts") which may at any time (including, without limitation, such time as this Agreement shall no longer be in effect) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement, the Custodial Agreement or any other related document or any Transactions thereunder or any action taken or omitted to be taken by Seller or any of its Affiliates under or in connection with any of the foregoing; provided, that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party. 27. MISCELLANEOUS a. Time is of the essence under this Agreement and all Transactions and all references to a time shall mean New York time in effect on the date of the action unless otherwise expressly stated in this Agreement. 30 b. Buyer shall be authorized to accept orders and take any other action affecting any accounts of Seller in response to instructions given in writing or orally by telephone or otherwise by any person with apparent authority to act on behalf of Seller, and Seller shall indemnify Buyer, defend, and hold Buyer harmless from and against any and all liabilities, losses, damages, costs, and expenses of any nature arising out of or in connection with any action taken by Buyer in response to such instructions received or reasonably believed to have been received from Seller. c. If there is any conflict between the terms of this Agreement or any Transaction entered into hereunder and the Custodial Agreement, this Agreement shall prevail. d. If there is any conflict between the terms of a Confirmation or a corrected Confirmation issued by Buyer and this Agreement, the Confirmation shall prevail. e. This Agreement may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. f. Seller agrees to reimburse Buyer for all reasonable costs and expenses of Buyer in connection with this Agreement including, without limitation, (i) the fees, expenses and disbursement of counsel to Buyer, (ii) due diligence expenses and (iii) on-going auditing fees. g. The headings in this Agreement are for convenience of reference only and shall not affect the interpretation or construction of this Agreement. [Signature page follows.] 31 IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date set forth above. LEHMAN COMMERCIAL PAPER INC., Buyer By: /s/ Vincent Primiano ------------------------------- Title: Senior Vice President ------------------------------- Date: 1/30/02 ------------------------------- GREEN TREE FINANCE CORP. - FIVE, Seller By: /s/ Charles H. Cremens ------------------------------- Title: President ------------------------------- Date: 1/30/02 ------------------------------- 32 EXHIBITS EXHIBIT I Confirmation EXHIBIT II Form of Power of Attorney EXHIBIT III Opinion of Counsel to Seller EXHIBIT IV Representations and Warranties Regarding Home Improvement Loans EXHIBIT V Representations and Warranties Regarding High LTV Home Equity Loans and Home Equity Loans EXHIBIT VI Representations and Warranties Regarding Retail Installment Contracts EXHIBIT VII Representations and Warranties Regarding Vehicle Leases EXHIBIT VIII Representations and Warranties Regarding Manufactured Housing Contracts EXHIBIT IX Representations and Warranties Regarding Floor Plan Assets EXHIBIT X Form of Limited Guaranty SCHEDULE A List of Esoteric Assets EXHIBIT I Form of Confirmation Letter (date) [Green Tree Finance Corp. - Five] Attention: Confirmation No. ------------------- Ladies/Gentlemen: This letter confirms our oral agreement to purchase from you the Eligible Assets listed in Appendix I hereto, pursuant to the Second Amended and Restated Master Repurchase Agreement between us, dated January 30, 2002 (the "Agreement"), as follows: Purchase Date: Eligible Assets to be Purchased: See Appendix I hereto. [Appendix I to Confirmation Letter will list Eligible Assets] Aggregate Principal Amount of Purchased Eligible Assets: Purchase Price: Pricing Rate: Repurchase Date: Repurchase Price: Collateral Amount Percentage with respect to Market Value for Home Equity: Collateral Amount Percentage with respect to Market Value for Insured Home Improvement Loans: Collateral Amount Percentage with respect to Market Value for Uninsured Home Improvement Loans: Collateral Amount Percentage with respect to Market Value for Loans arising under Retail Installment Contracts: Collateral Amount Percentage with respect to Market Value for Manufactured Housing Contracts: Collateral Amount Percentage with respect to Market Value for Vehicle Leases: I-1 Names and addresses for communications: Buyer: Lehman Commercial Paper Inc. 101 Hudson Street Jersey City, NJ Attention: Richard DePaulis or Chris Czako with a copy to: Lehman Commercial Paper Inc. 200 Vesey Street 12th Floor New York, New York 10285-0900 Attention: Fred Madonna Seller: [Green Tree Finance Corp. - Five] Attention: LEHMAN COMMERCIAL PAPER INC., Buyer By: --------------------------- Title: --------------------------- Date: --------------------------- Seller hereby confirms that all of the representations and warranties contained in the Agreement (including [Exhibit IV, Exhibit V, Exhibit VI, Exhibit VII, Exhibit VIII and Exhibit IX]) are true and correct as if made as of the date hereof, Seller is not in breach of any covenant contained therein and there exists no Event of Default thereunder. Agreed and Acknowledged: Green Tree Finance Corp. - Five Seller By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- I-2 EXHIBIT II Form of Power of Attorney "Know All Men by These Presents, that Green Tree Finance Corp. - Five ("Seller"), does hereby appoint Lehman Commercial Paper Inc. ("Buyer"), its attorney-in-fact to act in Seller's name, place and stead in any way which Seller could do with respect to (i) the completion of the endorsements of the Mortgage Notes and the assignments of Mortgages, (ii) the recordation of the assignments of Mortgages, (iii) the filing, amendment or assignment of UCC financing statements or certificates of title and (iv) the enforcement of Seller's rights under the Purchased Eligible Assets purchased by Buyer pursuant to the Second Amended and Restated Master Repurchase Agreement dated January 30, 2002 between Seller and Buyer and to take such other steps as may be necessary or desirable to enforce Buyer's rights against such Purchased Eligible Assets, the related Loan Files and the Servicing Records to the extent that Seller is permitted by law to act through an agent. TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT. II-1 IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and Seller's seal to be affixed this day of, , 200 . --- ---------- --- Green Tree Finance Corp. - Five By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- [NOTARIZE] II-2 EXHIBIT III OPINION OF SELLER'S COUNSEL 1. CORPORATE EXISTENCE 2. AUTHORIZATION, EXECUTION AND DELIVERY 3. ENFORCEABILITY 4. NO DEFAULTS 5. NO LITIGATION 6. COMPLIANCE WITH LAWS 7. NO CONSENTS/APPROVALS NEEDED 8. VALIDLY CREATED FIRST PRIORITY PERFECTED SECURITY INTEREST IN COLLATERAL III-1 EXHIBIT IV Representations with respect to Home Improvement Loans A. Payments. The scheduled payment of principal and interest due under the Home Improvement Loan was made on or before the Purchase Date by or on behalf of the obligor (without any advance from Seller or any Person acting at the request of Seller) or was not delinquent for more than 30 days after the Purchase Date. B. No Waivers. The terms of the Home Improvement Loan have not been waived, altered or modified in any respect, except by instruments or documents identified in the Home Improvement Loan File (as defined in the Custodial Agreement). All costs, fees and expenses incurred in making, closing and perfecting the lien and/or security interest, as applicable, of the Home Improvement Loan have been paid. C. Binding Obligation. The Home Improvement Loan is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights generally. In the case of Home Improvement Loans other than Unsecured Home Improvement Loans, Seller has delivered, or caused to be delivered, to the Custodian the original Mortgage, with evidence of recording thereon, or if the original Mortgage has not yet been returned from the recording office, a true copy of the Mortgage which has been delivered for recording in the appropriate recording office of the jurisdiction in which the Real Property is located. D. No Defenses. The Home Improvement Loan is not subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the Home Improvement Loan or the exercise of any right thereunder will not render the Home Improvement Loan unenforceable in whole or in part or subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and no such right of rescission, set off, counterclaim or defense has been asserted with respect thereto. E. Insurance. In the case of Home Improvement Loans other than Unsecured Home Improvement Loans, all improvements on the related real property are covered by a hazard insurance policy. All premiums due on such insurance have been paid in full. Each Insured Home Improvement Loan was originated in compliance with FHA regulations and is insured, without set-off, surcharge or defense, by FHA insurance. Seller has, in conformity with FHA regulations, filed all reports necessary for the Insured Home Improvement Loan to be registered for FHA insurance. Following assignment of the Insured Home Improvement Loan to Custodian, on behalf of the Owners, Custodian will be entitled to the full benefits of the FHA insurance. IV-1 F. Origination. The Home Improvement Loan was originated by a home improvement contractor or Seller in the regular course of its business and, if originated by a home improvement contractor, was purchased by Seller in the regular course of its business. G. Lawful Assignment. The Home Improvement Loan was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the Home Improvement Loan to Custodian or the ownership of the Home Improvement Loans by the Owner thereof unlawful or make the Home Improvement Loan unenforceable. H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws and FHA regulations, applicable to the Home Improvement Loan have been complied with and such compliance is not affected by the holding of the Home Improvement Loans by Custodian or the Owner's ownership of the Home Improvement Loans, and Seller shall for at least the period of this Agreement, maintain in its possession, available for Custodian's inspection, and shall deliver to Custodian upon demand, evidence of compliance with all such requirements. I. Home Improvement Loan in Force. The Home Improvement Loan has not been satisfied or subordinated (except for such subordination as may be allowed under FHA regulations) in whole or in part or rescinded, and, in the case of Home Improvement Loans other than Unsecured Home Improvement Loans, the real property securing the Home Improvement Loan, as applicable, has not been released from the lien of the Home Improvement Loan in whole or in part. J. Valid Lien. The Home Improvement Loan has been duly executed and delivered by the obligor and either the related Mortgage is a valid and subsisting first, second or third lien on the property therein described or the Home Improvement Loan is an unsecured borrowing of the obligor; any related Mortgage has been assigned by Seller to Custodian, and Custodian has and will have, on behalf of the Owners of the Home Improvement Loans, a valid and subsisting lien on the property therein described. Seller has full right to sell and assign the Home Improvement Loans to Custodian. K. Capacity of Parties. All parties to the Home Improvement Loan had capacity to execute the Home Improvement Loan. L. Good Title. Prior to transfer to Custodian, Seller is the sole owner of the Home Improvement Loan and has the authority to sell, transfer and assign the Home Improvement Loan. Seller has not sold, assigned or pledged the Home Improvement Loan to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Home Improvement Loan and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Home Improvement Loan. Seller has not waived any such default, breach, violation or event permitting acceleration. IV-2 N. No Liens. In the case of Home Improvement Loans other than Unsecured Home Improvement Loans, there are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the real property securing the Home Improvement Loan which are or may be liens prior to, or equal or coordinate with, the lien of the Home Improvement Loan. O. Equal Installments. The Home Improvement Loan has a fixed rate and provides for level monthly payments which fully amortize the loan over its term. P. Enforceability. The Home Improvement Loan contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security provided thereby. Q. One Original. There is only one original executed Home Improvement Loan contract and note, each of which has been delivered to the Custodian. R. Primary Resident. At the time of origination of the Home Improvement Loan, the obligor was the primary resident of the related real property. S. Qualified Mortgage for REMIC. Each Home Improvement Loan that is secured by a Mortgage on the property described therein is a "qualified mortgage" under Section 860G(a)(3) of the Code. T. Proceedings. There is no proceeding pending or, to Seller's knowledge, threatened for the total or partial condemnation of collateral securing a Home Improvement Loan. U. Marking Records. Seller has caused the portions of the Electronic Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to indicate that such Home Improvement Loans are owned by Custodian in accordance with the terms of the related Custodial Agreement. V. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Home Improvement Loans. IV-3 EXHIBIT V Representations with respect to High LTV Home Equity Loans and Home Equity Loans A. Payments. The scheduled payment of principal and interest due under the High LTV Home Equity Loan or Home Equity Loan was made on or before the Purchase Date by or on behalf of the obligor (without any advance from Seller or any Person acting at the request of Seller) or was not delinquent for more than 30 days after such Purchase Date. B. No Waivers. The terms of the High LTV Home Equity Loan or Home Equity Loan have not been waived, altered or modified in any respect, except by instruments or documents identified in the High LTV Home Equity Loan File or Home Equity Loan File, as applicable. All costs, fees and expenses incurred in making, closing and perfecting the lien and/or security interest, as applicable, of the High LTV Home Equity Loan or Home Equity Loan have been paid. C. Binding Obligation. The High LTV Home Equity Loan or Home Equity Loan is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights generally. Seller has delivered, or caused to be delivered, to the Custodian the original Mortgage, with evidence of recording thereon, or if the original Mortgage has not yet been returned from the recording office, a true copy of the Mortgage which has been delivered for recording in the appropriate recording office of the jurisdiction in which the Real Property is located. D. No Defenses. The High LTV Home Equity Loan or Home Equity Loan is not subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the High LTV Home Equity Loan or Home Equity Loan or the exercise of any right thereunder will not render the High LTV Home Equity Loan or Home Equity Loan unenforceable in whole or in part or subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and no such right of rescission, set off, counterclaim or defense has been asserted with respect thereto. E. Insurance. All improvements on the related real property are covered by a hazard insurance policy. All premiums due on such insurance have been paid in full. F. Origination. The High LTV Home Equity Loan or Home Equity Loan was originated by a home equity lender or Seller in the regular course of its business and, if originated by a home equity lender, was purchased by Seller in the regular course of its business. G. Lawful Assignment. The High LTV Home Equity Loan or Home Equity Loan was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the High LTV Home Equity Loan or Home Equity Loan to Custodian or the ownership of the High LTV Home Equity Loan or Home V-1 Equity Loans by the Owner thereof unlawful or make the High LTV Home Equity Loan or Home Equity Loan unenforceable. H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws, applicable to the High LTV Home Equity Loan or Home Equity Loan have been complied with and such compliance is not affected by the holding of the High LTV Home Equity Loans or Home Equity Loans by Custodian or the Owners' ownership of the High LTV Home Equity Loans or Home Equity Loans, and Seller shall for at least the period of this Agreement, maintain in its possession, available for Custodian's inspection, and shall deliver to Custodian upon demand, evidence of compliance with all such requirements. I. High LTV Home Equity Loan or Home Equity Loan in Force. The High LTV Home Equity Loan or Home Equity Loan has not been satisfied or subordinated in whole or in part or rescinded, and the real property securing the High LTV Home Equity Loan or Home Equity Loan has not been released from the lien of the High LTV Home Equity Loan or Home Equity Loan in whole or in part. J. Valid Lien. The High LTV Home Equity Loan or Home Equity Loan has been duly executed and delivered by the obligor and the related Mortgage is a valid and subsisting first, second or third lien on the property therein described; any related Mortgage has been assigned by Seller to Custodian, and Custodian has and will have, on behalf of the Owners of the High LTV Home Equity Loans and Home Equity Loans, a valid and subsisting lien on the property therein described. Seller has full right to sell and assign the High LTV Home Equity Loans and Home Equity Loans to Custodian. K. Capacity of Parties. All parties to the High LTV Home Equity Loan and Home Equity Loan had capacity to execute the High LTV Home Equity Loan and Home Equity Loan. L. Good Title. Prior to transfer to Custodian, Seller is the sole owner of the High LTV Home Equity Loan or Home Equity Loan and has the authority to sell, transfer and assign the High LTV Home Equity Loan or Home Equity Loan. Seller has not sold, assigned or pledged the High LTV Home Equity Loan or Home Equity Loan to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the High LTV Home Equity Loan or Home Equity Loan and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such High LTV Home Equity Loan or Home Equity Loan. Seller has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the real V-2 property securing the High LTV Home Equity Loan or Home Equity Loan which are or may be liens prior to, or equal or coordinate with, the lien of the High LTV Home Equity Loan or Home Equity Loan. O. Equal Installments. The High LTV Home Equity Loan or Home Equity Loan has a fixed rate and provides for level monthly payments which fully amortize the loan over its term. P. Enforceability. The High LTV Home Equity Loan or Home Equity Loan contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security provided thereby. Q. One Original. There is only one original executed High LTV Home Equity Loan note or Home Equity Loan note, and it has been delivered to the Custodian. R. Primary Resident. At the time of origination of the High LTV Home Equity Loan or Home Equity Loan, the obligor was the primary resident of the related real property. S. Qualified Mortgage for REMIC. Each High LTV Home Equity Loan or Home Equity Loan that is secured by a Mortgage on the property described therein is a "qualified mortgage" under Section 860G(a)(3) of the Code. T. Proceedings. There is no proceeding pending or, to Seller's knowledge, threatened for the total or partial condemnation of collateral securing a High LTV Home Equity Loan or Home Equity Loan. U. Marking Records. Seller has caused the portions of the Electronic Ledger relating to the Mortgage Loans to be clearly and unambiguously marked to indicate that such High LTV Home Equity Loans and Home Equity Loans are owned by Custodian in accordance with the terms of the related Custodial Agreement. V. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the High LTV Home Equity Loans or Home Equity Loans. W. Real Property. Each mortgaged property is improved by a single family dwelling which constitutes real property under state law and is the principal residence of the obligor. X. Wet Home Equity Loans. Each Wet Home Equity Loan, together with other Wet Home Equity Loans subject to Transactions hereunder, does not exceed the lesser of (x) 150,000,000 and (y) 30% of the aggregate outstanding Repurchase Price for all Transactions hereunder. V-3 EXHIBIT VI Representations with respect to Retail Installment Contracts A. Payments. The scheduled payment of principal and interest was made on or before the Purchase Date by or on behalf of the obligor (without any advance from Seller or any Person acting at the request of Seller) or was not delinquent for more than 30 days after such Purchase Date. B. No Waivers. The terms of the Retail Installment Contract have not been waived, altered or modified in any respect, except by instruments or documents identified in the Retail Installment File. C. Binding Obligation. The Retail Installment Contract is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights general. D. No Defenses. The Retail Installment Contract is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the Retail Installment Contract or the exercise of any right thereunder will not render the Retail Installment Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. E. Origination. The Retail Installment Contract was originated by a dealer or Seller in the regular course of its business and, if originated by a dealer, was purchased by Seller in the regular course of its business. F. Lawful Assignment. The Retail Installment Contract was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the Retail Installment Contract to the Custodian or the ownership of the Retail Installment Contracts by the Owner unlawful. G. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit opportunity laws, applicable to the Retail Installment Contract have been complied with and such compliance is not affected by the holding of the Retail Installment Contracts by the Custodian or the Owner's ownership of the Retail Installment Contracts, and Seller shall maintain in its possession, available for Buyer's inspection, and shall deliver to Buyer upon demand, evidence of compliance with all such requirements. VI-1 H. Contract in Force. The Retail Installment Contract has not been satisfied or subordinated in whole or in part or rescinded, and Seller's lien on the related Consumer Product has not been released in whole or in part. I. Purchase Money Security Interest. The Retail Installment Contract creates a "purchase money security interest" (as defined in the Uniform Commercial Code) in favor of Seller in the Consumer Product covered thereby as security for payment of the outstanding principal balance of such Retail Installment Contract and all other obligations of the obligor under such Retail Installment Contract; such security interest has been assigned by Seller to the Custodian, and the Custodian has and will have a valid purchase money security interest in such Consumer Product. J. Capacity of Parties. All parties to the Retail Installment Contract had capacity to execute the Retail Installment Contract. K. Good Title. Prior to the transfer to the Custodian, Seller is the owner of the Retail Installment Contract and has the authority to sell, transfer and assign the Retail Installment. Seller has not sold, assigned or pledged the Retail Installment Contract to any Person other than the Custodian. L. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Retail Installment Contract and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Retail Installment Contract. Seller has not waived any such default, breach, violation or event permitting acceleration. M. No Liens. There are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the Consumer Product which are or may be liens prior to, or equal or coordinate with, the lien of the Retail Installment Contract. N. Equal Installments. The Retail Installment Contract has a fixed rate and provides for level monthly payments which fully amortize the loan over its term. O. Enforceability. The Retail Installment Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. P. One Original. There is only one original executed the Retail Installment Contract, which is held by Seller. Q. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Retail Installment Contracts. VI-2 R. Notation of Security Interest. With respect to each Retail Installment Contract, if the related Consumer Product is located in a state in which notation of a security interest on the title document is required or permitted to perfect such security interest, the title document shows, or if a new or replacement title document with respect to such Consumer Product is being applied for such title document will be issued within 180 days and will show, Seller as the holder of a first priority security interest in such Consumer Product; if the related Consumer Product is located in a state in which the filing of a financing statement under the UCC is required to perfect a security interest in goods of the type including the Consumer Product, such filings or recordings have been duly made and show Seller as secured party; and if the related Consumer Product is an aircraft subject to registration with the Federal Aviation Administration's Aircraft Registry, and the recordation of a mortgage, security agreement or similar conveyance with such registry is required to perfect the lien created thereby, such recordation has been duly made and shows Seller as secured party or mortgagee. In any case, Buyer has the same rights as the secured party of record would have (if such secured party were still the owner of the Contract) against all Persons (including Seller and any trustee in bankruptcy of Seller) claiming an interest in such Consumer Product. VI-3 EXHIBIT VII Representations with respect to Vehicle Leases A. Binding Obligation. Each Vehicle Lease (i) constitutes a valid, binding and enforceable payment obligation of the Obligor in accordance with its terms (except as may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforceability of creditors' rights generally and the availability of equitable remedies), (ii) has been duly and properly sold, assigned and conveyed by Seller, (iii) was originated by Seller or an Affiliate in the ordinary course of its business, or (in the case of any Vehicle Lease purchased by Seller) was acquired by Seller or an Affiliate for proper consideration and was validly assigned to Seller by the originator of such Vehicle Lease and (iv) contains customary and enforceable provisions adequate to enable realization against the Obligor and/or the related Vehicle; provided that, it is acknowledged and agreed by Buyer that the Vehicle Leases may be held in the form of beneficial interests in a titling trust, so long as each such beneficial interest (a) has been validly issued and is outstanding, representing the entire beneficial interest in the named Vehicle Leases and the related Vehicles free and clear of all liens and encumbrances and title to the related Vehicles has been registered in the name of the titling trust or in the name of the trustee for such trust (or all filings necessary for such registration have been made), (b) represents a separate series of the issuing titling trust, and the related Vehicles and Vehicle Leases are not subject to the debts, liabilities or obligations of the other beneficiaries of the titling trust or that are incurred or existing with respect to assets purported to be held within other series of the titling trust and (c) is held by Seller free and clear of all liens and encumbrances and Seller has good title thereto without the necessity of any filings or additional actions that have not been completed. B. No Adverse Selection. No selection procedures adverse to Buyer were utilized in selecting the Vehicle Leases from those leases owned by Seller. C. Compliance with Law. All requirements of applicable Federal, state and local laws, and regulations thereunder, in respect of all of the Vehicle Leases, have been complied with in all material respects. D. No Defaults. There is no known default, breach, violation or event permitting cancellation or termination of the Vehicle Lease by the lessor under the terms of any Vehicle Lease (other than scheduled payment delinquencies (in excess of 10% of the scheduled payment due) of not more than 59 days), and there has been no waiver of any of the foregoing; no related Vehicle had been repossessed. E. No Liens. Immediately prior to the sale, assignment and conveyance of each Vehicle Lease, or the beneficial interest therein, by Seller to Buyer, Seller had good title to such lease or interest, as the case may be, and Seller's interest in the related Vehicle (subject to the terms of such Vehicle Lease) and was the sole owner thereof, free of any lien. VII-1 F. No Participations. No person has a participation in or other right to receive scheduled payments under any Vehicle Lease, and neither Buyer nor Seller has taken any action to convey any right to any person that would result in such person having a right to scheduled payments received with respect to any Vehicle Lease. G. Origination. Each Vehicle Lease was originated by Seller or an Affiliate or acquired by Seller or an Affiliate and was sold and assigned by Seller to Buyer without any fraud or misrepresentation on the part of Seller. H. Obligors. Each Obligor (i) is located in the United States, and (ii) is not (a) the United States of America or any State or local government or any agency, department, subdivision or instrumentality thereof or (b) Seller or any Affiliate thereof. I. Lawful Assignment. The sale, transfer and assignment of such Vehicle Lease and Seller's interest in the related Vehicle, or if applicable, the beneficial interest therein, to Buyer, and the transfer and conveyance of such Vehicle Lease are not unlawful, void or voidable under the laws of the jurisdiction applicable to such Vehicle Lease. J. Filings. All filings and other actions required to be made, taken or performed by any person in any jurisdiction to give Buyer a first priority perfected lien or ownership interest in the Vehicle Leases (which where the Vehicle Leases are held in the form of beneficial interests in a titling trust will be a back-up security interest) have been made, taken or performed. K. Lease File. There exists a Lease File pertaining to each Vehicle Lease, and such Lease File contains the Vehicle Lease or a facsimile copy thereof. L. Original. There is only one original executed copy of each Vehicle Lease or, if there are multiple originals, all such originals are in the possession of Seller or the signed original in the possession of Seller is noted thereon as being the only copy that constitutes chattel paper. M. Chattel Paper. The Vehicle Leases constitute chattel paper within the meaning of the UCC as in effect in the States of Minnesota and Delaware. N. No Bankruptcy. Each Vehicle Lease was entered into by an Obligor who had not been identified on the records of Seller as being the subject of a current bankruptcy proceeding. O. Computer Tape. The computer tape containing information with respect to the Vehicle Leases that was made available by Seller to Buyer and was used to select the Vehicle Leases was complete and accurate in all material respects and includes a description of the same Vehicle Leases that are described in the Confirmation. P. No Delinquency. No Vehicle Lease has a scheduled payment delinquency (in excess of 10% of the scheduled payment due) of more than 59 days past due as of the date hereof. VII-2 Q. No Consent. Each Vehicle Lease may be sold, assigned and transferred without the consent of, or prior approval from, or any notification to, the applicable Obligor. R. No Assumption. Each Vehicle Lease prohibits the sale, assignment or transfer of the Obligor's interest therein, the assumption of the Vehicle Lease by another person in a manner that would release the Obligor thereof from the Obligor's obligation, or any sale, assignment or transfer of the related Vehicle, without the prior consent of the lessor, other than Vehicle Leases which may (i) permit assignment to a subsidiary, corporate parent or other affiliate, (ii) permit the assignment to a third party, provided the Obligor remains liable under the Vehicle Lease, or (iii) permit assignment to a third party with a credit standing (determined by Seller in accordance with its underwriting policy and practice at the time for an equivalent contract type, term and amount) equal to or better than the original Obligor. S. Payment Currency. The Obligor under each Vehicle Lease is required to make payments thereunder (i) in United States dollars, and (ii) in fixed amounts and on fixed and predetermined dates. T. Obligor Responsibility. Each Vehicle Lease requires the Obligor to assume responsibility for payment of all expenses in connection with the maintenance and repair of the related Vehicle, the payment of all premiums for insurance of such Vehicle and the payment of all taxes (including sales and property taxes) relating to such Vehicle. U. No Set-Off. Each Vehicle Lease requires the Obligor thereunder to make all scheduled payments thereon under all circumstances and regardless of the condition or suitability of the related Vehicle and notwithstanding any defense, set-off or counterclaim that the Obligor may have against the manufacturer, lessor or lender (as the case may be). V. Damaged Vehicle. Under each Vehicle Lease, if the Vehicle is damaged or destroyed, the Obligor is required either (i) to repair such Vehicle, (ii) to make a termination payment to the lessor, or (iii) in some cases, to replace such damaged or destroyed Vehicle with other Vehicle of comparable use and value. W. Accurate Information. The information with respect to the Vehicle Leases listed on the Confirmation is true, correct and complete in all material respects. X. No Waiver. No provisions of any Vehicle Lease have been waived, altered or modified in any material respect, except as indicated in the related Lease File. VII-3 EXHIBIT VIII-1 Representations with respect to Manufactured Housing Contracts (not relating to real property) A. Payments. The scheduled payment of principal and interest was made on or before the Purchase Date by or on behalf of the obligor (without any advance from Conseco or any Person acting at the request of Conseco) or was not delinquent for more than 30 days after such Purchase Date. B. No Waivers. The terms of the Manufactured Housing Contract have not been waived, altered or modified in any respect, except by instruments or documents identified in the Manufactured Housing Chattel Paper Contract File. C. Binding Obligation. The Manufactured Housing Contract is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights general. D. No Defenses. The Manufactured Housing Contract is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the Manufactured Housing Contract or the exercise of any right thereunder will not render the Manufactured Housing Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. E. Insurance. Conseco or its agent has monitored the existence of a hazard insurance policy with respect to the manufactured home securing a Manufactured Housing Contract and if the Conseco has determined that no such policy exists, Conseco has arranged for such insurance and has billed the related obligor through its loan account. F. Origination. The Manufactured Housing Contract was originated by a manufactured housing dealer or Conseco in the regular course of its business and, if originated by a manufactured housing dealer, was purchased by Conseco in the regular course of its business. G. Lawful Assignment. The Manufactured Housing Contract was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the Manufactured Housing Contract to the Custodian or the ownership of the Manufactured Housing Contracts by Seller unlawful. H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit VIII-1-1 opportunity laws, applicable to the Manufactured Housing Contract have been complied with and such compliance is not affected by the holding of the Manufactured Housing Contracts by the Custodian or Seller's ownership of the Manufactured Housing Contracts, and Seller shall maintain in its possession, available for Buyer's inspection, and shall deliver to Buyer upon demand, evidence of compliance with all such requirements. I. Manufactured Housing Contract in Force. The Manufactured Housing Contract has not been satisfied or subordinated in whole or in part or rescinded, and the manufactured home securing the Manufactured Housing Contract has not been released from the lien of the Manufactured Housing Contract in whole or in part. J. Valid Security Interest. The Manufactured Housing Contract creates a valid and enforceable perfected first priority security interest in favor of Conseco in the manufactured home covered thereby as security for payment of the outstanding principal balance of such Manufactured Housing Contract and all other obligations of the obligor under such Manufactured Housing Contract; such security interest has been assigned by Conseco to the Custodian, and the Custodian has and will, on behalf of Buyer have a valid and perfected and enforceable first priority security interest in such manufactured home. K. Capacity of Parties. All parties to the Manufactured Housing Contract had capacity to execute the Manufactured Housing Contract. L. Good Title. In the case of a Manufactured Housing Contract purchased from a manufactured housing dealer, Conseco purchased the Manufactured Housing Contract for fair value and took possession thereof in the ordinary course of its business, without knowledge that the Manufactured Housing Contract was subject to a security interest. Conseco has not sold, assigned or pledged the Manufactured Housing Contract to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Manufactured Housing Contract and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Manufactured Housing Contract. Conseco has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the manufactured home securing the Manufactured Housing Contract which are or may be liens prior to, or equal or coordinate with, the lien of the Manufactured Housing Contract. O. Equal Installments. The Manufactured Housing Contract either has a fixed rate or is a Step-Up Rate Contract and provides for level monthly payments which fully amortize the loan over its term. VIII-1-2 P. Enforceability. The Manufactured Housing Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. Q. One Original. There is only one original executed Manufactured Housing Contract, which is held by Seller. R. Loan-to-Value Ratio. At the time of its origination each Manufactured Housing Contract had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home was new at the time such Manufactured Housing Contract was originated, the original principal balance of such Manufactured Housing Contract was not in excess of that permitted by Conseco's underwriting guidelines in effect at the time the Manufactured Housing Contract was originated. S. Primary Resident. At the time of origination of the Manufactured Housing Contract the obligor was the primary resident of the related manufactured home or the primary resident was the child of the obligor. T. Not Real Estate. The related manufactured home is not considered or classified as part of the real estate on which it is located under the laws of the jurisdiction in which it is located and such manufactured home is, to the best of Seller's knowledge, free of damage and in good repair. U. Notation of Security Interest. If the related manufactured home is located in a state in which notation of a security interest on the title document is required or permitted to perfect such security interest, the title document shows, or if a new or replacement title document with respect to such manufactured home is being applied for such title document will be issued within 180 days and will show, Conseco as the holder of a first priority security interest in such manufactured home. If the related manufactured home is located in a state in which the filing of a financing statement under the UCC is required to perfect a security interest in Manufactured Housing, such filings or recordings have been duly made and show Conseco as secured party. In either case, the Custodian has the same rights as the secured party of record would have (if such secured party were still the owner of the Manufactured Housing Contract) against all Persons claiming an interest in such manufactured home. V. Qualified Mortgage for REMIC. Each Manufactured Housing Contract is a "qualified mortgage" under Section 860G(a)(3) of the Code, and the related manufactured home is "Manufactured Housing" within the meaning of Section 25(e)(10) of the Code. W. FHA/VA Manufactured Housing Contracts. If the Manufactured Housing Contract is a FHA/VA Manufactured Housing Contract, the Manufactured Housing Contract has been serviced in accordance with the FHA/VA regulations, the insurance or guarantee of the Manufactured Housing Contract under FHA/VA regulations and related laws is in full force and effect, and no event has occurred which, with or without notice or lapse of time or both, would impair such insurance or guarantee. VIII-1-3 X. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Manufactured Housing Contracts. VIII-1-4 EXHIBIT VIII-2 Representations with respect to Manufactured Housing Contracts (relating to real property) A. Payments. The scheduled payment of principal and interest was made on or before the Purchase Date by or on behalf of the obligor (without any advance from Conseco or any Person acting at the request of Conseco) or was not delinquent for more than 30 days after such Purchase Date. B. No Waivers. The terms of the Manufactured Housing Contract have not been waived, altered or modified in any respect, except by instruments or documents identified in the Manufactured Housing Chattel Paper Contract File. C. Binding Obligation. The Manufactured Housing Contract is the legal, valid and binding obligation of the obligor thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights general. D. No Defenses. The Manufactured Housing Contract is not subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of the Manufactured Housing Contract or the exercise of any right thereunder will not render the Manufactured Housing Contract unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. E. Insurance. Conseco or its agent has monitored the existence of a hazard insurance policy with respect to the manufactured home securing a Manufactured Housing Contract and if Conseco has determined that no such policy exists, Conseco has arranged for such insurance and has billed the related obligor through its loan account. F. Origination. The Manufactured Housing Contract was originated by a manufactured housing dealer or Conseco in the regular course of its business and, if originated by a manufactured housing dealer, was purchased by Conseco in the regular course of its business. G. Lawful Assignment. The Manufactured Housing Contract was not originated in and is not subject to the laws of any jurisdiction whose laws would make the transfer of the Manufactured Housing Contract to the Custodian or the ownership of the Manufactured Housing Contracts by Seller unlawful. H. Compliance with Law. All requirements of any federal, state or local law, including, without limitation, usury, truth in lending and equal credit VIII-2-1 opportunity laws, applicable to the Manufactured Housing Contract have been complied with and such compliance is not affected by the holding of the Manufactured Housing Contracts by the Custodian or Seller's ownership of the Manufactured Housing Contracts, and Seller shall maintain in its possession, available for Buyer's inspection, and shall deliver to Buyer upon demand, evidence of compliance with all such requirements. I. Manufactured Housing Contract in Force. The Manufactured Housing Contract has not been satisfied or subordinated in whole or in part or rescinded, and the manufactured home securing the Manufactured Housing Contract has not been released from the lien of the Manufactured Housing Contract in whole or in part. J. Interest in Real Property. Each mortgage is a valid first lien in favor of Conseco on real property securing the amount owed by the obligor under the related Manufactured Housing Contract subject only to (a) the lien of current real property taxes and assessments, (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such mortgage, such exceptions appearing of record being acceptable to mortgage lending institutions generally in the area wherein the property subject to the mortgage is located or specifically reflected in the appraisal obtained in connection with the origination of the related Manufactured Housing Contract obtained by Conseco and (c) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such Mortgage. Conseco has assigned all of its right, title and interest in such Manufactured Housing Contract and related mortgage, including the security interest in the manufactured home covered thereby, to the Custodian. The Custodian has and will have a valid and perfected and enforceable first priority security interest in such Manufactured Housing Contract. The Manufactured Housing Contract creates a valid and enforceable perfected first priority security interest in favor of Conseco in the manufactured home covered thereby (to the extent such manufactured home is not considered real property) as security for payment of the outstanding principal balance of such Manufactured Housing Contract and all other obligations of the obligor under such Manufactured Housing Contract; such security interest has been assigned by Conseco to the Custodian, and the Custodian has and will, on behalf of the Owners of the Manufactured Housing Contracts, have a valid and perfected and enforceable first priority security interest in such manufactured home. K. Capacity of Parties. All parties to the Manufactured Housing Contract had capacity to execute the Manufactured Housing Contract. L. Good Title. In the case of a Manufactured Housing Contract purchased from a manufactured housing dealer, Conseco purchased the Manufactured Housing Contract for fair value and took possession thereof in the ordinary course of its business, without knowledge that the Manufactured Housing Contract was subject to a security interest. Conseco has not sold, assigned or pledged the Manufactured Housing Contract to any Person other than the Custodian. M. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Manufactured Housing Contract and no event which, with notice and the expiration of any grace or cure period, would VIII-2-2 constitute such a default, breach, violation or event permitting acceleration under such Manufactured Housing Contract. Conseco has not waived any such default, breach, violation or event permitting acceleration. N. No Liens. There are, to the best of Seller's knowledge, no liens or claims which have been filed for work, labor or materials affecting the manufactured home securing the Manufactured Housing Contract which are or may be liens prior to, or equal or coordinate with, the lien of the Manufactured Housing Contract. O. Equal Installments. The Manufactured Housing Contract either has a fixed rate or is a Step-Up Rate Contract and provides for level monthly payments which fully amortize the loan over its term. P. Enforceability. The Manufactured Housing Contract contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security. Q. One Original. There is only one original executed Manufactured Housing Contract, which is held by Seller. R. Loan-to-Value Ratio. At the time of its origination each Manufactured Housing Contract had a Loan-to-Value Ratio not greater than 95%; if the related manufactured home was new at the time such Manufactured Housing Contract was originated, the original principal balance of such Manufactured Housing Contract was not in excess of that permitted by Conseco's underwriting guidelines in effect at the time the Manufactured Housing Contract was originated. S. Primary Resident. At the time of origination of the Manufactured Housing Contract the obligor was the primary resident of the related manufactured home or the primary resident was the child of the obligor. T. Good Repair. The related manufactured home is, to the best of Seller's knowledge, free of damage and in good repair. U. Qualified Mortgage for REMIC. Each Manufactured Housing Contract is a "qualified mortgage" under Section 860G(a)(3) of the Code, and the related manufactured home is "Manufactured Housing" within the meaning of Section 25(e)(10) of the Code. V. FHA/VA Manufactured Housing Contracts. If the Manufactured Housing Contract is a FHA/VA Manufactured Housing Contract, the Manufactured Housing Contract has been serviced in accordance with the FHA/VA regulations, the insurance or guarantee of the Manufactured Housing Contract under FHA/VA regulations and related laws is in full force and effect, and no event has occurred which, with or without notice or lapse of time or both, would impair such insurance or guarantee. VIII-2-3 W. No Adverse Selection. Except for the effect of the representations and warranties made hereunder, no adverse selection procedures have been employed in selecting the Manufactured Housing Contracts. VIII-2-4 EXHIBIT IX Representations with respect to Floor Plan Assets A. No Waivers. The terms of the Floor Plan Asset have not been waived, altered or modified in any respect (except as provided in the related pooling and servicing agreement). B. Binding Obligation. The Floor Plan Asset is the legal, valid and binding obligation of the issuing master trust thereunder and is enforceable in accordance with its terms, except as such enforceability may be limited by laws affecting the enforcement of creditors' rights generally. C. Lawful Assignment. The Floor Plan Asset is not subject to the laws of any jurisdiction whose laws would make the transfer of the Floor Plan Asset to Custodian or the ownership of the Floor Plan Assets by the owner thereof unlawful or make the Floor Plan Asset unenforceable. D. Good Title. Prior to transfer to Custodian, Seller is the sole owner of the Floor Plan Asset and has the authority to sell, transfer and assign the Floor Plan Asset. Seller has not sold, assigned or pledged the Floor Plan Asset to any Person other than the Custodian. E. No Defaults. There was no default, breach, violation or event permitting acceleration existing under the Floor Plan Asset and no event which, with notice and the expiration of any grace or cure period, would constitute such a default, breach, violation or event permitting acceleration under such Floor Plan Asset. Seller has not waived any such default, breach, violation or event permitting acceleration. F. Enforceability. The Floor Plan Asset contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the collateral of the benefits of the security provided thereby. IX-1 EXHIBIT X January 30, 2002 Lehman Commercial Paper Inc. 101 Hudson Street Jersey City, New Jersey 07302 CONSECO FINANCE CORP. Amended and Restated Limited Guaranty Second Amended and Restated Master Repurchase Agreement Dated as of January 30, 2002 Gentlemen: AA. For value received and in accordance with the terms of the Second Amended and Restated Master Repurchase Agreement, dated as of January 30, 2002 as amended from time to time (the "Repurchase Agreement") between Lehman Commercial Paper Inc., as buyer ("Buyer"), and Green Tree Finance Corp. - Five, as seller ("Seller"), Conseco Finance Corp., formerly known as Green Tree Financial Corporation ("Conseco"), hereby guarantees payment to Buyer or any successor in interest of Buyer with respect to any Purchased Eligible Assets under the Repurchase Agreement in an aggregate amount from time to time not exceeding the sum of the Guaranty Amount, as hereinafter defined. Buyer or U.S. Bank National Association, as custodian under the Custodial Agreement (as defined in the Repurchase Agreement), may make demands under this Limited Guaranty of the Guaranty Amount from time to time. Conseco hereby represents that its obligations hereunder do and shall rank pari passu with all unsecured and unsubordinated indebtedness of Conseco. BB. Payments required under this Limited Guaranty shall be payable whenever any Guaranty Amount (as defined below) has not been promptly made to Buyer in accordance with the Repurchase Agreement and the Custodial Agreement, without regard to any stay or delay with respect to such payment permitted or required by bankruptcy or any other applicable law. Neither Buyer nor Custodian on behalf of Buyer shall be required to realize upon any Purchased Eligible Assets or other security or exercise any remedies prior to making a payment demand under this Limited Guaranty. The aggregate sum remaining available hereunder from time to time shall be available upon the presentation by Buyer or Custodian on behalf of Buyer of the Notice for Payment in the form of Exhibit A hereto (the "Notice"), setting forth the information called for therein. X-1 CC. The "Guaranty Amount" as of any date means, collectively, the sums described in paragraphs HH and II of this Limited Guaranty plus the sum of (i) the lesser of (x) the sum of (A) the Repurchase Price of the Purchased Non-Esoteric Eligible Assets (whether payable upon demand by Buyer, as a result of an acceleration of the Repurchase Date therefor or otherwise) and (B) the Price Differential thereof and any liquidation costs and attorneys' fees associated with realizing upon and selling Purchased Non-Esoteric Eligible Assets and (y) 10% of the outstanding principal amount of all Purchased Non-Esoteric Eligible Assets at the time a payment demand is made under this Limited Guaranty and (ii) the sum of (A) the Repurchase Price of the Purchased Esoteric Eligible Assets (whether payable upon demand by Buyer, as a result of an acceleration of the Repurchase Date therefor or otherwise) and (B) the Price Differential thereof and any liquidation costs and attorneys' fees associated with realizing upon and the selling Purchased Esoteric Eligible Assets. All payments due hereunder shall be paid in immediately available funds after receipt of the Notice no later than 1:00 P.M. on the second business day following the date of presentation of the Notice. "Purchased Esoteric Eligible Assets" are Purchased Eligible Assets that are Esoteric Assets and "Purchased Non-Esoteric Eligible Assets" are the Purchased other than the Esoteric Assets. DD. Presentation of the Notice shall be made in writing to the address specified in this paragraph or by presentation of facsimile documentation at (612) 293-5745, Attention: Chief Financial Officer, or such other number or name as Conseco may specify. Such documentation shall be followed by original documentation as soon as reasonably practicable to Conseco's office located at 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota 55102-1639, Attention: Chief Financial Officer, or such other number or name which may be designated by Conseco by written notice delivered to the Custodian. EE. This Limited Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. Communications with respect to this Limited Guaranty other than requests for payment pursuant to a Notice referred to in the preceding paragraph shall be addressed to Conseco at 1100 Landmark Towers, 345 St. Peter Street, St. Paul, Minnesota 55102-1639, Attention: Chief Financial Officer, specifically referring to this Limited Guaranty. FF. Conseco hereby waives all rights of subrogation, contribution, reimbursement, indemnity or otherwise, whether arising by contract or operation of law (including, without limitation, any such right arising under the Federal Bankruptcy Code) or otherwise by reason of any payment by Conseco pursuant to the provisions of this Limited Guaranty and agrees for the benefit of each of Seller's creditors that any such payment by it shall constitute a contribution of capital by Conseco to Seller. GG. As further security for this Limited Guaranty and to secure all of Seller's obligations to Buyer, Conseco hereby grants a present security interest in and transfers and assigns to Buyer (a) any and all interest, if any, it may now or hereafter have in the Purchased Eligible Assets (as defined in the Repurchase Agreement) until such securities have been sold or otherwise disposed of by Buyer, and (b) all claims and demands, presently existing or hereafter X-2 accrued thereon, and any and all collateral or security Conseco now has or may hereafter have or acquire against Seller with respect to the Purchased Eligible Assets or any of them with full right on the part of Buyer in its own name or in the name of Conseco to collect and enforce such claims by legal action, proof of debt in bankruptcy or other liquidation proceedings, and to vote in any proceedings for the arrangement of debts at any time proposed, and Conseco hereby irrevocably appoints Buyer as attorney-in-fact for Conseco for the purpose of such enforcement and for the purpose of endorsing in the name of Guarantors any instrument for the payment of money. HH. In the event that any representation or warranty made by Seller in the Repurchase Agreement or by Conseco or Seller under any servicing arrangements or the Custodial Agreement shall be false or misleading in any material respect, there shall be immediately due from Conseco to Buyer the loss, cost, damage or expense incurred by Buyer by reason of such representation or warranty being false or misleading in any material respect. In addition, there shall be immediately due from Conseco any Indemnified Amounts that are due to Buyer or any other Indemnified Parties under, and as defined in, the Repurchase Agreement. II. In the event that Buyer for any reason whatsoever shall deem it necessary to refer this Limited Guaranty to an attorney for the enforcement thereof or of any rights hereunder or otherwise, there shall be immediately due from Conseco to Buyer, reasonable attorneys' fees and disbursements, together with all costs and expenses of such action. JJ. This Limited Guaranty sets forth in full Conseco's undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein other than any request, for payment hereunder and the Repurchase Agreement, and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for requests for payment pursuant to a Notice and the Repurchase Agreement. KK. Conseco hereby waives the right of trial by jury in any litigation arising hereunder and also waives the right in any such litigation, to impose counterclaims or setoffs of any kind or description unless such counterclaim or set off is compulsory or mandatory in nature under the New York Civil Practice Law and Rules. Conseco further agrees to submit to personal jurisdiction in the State of New York in any action or proceeding arising out of this Guaranty. LL. Conseco shall provide information, documentation and access to personnel as Buyer shall require in order to monitor Conseco's liquidity, cash flow and capitalization. MM. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Repurchase Agreement. X-3 IN WITNESS WHEREOF, this Limited Guaranty is impressed, imprinted or engraved hereon, attested by its secretary or any Assistant Secretary. CONSECO FINANCE CORP. By: -------------------------------- Name: Title: Attest: By: ---------------------- Name: Title: X-4 EXHIBIT A to Limited Guaranty Conseco Finance Corp. 1100 Landmark Towers 345 St. Peter Street St. Paul, Minnesota 55102-1639 Attention: Chief Financial Officer NOTICE FOR PAYMENT UNDER THE LIMITED GUARANTY The undersigned individual, a duly authorized officer of [ Lehman Commercial Paper Inc. (the "Buyer") ], [U.S. Bank National Association, as custodian ("Custodian") under that certain Custodial Agreement among Custodian, Buyer and Green Tree Finance Corp. - Five ("Seller"),] hereby certified to Conseco Finance Corp. ("Conseco") on behalf of Buyer with reference to that certain Amended and Restated Limited Guaranty, dated January 30, 2002 (the "Limited Guaranty"), of Conseco in favor of Buyer, executed pursuant to the Second Amended and Restated Master Repurchase Agreement, dated January 30, 2002 (the "Repurchase Agreement"), between Seller and Buyer, in respect of Securities (as defined in the Repurchase Agreement) as follows: 1. [Buyer] [Custodian on behalf of Buyer] is entitled to make a demand under the Limited Guaranty. 2. The Guaranty Amount as of the Date of this Notice is $________. The amount demanded by this notice (together with the amount of any other payments demanded under all other Notices for Payment) does not exceed the Guaranty Amount. X-A-1 3. [Buyer] [Custodian on behalf of Buyer] demands payment of $_________, which is the amount it is entitled to demand pursuant to the Limited Guaranty. 4. The amount demanded is to be paid in immediately available funds by 1:00 P.M. of the second business day following the date of presentation of this notice. 5. [Provide payment instructions.] 6. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Repurchase Agreement. IN WITNESS WHEREOF, this notice has been executed this____day of____. [LEHMAN COMMERCIAL PAPER INC.] [CUSTODIAN] By: --------------------------- Name: Title: X-A-2 Schedule A Esoteric Assets
Principal Balance Pool ID Pool Description Account Number Amount Product Class 20899 LB HELOC 1999-6912512685 $39,916.96 Home Equity 20899 LB HELOC 1999-6912504773 $36,900.00 Home Equity 20899 LB HELOC 1999-6912495998 $82,094.42 Home Equity 20899 LB HELOC 1999-6912494959 $204,892.20 Home Equity 20899 LB HELOC 1999-6912494587 $31,605.03 Home Equity 20899 LB HELOC 1999-6912492599 $23,955.95 Home Equity 20899 LB HELOC 1999-6912490619 $38,586.77 Home Equity 20899 LB HELOC 1999-6912489926 $58,560.35 Home Equity 20899 LB HELOC 1999-6912484463 $239,343.68 Home Equity 20899 LB HELOC 1999-6912478408 $66,562.40 Home Equity 20899 LB HELOC 1999-6912477921 $181,674.08 Home Equity 20899 LB HELOC 1999-6912476105 $64,368.12 Home Equity 20899 LB HELOC 1999-6912476048 $60,200.00 Home Equity 20899 LB HELOC 1999-6912472849 $144,282.50 Home Equity 20899 LB HELOC 1999-6912471379 $43,088.94 Home Equity 20899 LB HELOC 1999-6912470876 $156,195.01 Home Equity 20899 LB HELOC 1999-6912468730 $28,841.90 Home Equity 20899 LB HELOC 1999-6912467443 $60,259.48 Home Equity 20899 LB HELOC 1999-6912465280 $134,049.69 Home Equity 20899 LB HELOC 1999-6912457352 $53,505.44 Home Equity 20899 LB HELOC 1999-6912454573 $26,847.04 Home Equity 20899 LB HELOC 1999-6912453989 $110,647.35 Home Equity 20899 LB HELOC 1999-6912444194 $147,520.05 Home Equity 20899 LB HELOC 1999-6912441745 $155,791.05 Home Equity 20899 LB HELOC 1999-6912441265 $165,957.90 Home Equity 20899 LB HELOC 1999-6912440762 $22,466.25 Home Equity 20899 LB HELOC 1999-6912406813 $31,248.45 Home Equity 20899 LB HELOC 1999-6912498158 $95,288.00 Home Equity 20899 LB HELOC 1999-6912599658 $102,764.70 Home Equity 20899 LB HELOC 1999-6912572614 $74,778.21 Home Equity 20899 LB HELOC 1999-6912086847 $233,333.58 Home Equity 20899 LB HELOC 1999-6911740576 $25,982.85 Home Equity 20899 LB HELOC 1999-6911667902 $39,123.33 Home Equity 20899 LB HELOC 1999-6911666813 $48,928.67 Home Equity 20899 LB HELOC 1999-6911662978 $111,286.85 Home Equity 20899 LB HELOC 1999-6911625231 $53,916.11 Home Equity 20899 LB HELOC 1999-6911624598 $32,206.05 Home Equity 20899 LB HELOC 1999-6911617493 $74,621.82 Home Equity 20899 LB HELOC 1999-6911593876 $99,401.14 Home Equity 20899 LB HELOC 1999-6911591979 $31,855.33 Home Equity 20899 LB HELOC 1999-6912292718 $69,895.00 Home Equity 20899 LB HELOC 1999-6912216998 $241,537.05 Home Equity A-1 20899 LB HELOC 1999-6912211593 $302,667.90 Home Equity 20899 LB HELOC 1999-6912195697 $56,995.31 Home Equity 20899 LB HELOC 1999-6912175061 $59,603.03 Home Equity 20899 LB HELOC 1999-6911977848 $90,278.43 Home Equity 20899 LB HELOC 1999-6911113568 $166,514.01 Home Equity 20899 LB HELOC 1999-6910931648 $56,871.16 Home Equity 20899 LB HELOC 1999-6912234447 $42,181.67 Home Equity 20899 LB HELOC 1999-6912233670 $105,698.12 Home Equity 20899 LB HELOC 1999-6912233506 $134,405.49 Home Equity 20899 LB HELOC 1999-6912229363 $141,339.88 Home Equity 20899 LB HELOC 1999-6912226682 $149,572.85 Home Equity 20899 LB HELOC 1999-6911669924 $22,524.27 Home Equity 20899 LB HELOC 1999-6911668942 $30,304.36 Home Equity 20899 LB HELOC 1999-6911657903 $33,100.66 Home Equity 20899 LB HELOC 1999-6911657143 $99,396.31 Home Equity 20899 LB HELOC 1999-6911649371 $70,698.45 Home Equity 20899 LB HELOC 1999-6911641410 $134,988.27 Home Equity 20899 LB HELOC 1999-6911624275 $9,900.00 Home Equity 20899 LB HELOC 1999-6911620836 $20,800.96 Home Equity 20899 LB HELOC 1999-6911602776 $9,932.85 Home Equity 20899 LB HELOC 1999-6911599584 $66,801.97 Home Equity 20899 LB HELOC 1999-6911594551 $42,926.10 Home Equity 20899 LB HELOC 1999-6911560347 $134,538.62 Home Equity 20899 LB HELOC 1999-6911550132 $39,850.31 Home Equity 20899 LB HELOC 1999-6911544218 $67,195.63 Home Equity 20899 LB HELOC 1999-6911526660 $62,004.00 Home Equity 20899 LB HELOC 1999-6911523303 $32,186.95 Home Equity 20899 LB HELOC 1999-6911475553 $63,671.03 Home Equity 20899 LB HELOC 1999-6911399449 $137,394.02 Home Equity 20899 LB HELOC 1999-6911399001 $23,487.57 Home Equity 20899 LB HELOC 1999-6911397898 $19,855.74 Home Equity 20899 LB HELOC 1999-6911391073 $94,360.43 Home Equity 20899 LB HELOC 1999-6911380134 $66,397.13 Home Equity 20899 LB HELOC 1999-6911373840 $68,157.47 Home Equity 20899 LB HELOC 1999-6911364716 $118,900.95 Home Equity 20899 LB HELOC 1999-6911341136 $113,516.59 Home Equity 20899 LB HELOC 1999-6911334776 $75,898.48 Home Equity 20899 LB HELOC 1999-6911317607 $79,065.11 Home Equity 20899 LB HELOC 1999-6911313424 $89,309.83 Home Equity 20899 LB HELOC 1999-6911256888 $55,809.03 Home Equity 20899 LB HELOC 1999-6911109954 $70,886.37 Home Equity 20899 LB HELOC 1999-6910852042 $44,891.82 Home Equity 20899 LB HELOC 1999-6910593547 $173,331.33 Home Equity A-2 20899 LB HELOC 1999-6912061592 $64,793.97 Home Equity 20899 LB HELOC 1999-6910592838 $23,629.03 Home Equity 20899 LB HELOC 1999-6910584058 $61,373.85 Home Equity 20899 LB HELOC 1999-6910572889 $31,829.01 Home Equity 20899 LB HELOC 1999-6910502720 $96,855.13 Home Equity 20899 LB HELOC 1999-6910851325 $53,878.73 Home Equity 20899 LB HELOC 1999-6910850053 $40,978.98 Home Equity 20899 LB HELOC 1999-6910836755 $213,133.01 Home Equity 20899 LB HELOC 1999-6910829776 $41,919.88 Home Equity 20899 LB HELOC 1999-6910826814 $28,364.60 Home Equity 20899 LB HELOC 1999-6910811444 $133,286.52 Home Equity 20899 LB HELOC 1999-6910802450 $22,961.82 Home Equity 20899 LB HELOC 1999-6910753554 $146,039.27 Home Equity 20899 LB HELOC 1999-6910698585 $133,477.41 Home Equity 20899 LB HELOC 1999-6910880712 $35,556.67 Home Equity 20899 LB HELOC 1999-6910876561 $11,433.29 Home Equity 20899 LB HELOC 1999-6910860995 $12,025.89 Home Equity 20899 LB HELOC 1999-6910860029 $25,313.71 Home Equity 20899 LB HELOC 1999-6910858924 $104,581.62 Home Equity 20899 LB HELOC 1999-6911075627 $42,171.02 Home Equity 20899 LB HELOC 1999-6911323779 $62,182.84 Home Equity 20899 LB HELOC 1999-6911320825 $278,698.66 Home Equity 20899 LB HELOC 1999-6911315320 $31,239.47 Home Equity 20899 LB HELOC 1999-6911274659 $66,095.75 Home Equity 20899 LB HELOC 1999-6911269345 $85,285.39 Home Equity 20899 LB HELOC 1999-6911181904 $22,125.52 Home Equity 20899 LB HELOC 1999-6911181151 $54,859.46 Home Equity 20899 LB HELOC 1999-6911177530 $36,166.89 Home Equity 20899 LB HELOC 1999-6911116082 $59,817.73 Home Equity 20899 LB HELOC 1999-6911110325 $229,057.23 Home Equity 20899 LB HELOC 1999-6911110077 $109,014.78 Home Equity 20899 LB HELOC 1999-6911108956 $161,283.83 Home Equity 20899 LB HELOC 1999-6911101209 $82,331.90 Home Equity 20899 LB HELOC 1999-6911099395 $52,548.07 Home Equity 20899 LB HELOC 1999-6911086160 $137,733.88 Home Equity 20899 LB HELOC 1999-6911322763 $16,625.88 Home Equity 20899 LB HELOC 1999-6911375076 $9,717.29 Home Equity 20899 LB HELOC 1999-6911978168 $121,948.33 Home Equity 20899 LB HELOC 1999-6911972815 $46,995.11 Home Equity 20899 LB HELOC 1999-6911912639 $35,819.91 Home Equity 20899 LB HELOC 1999-6911894985 $407,519.98 Home Equity 20899 LB HELOC 1999-6911888763 $86,788.05 Home Equity 20899 LB HELOC 1999-6911690607 $48,222.02 Home Equity A-3 20899 LB HELOC 1999-6912289326 $56,859.64 Home Equity 20899 LB HELOC 1999-6912258511 $53,818.23 Home Equity 20899 LB HELOC 1999-6912210223 $38,961.47 Home Equity 20899 LB HELOC 1999-6912198204 $32,033.69 Home Equity 20899 LB HELOC 1999-6912197610 $69,800.65 Home Equity 20899 LB HELOC 1999-6912127237 $63,592.42 Home Equity 20899 LB HELOC 1999-6912122139 $38,912.56 Home Equity 20899 LB HELOC 1999-6911943576 $137,087.62 Home Equity 20899 LB HELOC 1999-6911938923 $244,140.87 Home Equity 20899 LB HELOC 1999-6911917448 $153,623.31 Home Equity 20899 LB HELOC 1999-6911898622 $14,715.72 Home Equity 20899 LB HELOC 1999-6911808480 $82,870.33 Home Equity 20899 LB HELOC 1999-6912556807 $55,000.00 Home Equity 20899 LB HELOC 1999-6912545396 $33,581.62 Home Equity 20899 LB HELOC 1999-6912479265 $49,115.00 Home Equity 20899 LB HELOC 1999-6912473441 $50,845.14 Home Equity 20899 LB HELOC 1999-6912440374 $94,701.73 Home Equity 20899 LB HELOC 1999-6912415301 $80,509.65 Home Equity 20899 LB HELOC 1999-6912367775 $167,707.18 Home Equity 20899 LB HELOC 1999-6912044655 $211,900.28 Home Equity 20899 LB HELOC 1999-6912038038 $52,128.91 Home Equity 20899 LB HELOC 1999-6912029268 $19,830.38 Home Equity 20899 LB HELOC 1999-6911971825 $91,608.28 Home Equity 20899 LB HELOC 1999-6911958459 $104,701.87 Home Equity 20899 LB HELOC 1999-6911952163 $191,832.95 Home Equity 20899 LB HELOC 1999-6912002182 $54,033.42 Home Equity 20899 LB HELOC 1999-6911949920 $23,134.55 Home Equity 20899 LB HELOC 1999-6912436927 $80,878.50 Home Equity 20899 LB HELOC 1999-6912434401 $127,471.76 Home Equity 20899 LB HELOC 1999-6912413058 $81,877.00 Home Equity 20899 LB HELOC 1999-6912401848 $80,878.50 Home Equity 20899 LB HELOC 1999-6912395768 $68,896.50 Home Equity 20899 LB HELOC 1999-6912391353 $72,760.50 Home Equity 20899 LB HELOC 1999-6912365373 $71,742.20 Home Equity 20899 LB HELOC 1999-6912365241 $74,662.72 Home Equity 20899 LB HELOC 1999-6912362693 $25,451.41 Home Equity 20899 LB HELOC 1999-6912346381 $19,601.96 Home Equity $13,759,440.06 Outstanding as of 1/28 ($10,900,000.00) A-4 15030 LB REC - Consumer 1549-14096687 $3,663.50 Horse Trailers 15030 LB REC - Consumer 1549-14078279 $2,412.55 Horse Trailers 15030 LB REC - Consumer 1549-14094200 $2,296.76 Horse Trailers 15030 LB REC - Consumer 1549-14133375 $10,767.45 Horse Trailers 15030 LB REC - Consumer 1549-14132954 $2,946.58 Horse Trailers 15030 LB REC - Consumer 1549-14122239 $5,645.27 Horse Trailers 15030 LB REC - Consumer 1549-14111408 $2,922.10 Horse Trailers 15030 LB REC - Consumer 1549-14121078 $4,427.70 Horse Trailers 15030 LB REC - Consumer 1549-14112202 $2,300.87 Horse Trailers 15030 LB REC - Consumer 1549-14103741 $2,292.08 Horse Trailers 15030 LB REC - Consumer 1549-14129290 $1,521.75 Horse Trailers 15030 LB REC - Consumer 1549-14132873 $1,968.25 Horse Trailers 15030 LB REC - Consumer 1549-14096321 $3,675.79 Horse Trailers 15030 LB REC - Consumer 1549-14101210 $4,017.66 Horse Trailers 15030 LB REC - Consumer 1549-14100233 $32,637.42 Horse Trailers 15030 LB REC - Consumer 1549-14110745 $2,198.43 Horse Trailers 15030 LB REC - Consumer 1549-14116337 $1,110.24 Horse Trailers 15030 LB REC - Consumer 1549-14785228 $40,276.34 Horse Trailers 15030 LB REC - Consumer 1549-14136653 $4,519.54 Horse Trailers 15030 LB REC - Consumer 1549-14133106 $9,955.06 Horse Trailers 15030 LB REC - Consumer 1549-14110275 $6,817.66 Horse Trailers 15030 LB REC - Consumer 1549-14130367 $6,643.66 Horse Trailers 15030 LB REC - Consumer 1549-14117444 $5,439.11 Horse Trailers 15030 LB REC - Consumer 1549-14124883 $2,164.81 Horse Trailers 15030 LB REC - Consumer 1549-14121238 $1,690.60 Horse Trailers 15030 LB REC - Consumer 1549-14125250 $4,738.42 Horse Trailers 15030 LB REC - Consumer 1549-14119236 $14,737.63 Horse Trailers 15030 LB REC - Consumer 1549-14134579 $2,299.61 Horse Trailers 15030 LB REC - Consumer 1549-14067338 $5,771.67 Horse Trailers 15030 LB REC - Consumer 1549-14078292 $3,171.83 Horse Trailers 15030 LB REC - Consumer 1549-14126421 $10,647.42 Horse Trailers 15030 LB REC - Consumer 1549-14136599 $4,520.37 Horse Trailers 15030 LB REC - Consumer 1549-14086140 $5,734.19 Horse Trailers 15030 LB REC - Consumer 1549-14077989 $9,569.40 Horse Trailers 15030 LB REC - Consumer 1549-14097503 $5,407.00 Horse Trailers 15030 LB REC - Consumer 1549-14076308 $12,665.36 Horse Trailers 15030 LB REC - Consumer 1549-14115075 $14,828.09 Horse Trailers 15030 LB REC - Consumer 1549-14136912 $2,056.34 Horse Trailers 15030 LB REC - Consumer 1549-14128178 $12,308.58 Horse Trailers 15030 LB REC - Consumer 1549-14125200 $28,233.07 Horse Trailers 15030 LB REC - Consumer 1549-14122856 $10,797.25 Horse Trailers 15030 LB REC - Consumer 1549-14136204 $6,429.29 Horse Trailers 15030 LB REC - Consumer 1549-14106430 $16,464.23 Horse Trailers 15030 LB REC - Consumer 1549-14120262 $2,322.22 Horse Trailers A-5 15030 LB REC - Consumer 1549-14134302 $6,996.52 Horse Trailers 15030 LB REC - Consumer 1549-14557210 $9,605.31 Horse Trailers 15030 LB REC - Consumer 1549-14552835 $9,249.83 Horse Trailers 15030 LB REC - Consumer 1549-14547728 $6,355.90 Horse Trailers 15030 LB REC - Consumer 1549-14549138 $8,156.24 Horse Trailers 15030 LB REC - Consumer 1549-14531949 $8,160.63 Horse Trailers 15030 LB REC - Consumer 1549-14553945 $10,085.82 Horse Trailers 15030 LB REC - Consumer 1549-14552511 $3,816.17 Horse Trailers 15030 LB REC - Consumer 1549-14103191 $3,643.04 Sports Vehicle 15030 LB REC - Consumer 1549-14102372 $4,550.83 Sports Vehicle 15030 LB REC - Consumer 1549-14099971 $3,385.17 Sports Vehicle 15030 LB REC - Consumer 1549-14087117 $2,988.97 Sports Vehicle 15030 LB REC - Consumer 1549-14097968 $2,546.35 Sports Vehicle 15030 LB REC - Consumer 1549-14099601 $5,627.19 Sports Vehicle 15030 LB REC - Consumer 1549-14098509 $2,485.12 Sports Vehicle 15030 LB REC - Consumer 1549-14076116 $2,656.62 Sports Vehicle 15030 LB REC - Consumer 1549-14098474 $991.34 Sports Vehicle 15030 LB REC - Consumer 1549-14099877 $1,216.48 Sports Vehicle 15030 LB REC - Consumer 1549-14075377 $3,093.97 Sports Vehicle 15030 LB REC - Consumer 1549-14095972 $5,653.23 Sports Vehicle 15030 LB REC - Consumer 1549-14093097 $3,667.84 Sports Vehicle 15030 LB REC - Consumer 1549-14075577 $1,668.04 Sports Vehicle 15030 LB REC - Consumer 1549-14071817 $2,706.39 Sports Vehicle 15030 LB REC - Consumer 1549-14101970 $4,695.68 Sports Vehicle 15030 LB REC - Consumer 1549-14099772 $4,741.70 Sports Vehicle 15030 LB REC - Consumer 1549-14095610 $5,525.18 Sports Vehicle 15030 LB REC - Consumer 1549-14074673 $1,650.24 Sports Vehicle 15030 LB REC - Consumer 1549-14002699 $2,851.63 Sports Vehicle 15030 LB REC - Consumer 1549-14084667 $3,609.51 Sports Vehicle 15030 LB REC - Consumer 1549-14092463 $2,912.33 Sports Vehicle 15030 LB REC - Consumer 1549-14100583 $4,273.34 Sports Vehicle 15030 LB REC - Consumer 1549-14094748 $2,956.07 Sports Vehicle 15030 LB REC - Consumer 1549-14100418 $3,470.91 Sports Vehicle 15030 LB REC - Consumer 1549-14101137 $2,226.82 Sports Vehicle 15030 LB REC - Consumer 1549-14085938 $1,694.10 Sports Vehicle 15030 LB REC - Consumer 1549-14106115 $1,870.80 Sports Vehicle 15030 LB REC - Consumer 1549-14099165 $4,020.85 Sports Vehicle 15030 LB REC - Consumer 1549-14101087 $3,261.33 Sports Vehicle 15030 LB REC - Consumer 1549-14100833 $2,498.41 Sports Vehicle 15030 LB REC - Consumer 1549-14096211 $2,077.43 Sports Vehicle 15030 LB REC - Consumer 1549-14095521 $2,146.65 Sports Vehicle 15030 LB REC - Consumer 1549-14094102 $3,036.25 Sports Vehicle 15030 LB REC - Consumer 1549-14093231 $2,874.49 Sports Vehicle 15030 LB REC - Consumer 1549-14087640 $5,000.92 Sports Vehicle 15030 LB REC - Consumer 1549-14078863 $4,468.90 Sports Vehicle A-6 15030 LB REC - Consumer 1549-14071201 $3,081.50 Sports Vehicle 15030 LB REC - Consumer 1549-14074625 $2,918.08 Sports Vehicle 15030 LB REC - Consumer 1549-14059123 $3,869.69 Sports Vehicle 15030 LB REC - Consumer 1549-14061043 $3,018.77 Sports Vehicle 15030 LB REC - Consumer 1549-14085986 $4,061.72 Sports Vehicle 15030 LB REC - Consumer 1549-14070677 $3,678.65 Sports Vehicle 15030 LB REC - Consumer 1549-14100007 $5,464.73 Sports Vehicle 15030 LB REC - Consumer 1549-14128380 $12,453.92 Sports Vehicle 15030 LB REC - Consumer 1549-14086614 $5,888.55 Sports Vehicle 15030 LB REC - Consumer 1549-14076975 $4,355.63 Sports Vehicle 15030 LB REC - Consumer 1549-14077365 $5,385.15 Sports Vehicle 15030 LB REC - Consumer 1549-14080258 $3,377.01 Sports Vehicle 15030 LB REC - Consumer 1549-14731035 $1,355.50 Sports Vehicle 15030 LB REC - Consumer 1549-14102129 $1,868.23 Sports Vehicle 15030 LB REC - Consumer 1549-14553883 $6,577.38 Keyboard 15030 LB REC - Consumer 1549-14548104 $5,426.90 Marine Products 15030 LB REC - Consumer 1549-14561673 $1,596.56 Marine Products 15030 LB REC - Consumer 1549-14111499 $17,138.28 Marine Products 15030 LB REC - Consumer 1549-14134993 $14,166.89 Marine Products 15030 LB REC - Consumer 1549-14133213 $17,492.02 Marine Products 15030 LB REC - Consumer 1549-14106462 $16,968.58 Marine Products 15030 LB REC - Consumer 1549-14134035 $8,569.98 Marine Products 15030 LB REC - Consumer 1549-14131500 $22,653.96 Marine Products 15030 LB REC - Consumer 1549-14131445 $14,179.64 Marine Products 15030 LB REC - Consumer 1549-14120817 $33,998.81 Marine Products 15030 LB REC - Consumer 1549-14131758 $17,372.15 Marine Products 15030 LB REC - Consumer 1549-14109481 $18,350.00 Marine Products 15030 LB REC - Consumer 1549-14126054 $3,199.22 Marine Products 15030 LB REC - Consumer 1549-14116779 $10,500.76 Marine Products 15030 LB REC - Consumer 1549-14114765 $12,706.30 Marine Products 15030 LB REC - Consumer 1549-14111033 $13,773.57 Marine Products 15030 LB REC - Consumer 1549-14106737 $11,513.61 Marine Products 15030 LB REC - Consumer 1549-14136981 $16,436.94 Marine Products 15030 LB REC - Consumer 1549-14129207 $15,476.34 Marine Products 15030 LB REC - Consumer 1549-14129062 $21,351.35 Marine Products 15030 LB REC - Consumer 1549-14120540 $9,706.32 Marine Products 15030 LB REC - Consumer 1549-14117358 $7,417.02 Marine Products 15030 LB REC - Consumer 1549-14115723 $13,312.02 Marine Products 15030 LB REC - Consumer 1549-14112330 $6,398.92 Marine Products 15030 LB REC - Consumer 1549-14086392 $10,270.20 Marine Products 15030 LB REC - Consumer 1549-14127085 $16,451.10 Marine Products 15030 LB REC - Consumer 1549-14116577 $16,401.45 Marine Products 15030 LB REC - Consumer 1549-14132201 $30,048.26 Marine Products 15030 LB REC - Consumer 1549-14107854 $11,943.10 Marine Products 15030 LB REC - Consumer 1549-14672888 $7,884.98 Marine Products A-7 15030 LB REC - Consumer 1549-14113107 $15,307.22 Marine Products 15030 LB REC - Consumer 1549-14112051 $25,170.07 Marine Products 15030 LB REC - Consumer 1549-14111067 $6,132.56 Marine Products 15030 LB REC - Consumer 1549-14137936 $2,627.66 Marine Products 15030 LB REC - Consumer 1549-14124574 $7,131.24 Marine Products 15030 LB REC - Consumer 1549-14128548 $7,162.87 Marine Products 15030 LB REC - Consumer 1549-14104258 $17,433.94 Marine Products 15030 LB REC - Consumer 1549-14116856 $57,247.69 Marine Products 15030 LB REC - Consumer 1549-14138062 $12,853.41 Marine Products 15030 LB REC - Consumer 1549-14131385 $24,988.88 Marine Products 15030 LB REC - Consumer 1549-14107448 $6,016.83 Marine Products 15030 LB REC - Consumer 1549-14137296 $24,492.26 Marine Products 15030 LB REC - Consumer 1549-14672686 $1,223.34 Marine Products 15030 LB REC - Consumer 1549-14672850 $23,332.80 Marine Products 15030 LB REC - Consumer 1549-14672832 $63,426.17 Marine Products 15030 LB REC - Consumer 1549-14672766 $83,841.30 Marine Products 15030 LB REC - Consumer 1549-14672755 $158,781.68 Marine Products 15030 LB REC - Consumer 1549-14672729 $65,167.26 Marine Products 15030 LB REC - Consumer 1549-14120990 $15,362.64 Marine Products 15030 LB REC - Consumer 1549-14110896 $15,850.53 Marine Products 15030 LB REC - Consumer 1549-14558774 $28,939.32 Marine Products 15030 LB REC - Consumer 1549-14106444 $1,826.29 Marine Products 15030 LB REC - Consumer 1549-14108397 $5,494.12 Motorcycle 15030 LB REC - Consumer 1549-14133821 $15,913.43 Motorcycle 15030 LB REC - Consumer 1549-14122961 $17,297.77 Motorcycle 15030 LB REC - Consumer 1549-14132278 $8,044.95 Motorcycle 15030 LB REC - Consumer 1549-14084909 $11,451.15 Motorcycle 15030 LB REC - Consumer 1549-14122187 $15,805.45 Motorcycle 15030 LB REC - Consumer 1549-14076204 $3,731.81 Motorcycle 15030 LB REC - Consumer 1549-14135684 $16,039.62 Motorcycle 15030 LB REC - Consumer 1549-14122673 $15,945.32 Motorcycle 15030 LB REC - Consumer 1549-14119382 $14,350.02 Motorcycle 15030 LB REC - Consumer 1549-14114916 $12,803.48 Motorcycle 15030 LB REC - Consumer 1549-14082275 $1,863.75 Motorcycle 15030 LB REC - Consumer 1549-14114329 $9,248.01 Motorcycle 15030 LB REC - Consumer 1549-14137365 $1,401.10 Motorcycle 15030 LB REC - Consumer 1549-14136264 $16,817.91 Motorcycle 15030 LB REC - Consumer 1549-14129553 $12,208.57 Motorcycle 15030 LB REC - Consumer 1549-14119090 $5,970.55 Motorcycle 15030 LB REC - Consumer 1549-14136649 $11,058.94 Motorcycle 15030 LB REC - Consumer 1549-14134794 $13,040.52 Motorcycle 15030 LB REC - Consumer 1549-14119960 $8,382.01 Motorcycle 15030 LB REC - Consumer 1549-14119368 $10,761.87 Motorcycle 15030 LB REC - Consumer 1549-14136697 $18,299.22 Motorcycle 15030 LB REC - Consumer 1549-14129914 $8,387.93 Motorcycle A-8 15030 LB REC - Consumer 1549-14133782 $9,783.18 Motorcycle 15030 LB REC - Consumer 1549-14129536 $8,930.96 Motorcycle 15030 LB REC - Consumer 1549-14107537 $4,349.79 Motorcycle 15030 LB REC - Consumer 1549-14104169 $5,903.67 Motorcycle 15030 LB REC - Consumer 1549-14102010 $6,931.32 Motorcycle 15030 LB REC - Consumer 1549-14111029 $8,381.05 Motorcycle 15030 LB REC - Consumer 1549-14137654 $9,994.56 Motorcycle 15030 LB REC - Consumer 1549-14131235 $25,502.32 Motorcycle 15030 LB REC - Consumer 1549-14136038 $12,171.46 Motorcycle 15030 LB REC - Consumer 1549-14133098 $25,947.17 Motorcycle 15030 LB REC - Consumer 1549-14130737 $6,727.76 Motorcycle 15030 LB REC - Consumer 1549-14112423 $16,991.86 Motorcycle 15030 LB REC - Consumer 1549-14123433 $16,384.51 Motorcycle 15030 LB REC - Consumer 1549-14121358 $15,052.62 Motorcycle 15030 LB REC - Consumer 1549-14117063 $8,874.48 Motorcycle 15030 LB REC - Consumer 1549-14114697 $13,658.46 Motorcycle 15030 LB REC - Consumer 1549-14114616 $14,422.17 Motorcycle 15030 LB REC - Consumer 1549-14111248 $10,181.05 Motorcycle 15030 LB REC - Consumer 1549-14134785 $8,174.73 Motorcycle 15030 LB REC - Consumer 1549-14129419 $7,319.85 Motorcycle 15030 LB REC - Consumer 1549-14122984 $11,403.83 Motorcycle 15030 LB REC - Consumer 1549-14107759 $3,233.10 Motorcycle 15030 LB REC - Consumer 1549-14136690 $13,944.43 Motorcycle 15030 LB REC - Consumer 1549-14136395 $7,209.24 Motorcycle 15030 LB REC - Consumer 1549-14111955 $7,686.15 Motorcycle 15030 LB REC - Consumer 1549-14107725 $16,127.26 Motorcycle 15030 LB REC - Consumer 1549-14105981 $13,720.12 Motorcycle 15030 LB REC - Consumer 1549-14103378 $14,596.52 Motorcycle 15030 LB REC - Consumer 1549-14101898 $11,770.82 Motorcycle 15030 LB REC - Consumer 1549-14120629 $14,455.35 Motorcycle 15030 LB REC - Consumer 1549-14132021 $12,502.68 Motorcycle 15030 LB REC - Consumer 1549-14134279 $12,421.47 Motorcycle 15030 LB REC - Consumer 1549-14108553 $17,424.26 Motorcycle 15030 LB REC - Consumer 1549-14125939 $19,818.61 Motorcycle 15030 LB REC - Consumer 1549-14109973 $8,537.07 Motorcycle 15030 LB REC - Consumer 1549-14105979 $19,889.97 Motorcycle 15030 LB REC - Consumer 1549-14130802 $13,969.60 Motorcycle 15030 LB REC - Consumer 1549-14110145 $21,293.94 Motorcycle 15030 LB REC - Consumer 1549-14108369 $19,123.71 Motorcycle 15030 LB REC - Consumer 1549-14102210 $2,067.01 Motorcycle 15030 LB REC - Consumer 1549-14117884 $11,301.94 Motorcycle 15030 LB REC - Consumer 1549-14134904 $8,728.80 Motorcycle 15030 LB REC - Consumer 1549-14103402 $18,177.29 Motorcycle 15030 LB REC - Consumer 1549-14133887 $26,927.92 Recreational Vehicle 15030 LB REC - Consumer 1549-14127075 $9,505.16 Recreational Vehicle A-9 15030 LB REC - Consumer 1549-14124124 $9,345.86 Recreational Vehicle 15030 LB REC - Consumer 1549-14110786 $36,708.33 Recreational Vehicle 15030 LB REC - Consumer 1549-14108305 $54,085.18 Recreational Vehicle 15030 LB REC - Consumer 1549-14112833 $22,902.42 Recreational Vehicle 15030 LB REC - Consumer 1549-14138007 $18,651.86 Recreational Vehicle 15030 LB REC - Consumer 1549-14028453 $3,200.08 Recreational Vehicle 15030 LB REC - Consumer 1549-14123060 $4,760.95 Recreational Vehicle 15030 LB REC - Consumer 1549-14104670 $4,264.16 Recreational Vehicle 15030 LB REC - Consumer 1549-14127270 $15,423.45 Recreational Vehicle 15030 LB REC - Consumer 1549-14134851 $13,779.69 Recreational Vehicle 15030 LB REC - Consumer 1549-14137899 $12,178.45 Recreational Vehicle 15030 LB REC - Consumer 1549-14132170 $16,120.59 Recreational Vehicle 15030 LB REC - Consumer 1549-14122680 $17,551.57 Recreational Vehicle 15030 LB REC - Consumer 1549-14117791 $12,377.31 Recreational Vehicle 15030 LB REC - Consumer 1549-14135286 $15,373.87 Recreational Vehicle 15030 LB REC - Consumer 1549-14131918 $15,551.97 Recreational Vehicle 15030 LB REC - Consumer 1549-14131148 $7,006.65 Recreational Vehicle 15030 LB REC - Consumer 1549-14125644 $9,496.51 Recreational Vehicle 15030 LB REC - Consumer 1549-14119704 $16,881.51 Recreational Vehicle 15030 LB REC - Consumer 1549-14117661 $20,722.93 Recreational Vehicle 15030 LB REC - Consumer 1549-14105621 $10,038.43 Recreational Vehicle 15030 LB REC - Consumer 1549-14119587 $12,895.31 Recreational Vehicle 15030 LB REC - Consumer 1549-14111575 $10,199.40 Recreational Vehicle 15030 LB REC - Consumer 1549-14130113 $6,693.86 Recreational Vehicle 15030 LB REC - Consumer 1549-14080317 $5,026.32 Recreational Vehicle 15030 LB REC - Consumer 1549-14116542 $18,968.53 Recreational Vehicle 15030 LB REC - Consumer 1549-14120598 $4,602.54 Recreational Vehicle 15030 LB REC - Consumer 1549-14115059 $3,977.50 Recreational Vehicle 15030 LB REC - Consumer 1549-14133182 $1,629.19 Recreational Vehicle 15030 LB REC - Consumer 1549-14074801 $6,859.19 Recreational Vehicle 15030 LB REC - Consumer 1549-14111613 $3,764.07 Recreational Vehicle 15030 LB REC - Consumer 1549-14132154 $6,176.09 Recreational Vehicle 15030 LB REC - Consumer 1549-14131580 $5,356.76 Recreational Vehicle 15030 LB REC - Consumer 1549-14106925 $2,067.69 Recreational Vehicle 15030 LB REC - Consumer 1549-14124898 $9,462.44 Recreational Vehicle 15030 LB REC - Consumer 1549-14111389 $3,148.83 Recreational Vehicle 15030 LB REC - Consumer 1549-14121459 $28,439.96 Recreational Vehicle 15030 LB REC - Consumer 1549-14131699 $42,817.98 Recreational Vehicle 15030 LB REC - Consumer 1549-14134022 $18,176.76 Recreational Vehicle 15030 LB REC - Consumer 1549-14132456 $45,348.86 Recreational Vehicle 15030 LB REC - Consumer 1549-14104535 $45,767.44 Recreational Vehicle 15030 LB REC - Consumer 1549-14112852 $41,231.68 Recreational Vehicle 15030 LB REC - Consumer 1549-14112874 $11,059.01 Recreational Vehicle 15030 LB REC - Consumer 1549-14112620 $37,696.86 Recreational Vehicle $3,206,184.15 A-10 Outstanding as of 1/28 ($2,600,000.00) A-11 20000 LB REC - Equipment 1549-14026097 $47,471.19 Aircraft 20000 LB REC - Equipment 1549-14065025 $11,676.14 Aircraft 20000 LB REC - Equipment 1549-14042673 $35,270.09 Aircraft 20000 LB REC - Equipment 1549-14029718 $29,601.99 Aircraft 20000 LB REC - Equipment 1549-14029765 $53,304.75 Aircraft 20000 LB REC - Equipment 1549-14039533 $36,680.10 Aircraft 20000 LB REC - Equipment 1549-14544937 $10,298.73 Aircraft 20000 LB REC - Equipment 1549-14061350 $44,056.51 Aircraft 20000 LB REC - Equipment 1549-79300929 $3,933.13 Aircraft 20000 LB REC - Equipment 1549-14561228 $8,058.80 Aircraft 20000 LB REC - Equipment 1549-14560921 $15,636.34 Aircraft 20000 LB REC - Equipment 1549-14558381 $6,657.31 Aircraft 20000 LB REC - Equipment 1549-14553487 $13,449.85 Aircraft 20000 LB REC - Equipment 1549-14553371 $10,442.56 Aircraft 20000 LB REC - Equipment 1549-14553356 $3,575.18 Aircraft 20000 LB REC - Equipment 1549-14552897 $18,922.94 Aircraft 20000 LB REC - Equipment 1549-14548571 $2,730.20 Aircraft 20000 LB REC - Equipment 1549-14545638 $10,961.85 Aircraft 20000 LB REC - Equipment 1549-14036711 $10,743.39 Aircraft 20000 LB REC - Equipment 1549-14032362 $70,679.90 Aircraft 20000 LB REC - Equipment 1549-14020809 $17,201.29 Aircraft 20000 LB REC - Equipment 1549-14041137 $21,227.23 Aircraft 20000 LB REC - Equipment 1549-14017550 $22,411.64 Aircraft 20000 LB REC - Equipment 1549-14035132 $18,359.79 Aircraft 20000 LB REC - Equipment 1549-14021495 $41,850.63 Aircraft 20000 LB REC - Equipment 1549-14072851 $17,355.83 Aircraft 20000 LB REC - Equipment 1549-14063064 $13,571.67 Aircraft 20000 LB REC - Equipment 1549-14053720 $15,929.61 Aircraft 20000 LB REC - Equipment 1549-14031572 $56,073.59 Aircraft 20000 LB REC - Equipment 1549-14026247 $31,872.73 Aircraft 20000 LB REC - Equipment 1549-14021516 $38,376.54 Aircraft 20000 LB REC - Equipment 1549-14014554 $45,877.49 Aircraft 20000 LB REC - Equipment 1549-14033534 $33,209.63 Aircraft 20000 LB REC - Equipment 1549-14549840 $13,740.81 Aircraft 20000 LB REC - Equipment 1549-14055119 $12,305.68 Aircraft 20000 LB REC - Equipment 1549-14048324 $43,357.03 Aircraft 20000 LB REC - Equipment 1549-14045627 $29,011.15 Aircraft 20000 LB REC - Equipment 1549-14013928 $59,182.00 Aircraft 20000 LB REC - Equipment 1549-14017524 $16,445.50 Aircraft 20000 LB REC - Equipment 1549-14051158 $39,888.67 Aircraft 20000 LB REC - Equipment 1549-14040835 $11,321.16 Aircraft 20000 LB REC - Equipment 1549-14029297 $14,471.66 Aircraft 20000 LB REC - Equipment 1549-14071310 $4,093.85 Aircraft A-12 20000 LB REC - Equipment 1549-14044845 $15,264.42 Aircraft 20000 LB REC - Equipment 1549-14053341 $42,306.55 Aircraft 20000 LB REC - Equipment 1549-14062250 $22,064.32 Aircraft 20000 LB REC - Equipment 1549-14053253 $49,289.04 Aircraft 20000 LB REC - Equipment 1549-14059288 $22,094.82 Aircraft 20000 LB REC - Equipment 1549-14079417 $20,302.01 Aircraft 20000 LB REC - Equipment 1549-14049985 $40,745.91 Aircraft 20000 LB REC - Equipment 1549-14050937 $48,875.78 Aircraft 20000 LB REC - Equipment 1549-14045271 $6,555.47 Aircraft 20000 LB REC - Equipment 1549-14041860 $10,220.63 Aircraft 20000 LB REC - Equipment 1549-14035750 $20,204.00 Aircraft 20000 LB REC - Equipment 1549-14076825 $11,361.54 Aircraft 20000 LB REC - Equipment 1549-14047301 $53,425.18 Aircraft 20000 LB REC - Equipment 1549-14049199 $31,870.89 Aircraft 20000 LB REC - Equipment 1549-14017846 $24,245.74 Aircraft 20000 LB REC - Equipment 1549-14033464 $32,635.37 Aircraft 20000 LB REC - Equipment 1549-14081752 $4,437.71 Aircraft 20000 LB REC - Equipment 1549-14061332 $14,675.59 Aircraft 20000 LB REC - Equipment 1549-14029697 $28,059.42 Aircraft 20000 LB REC - Equipment 1549-14029487 $34,914.20 Aircraft 20000 LB REC - Equipment 1549-14039117 $15,947.13 Aircraft 20000 LB REC - Equipment 1549-14050797 $26,237.18 Aircraft 20000 LB REC - Equipment 1549-14040273 $53,980.96 Aircraft 20000 LB REC - Equipment 1549-14033288 $20,167.76 Aircraft 20000 LB REC - Equipment 1549-14033951 $25,201.07 Aircraft 20000 LB REC - Equipment 1549-14032996 $25,325.79 Aircraft 20000 LB REC - Equipment 1549-14032927 $57,880.57 Aircraft 20000 LB REC - Equipment 1549-14053408 $14,231.79 Aircraft 20000 LB REC - Equipment 1549-14047742 $52,142.52 Aircraft 20000 LB REC - Equipment 1549-14050952 $39,878.54 Aircraft 20000 LB REC - Equipment 1549-14016543 $10,712.90 Aircraft 20000 LB REC - Equipment 1549-14017271 $17,039.66 Aircraft 20000 LB REC - Equipment 1549-14024934 $15,075.27 Aircraft 20000 LB REC - Equipment 1549-14049932 $48,350.09 Aircraft 20000 LB REC - Equipment 1549-14056493 $46,739.27 Aircraft 20000 LB REC - Equipment 1549-14034850 $13,728.21 Aircraft 20000 LB REC - Equipment 1549-14059817 $43,479.60 Aircraft 20000 LB REC - Equipment 1549-14052178 $23,889.88 Aircraft 20000 LB REC - Equipment 1549-14034705 $19,844.56 Aircraft 20000 LB REC - Equipment 1549-14027141 $23,442.45 Aircraft 20000 LB REC - Equipment 1549-14023163 $43,885.03 Aircraft 20000 LB REC - Equipment 1549-14083547 $8,091.66 Aircraft 20000 LB REC - Equipment 1549-14042695 $33,787.25 Aircraft 20000 LB REC - Equipment 1549-14045886 $7,237.08 Aircraft 20000 LB REC - Equipment 1549-14029809 $39,036.67 Aircraft A-13 20000 LB REC - Equipment 1549-14047105 $52,833.62 Aircraft 20000 LB REC - Equipment 1549-14065030 $6,164.99 Aircraft 20000 LB REC - Equipment 1549-14053851 $61,582.99 Aircraft 20000 LB REC - Equipment 1549-14048163 $29,519.10 Aircraft 20000 LB REC - Equipment 1549-14028910 $57,925.71 Aircraft 20000 LB REC - Equipment 1549-14043185 $63,994.35 Aircraft 20000 LB REC - Equipment 1549-14022542 $49,212.72 Aircraft 20000 LB REC - Equipment 1549-14033003 $43,764.10 Aircraft 20000 LB REC - Equipment 1549-14028446 $51,935.34 Aircraft 20000 LB REC - Equipment 1549-14036988 $54,053.22 Aircraft 20000 LB REC - Equipment 1549-14040491 $52,329.28 Aircraft 20000 LB REC - Equipment 1549-14026322 $10,599.35 Aircraft 20000 LB REC - Equipment 1549-14032581 $25,811.41 Aircraft 20000 LB REC - Equipment 1549-14035244 $39,105.43 Aircraft 20000 LB REC - Equipment 1549-14070254 $5,255.52 Aircraft 20000 LB REC - Equipment 1549-14045874 $30,968.21 Aircraft 20000 LB REC - Equipment 1549-14043534 $72,029.19 Aircraft 20000 LB REC - Equipment 1549-14032896 $48,659.59 Aircraft 20000 LB REC - Equipment 1549-14060126 $13,112.23 Aircraft 20000 LB REC - Equipment 1549-14024147 $10,519.76 Aircraft 20000 LB REC - Equipment 1549-14035498 $31,291.07 Aircraft 20000 LB REC - Equipment 1549-14016849 $78,032.10 Aircraft 20000 LB REC - Equipment 1549-14011768 $19,294.20 Aircraft 20000 LB REC - Equipment 1549-14082045 $12,048.77 Aircraft 20000 LB REC - Equipment 1549-14033576 $56,611.71 Aircraft 20000 LB REC - Equipment 1549-14045117 $53,958.68 Aircraft 20000 LB REC - Equipment 1549-14036354 $29,719.06 Aircraft 20000 LB REC - Equipment 1549-14026626 $73,090.00 Aircraft 20000 LB REC - Equipment 1549-14035718 $54,677.40 Aircraft 20000 LB REC - Equipment 1549-14051191 $7,760.38 Aircraft 20000 LB REC - Equipment 1549-14033485 $26,877.66 Aircraft 20000 LB REC - Equipment 1549-14044784 $24,758.15 Aircraft 20000 LB REC - Equipment 1549-14049934 $28,416.79 Aircraft 20000 LB REC - Equipment 1549-14027667 $35,699.79 Aircraft 20000 LB REC - Equipment 1549-14054504 $65,350.20 Aircraft 20000 LB REC - Equipment 1549-14024298 $50,396.40 Aircraft 20000 LB REC - Equipment 1549-14050591 $19,587.69 Aircraft 20000 LB REC - Equipment 1549-14029747 $46,109.44 Aircraft 20000 LB REC - Equipment 1549-14077617 $20,025.92 Aircraft 20000 LB REC - Equipment 1549-14057595 $33,072.89 Aircraft 20000 LB REC - Equipment 1549-14055644 $16,838.47 Aircraft 20000 LB REC - Equipment 1549-14019244 $50,223.59 Aircraft 20000 LB REC - Equipment 1549-14022099 $29,393.78 Aircraft 20000 LB REC - Equipment 1549-14019488 $28,671.95 Aircraft 20000 LB REC - Equipment 1549-14025863 $16,108.51 Aircraft A-14 20000 LB REC - Equipment 1549-14029353 $24,669.75 Aircraft 20000 LB REC - Equipment 1549-14046877 $15,426.96 Aircraft 20000 LB REC - Equipment 1549-14057355 $19,647.31 Aircraft 20000 LB REC - Equipment 1549-14053411 $36,883.08 Aircraft 20000 LB REC - Equipment 1549-14057494 $34,590.82 Aircraft 20000 LB REC - Equipment 1549-14052596 $22,726.04 Aircraft 20000 LB REC - Equipment 1549-14043929 $79,533.55 Aircraft 20000 LB REC - Equipment 1549-14046147 $37,902.28 Aircraft 20000 LB REC - Equipment 1549-14041616 $20,347.01 Aircraft 20000 LB REC - Equipment 1549-14044709 $47,912.40 Aircraft 20000 LB REC - Equipment 1549-14026917 $31,561.55 Aircraft 20000 LB REC - Equipment 1549-14027404 $23,140.20 Aircraft 20000 LB REC - Equipment 1549-14036794 $54,024.67 Aircraft 20000 LB REC - Equipment 1549-14035524 $38,905.53 Aircraft 20000 LB REC - Equipment 1549-14033337 $53,188.22 Aircraft 20000 LB REC - Equipment 1549-14022863 $19,384.51 Aircraft 20000 LB REC - Equipment 1549-14054035 $21,682.86 Aircraft 20000 LB REC - Equipment 1549-14057744 $16,378.65 Aircraft 20000 LB REC - Equipment 1549-14040682 $36,731.07 Aircraft 20000 LB REC - Equipment 1549-14056098 $19,598.58 Aircraft 20000 LB REC - Equipment 1549-14024015 $58,747.88 Aircraft 20000 LB REC - Equipment 1549-14020826 $23,711.57 Aircraft 20000 LB REC - Equipment 1549-14035948 $41,498.89 Aircraft 20000 LB REC - Equipment 1549-14056937 $19,546.66 Aircraft 20000 LB REC - Equipment 1549-14047797 $30,395.37 Aircraft 20000 LB REC - Equipment 1549-14038401 $18,690.78 Aircraft 20000 LB REC - Equipment 1549-14045298 $19,586.47 Aircraft 20000 LB REC - Equipment 1549-14063057 $15,935.83 Aircraft 20000 LB REC - Equipment 1549-14023733 $28,644.71 Aircraft 20000 LB REC - Equipment 1549-14037570 $33,657.20 Aircraft 20000 LB REC - Equipment 1549-14014181 $15,489.59 Aircraft 20000 LB REC - Equipment 1549-14024152 $15,935.19 Aircraft 20000 LB REC - Equipment 1549-14050013 $50,632.19 Aircraft 20000 LB REC - Equipment 1549-14048267 $31,587.05 Aircraft 20000 LB REC - Equipment 1549-14079708 $11,905.06 Aircraft 20000 LB REC - Equipment 1549-14035926 $27,874.78 Aircraft 20000 LB REC - Equipment 1549-14048852 $18,215.24 Aircraft 20000 LB REC - Equipment 1549-14056138 $30,370.31 Aircraft 20000 LB REC - Equipment 1549-14037394 $36,722.25 Aircraft 20000 LB REC - Equipment 1549-14028822 $24,595.90 Aircraft 20000 LB REC - Equipment 1549-14039942 $26,996.71 Aircraft 20000 LB REC - Equipment 1549-14043450 $18,049.00 Aircraft 20000 LB REC - Equipment 1549-14025368 $37,204.57 Aircraft 20000 LB REC - Equipment 1549-14034544 $36,193.10 Aircraft 20000 LB REC - Equipment 1549-14059113 $32,165.85 Aircraft A-15 20000 LB REC - Equipment 1549-14037984 $11,548.95 Aircraft 20000 LB REC - Equipment 1549-14015824 $26,544.79 Aircraft 20000 LB REC - Equipment 1549-14015983 $7,586.17 Aircraft 20000 LB REC - Equipment 1549-14020748 $18,576.69 Aircraft 20000 LB REC - Equipment 1549-14015293 $20,137.31 Aircraft 20000 LB REC - Equipment 1549-14027871 $21,930.75 Aircraft 20000 LB REC - Equipment 1549-14080044 $18,939.63 Aircraft 20000 LB REC - Equipment 1549-14056541 $45,647.95 Aircraft 20000 LB REC - Equipment 1549-14020253 $15,056.46 Aircraft 20000 LB REC - Equipment 1549-14024951 $12,607.89 Aircraft 20000 LB REC - Equipment 1549-14026235 $9,321.10 Aircraft 20000 LB REC - Equipment 1549-14070248 $18,379.37 Aircraft 20000 LB REC - Equipment 1549-14039622 $19,773.08 Aircraft 20000 LB REC - Equipment 1549-14033760 $28,040.97 Aircraft 20000 LB REC - Equipment 1549-14033212 $53,882.04 Aircraft 20000 LB REC - Equipment 1549-14029065 $27,486.77 Aircraft 20000 LB REC - Equipment 1549-14053182 $40,090.01 Aircraft 20000 LB REC - Equipment 1549-14029752 $45,468.63 Aircraft 20000 LB REC - Equipment 1549-14014480 $68,830.57 Aircraft 20000 LB REC - Equipment 1549-14044775 $7,115.65 Aircraft 20000 LB REC - Equipment 1549-14077460 $21,991.12 Aircraft 20000 LB REC - Equipment 1549-14058145 $40,276.75 Aircraft 20000 LB REC - Equipment 1549-14040536 $10,018.55 Aircraft 20000 LB REC - Equipment 1549-14035166 $43,466.57 Aircraft 20000 LB REC - Equipment 1549-14051234 $22,163.68 Aircraft 20000 LB REC - Equipment 1549-14022628 $20,860.01 Aircraft 20000 LB REC - Equipment 1549-14051168 $14,177.50 Aircraft 20000 LB REC - Equipment 1549-14067888 $20,049.61 Aircraft 20000 LB REC - Equipment 1549-14063338 $13,151.66 Aircraft 20000 LB REC - Equipment 1549-14050512 $35,979.69 Aircraft 20000 LB REC - Equipment 1549-14019752 $23,589.12 Aircraft 20000 LB REC - Equipment 1549-14030144 $41,456.48 Aircraft 20000 LB REC - Equipment 1549-14034690 $28,818.78 Aircraft 20000 LB REC - Equipment 1549-14017569 $18,920.28 Aircraft 20000 LB REC - Equipment 1549-14017632 $16,838.96 Aircraft 20000 LB REC - Equipment 1549-14039124 $20,142.29 Aircraft 20000 LB REC - Equipment 1549-14017130 $73,673.24 Aircraft 20000 LB REC - Equipment 1549-14044652 $51,894.77 Aircraft 20000 LB REC - Equipment 1549-14036974 $73,267.81 Aircraft 20000 LB REC - Equipment 1549-14030263 $63,521.13 Aircraft 20000 LB REC - Equipment 1549-14051696 $7,852.60 Aircraft 20000 LB REC - Equipment 1549-14072801 $10,091.23 Aircraft 20000 LB REC - Equipment 1549-14052058 $12,156.38 Aircraft 20000 LB REC - Equipment 1549-14025557 $23,968.55 Aircraft 20000 LB REC - Equipment 1549-14037650 $29,921.77 Aircraft A-16 20000 LB REC - Equipment 1549-14064366 $2,990.04 Aircraft 20000 LB REC - Equipment 1549-14059818 $81,547.12 Aircraft 20000 LB REC - Equipment 1549-14035863 $25,270.01 Aircraft 20000 LB REC - Equipment 1549-14021373 $35,930.24 Aircraft 20000 LB REC - Equipment 1549-14050874 $20,224.41 Aircraft 20000 LB REC - Equipment 1549-14053427 $6,016.92 Aircraft 20000 LB REC - Equipment 1549-14031267 $12,473.43 Aircraft 20000 LB REC - Equipment 1549-14057468 $26,098.03 Aircraft 20000 LB REC - Equipment 1549-14038725 $54,055.47 Aircraft 20000 LB REC - Equipment 1549-14037222 $19,861.35 Aircraft 20000 LB REC - Equipment 1549-14031314 $25,991.20 Aircraft 20000 LB REC - Equipment 1549-14030591 $33,375.74 Aircraft 20000 LB REC - Equipment 1549-14068688 $12,740.65 Aircraft 20000 LB REC - Equipment 1549-14064350 $17,160.33 Aircraft 20000 LB REC - Equipment 1549-14052921 $21,644.08 Aircraft 20000 LB REC - Equipment 1549-14052482 $47,307.15 Aircraft 20000 LB REC - Equipment 1549-14038156 $41,405.95 Aircraft 20000 LB REC - Equipment 1549-14033700 $18,406.68 Aircraft 20000 LB REC - Equipment 1549-14055398 $17,523.75 Aircraft 20000 LB REC - Equipment 1549-14045954 $24,021.40 Aircraft 20000 LB REC - Equipment 1549-14027080 $14,839.49 Aircraft 20000 LB REC - Equipment 1549-14057279 $17,368.10 Aircraft 20000 LB REC - Equipment 1549-14019264 $41,396.67 Aircraft 20000 LB REC - Equipment 1549-14019275 $22,330.86 Aircraft 20000 LB REC - Equipment 1549-14049145 $40,949.30 Aircraft 20000 LB REC - Equipment 1549-14038425 $47,285.18 Aircraft 20000 LB REC - Equipment 1549-14032594 $35,692.12 Aircraft 20000 LB REC - Equipment 1549-14017262 $43,738.25 Aircraft 20000 LB REC - Equipment 1549-14059833 $23,640.99 Aircraft 20000 LB REC - Equipment 1549-14049826 $29,102.64 Aircraft 20000 LB REC - Equipment 1549-14014806 $19,249.73 Aircraft 20000 LB REC - Equipment 1549-14032378 $33,540.39 Aircraft 20000 LB REC - Equipment 1549-14042641 $45,230.53 Aircraft 20000 LB REC - Equipment 1549-14023331 $14,553.42 Aircraft 20000 LB REC - Equipment 1549-14065661 $15,058.53 Aircraft 20000 LB REC - Equipment 1549-14035942 $40,052.47 Aircraft 20000 LB REC - Equipment 1549-14040887 $63,530.10 Aircraft 20000 LB REC - Equipment 1549-14036346 $25,790.40 Aircraft 20000 LB REC - Equipment 1549-14011380 $60,727.66 Aircraft 20000 LB REC - Equipment 1549-14047751 $19,611.53 Aircraft 20000 LB REC - Equipment 1549-14050871 $83,465.93 Aircraft 20000 LB REC - Equipment 1549-14046218 $31,564.22 Aircraft 20000 LB REC - Equipment 1549-14031639 $45,071.04 Aircraft 20000 LB REC - Equipment 1549-14031461 $21,901.46 Aircraft 20000 LB REC - Equipment 1549-14031813 $23,424.85 Aircraft A-17 20000 LB REC - Equipment 1549-14038721 $31,984.59 Aircraft 20000 LB REC - Equipment 1549-14027661 $51,939.44 Aircraft 20000 LB REC - Equipment 1549-14031413 $20,086.89 Aircraft 20000 LB REC - Equipment 1549-14034641 $51,145.43 Aircraft 20000 LB REC - Equipment 1549-14078833 $17,442.25 Aircraft 20000 LB REC - Equipment 1549-14059469 $28,254.37 Aircraft 20000 LB REC - Equipment 1549-14017566 $23,561.54 Aircraft 20000 LB REC - Equipment 1549-14047486 $21,947.29 Aircraft 20000 LB REC - Equipment 1549-14031459 $19,374.96 Aircraft 20000 LB REC - Equipment 1549-14040530 $23,808.16 Aircraft 20000 LB REC - Equipment 1549-14019827 $12,933.16 Aircraft 20000 LB REC - Equipment 1549-14022915 $15,715.74 Aircraft 20000 LB REC - Equipment 1549-14040457 $12,040.32 Aircraft 20000 LB REC - Equipment 1549-14029550 $16,433.23 Aircraft 20000 LB REC - Equipment 1549-14042242 $38,740.00 Aircraft 20000 LB REC - Equipment 1549-14055829 $85,203.74 Aircraft 20000 LB REC - Equipment 1549-14067442 $9,421.76 Aircraft 20000 LB REC - Equipment 1549-14055798 $21,117.24 Aircraft 20000 LB REC - Equipment 1549-14014505 $38,867.52 Aircraft 20000 LB REC - Equipment 1549-79300744 $14,856.92 Aircraft 20000 LB REC - Equipment 1549-14020234 $51,925.22 Aircraft 20000 LB REC - Equipment 1549-14056055 $54,201.27 Aircraft 20000 LB REC - Equipment 1549-79300062 $5,821.49 Aircraft 20000 LB REC - Equipment 1549-14556265 $11,999.45 Aircraft 20000 LB REC - Equipment 1549-14543268 $14,309.13 Aircraft 20000 LB REC - Equipment 1549-14009079 $8,696.57 Aircraft 20000 LB REC - Equipment 1549-14055406 $41,036.52 Aircraft 20000 LB REC - Equipment 1549-14778005 $17,779.72 Aircraft 20000 LB REC - Equipment 1549-14739309 $19,401.80 Aircraft 20000 LB REC - Equipment 1549-14769920 $10,845.66 Aircraft 20000 LB REC - Equipment 1549-14773719 $28,502.85 Aircraft 20000 LB REC - Equipment 1549-14755350 $18,559.52 Aircraft 20000 LB REC - Equipment 1549-14028099 $10,499.58 Aircraft 20000 LB REC - Equipment 1549-14078355 $19,312.89 Aircraft 20000 LB REC - Equipment 1549-14764704 $53,825.83 Aircraft 20000 LB REC - Equipment 1549-14019826 $34,407.63 Aircraft 20000 LB REC - Equipment 1549-14036966 $13,260.36 Aircraft 20000 LB REC - Equipment 1549-14033959 $20,411.33 Aircraft 20000 LB REC - Equipment 1549-14751554 $12,156.33 Aircraft 20000 LB REC - Equipment 1549-14042528 $27,253.31 Aircraft 20000 LB REC - Equipment 1549-14041800 $43,400.15 Aircraft 20000 LB REC - Equipment 1549-14021235 $33,616.76 Aircraft 20000 LB REC - Equipment 1549-14009850 $13,153.09 Aircraft 20000 LB REC - Equipment 1549-14066405 $19,300.67 Aircraft 20000 LB REC - Equipment 1549-14742754 $19,352.30 Aircraft A-18 20000 LB REC - Equipment 1549-14006906 $9,440.54 Aircraft 20000 LB REC - Equipment 1549-14004793 $25,365.56 Aircraft 20000 LB REC - Equipment 1549-14047829 $15,621.60 Aircraft 20000 LB REC - Equipment 1549-14056143 $12,631.34 Aircraft 20000 LB REC - Equipment 1549-14048999 $26,457.04 Aircraft 20000 LB REC - Equipment 1549-14057488 $15,874.09 Aircraft 20000 LB REC - Equipment 1549-14042258 $80,772.52 Aircraft 20000 LB REC - Equipment 1549-14021535 $83,533.33 Aircraft 20000 LB REC - Equipment 1549-14775586 $51,043.37 Aircraft 20000 LB REC - Equipment 1549-14774091 $36,195.32 Aircraft 20000 LB REC - Equipment 1549-14795579 $20,458.20 Aircraft 20000 LB REC - Equipment 1549-14738685 $21,022.00 Aircraft 20000 LB REC - Equipment 1549-14798482 $4,589.76 Aircraft 20000 LB REC - Equipment 1549-14057605 $18,568.01 Aircraft 20000 LB REC - Equipment 1549-14030575 $25,720.38 Aircraft 20000 LB REC - Equipment 1549-14035678 $21,556.07 Aircraft 20000 LB REC - Equipment 1549-14016826 $4,586.32 Aircraft 20000 LB REC - Equipment 1549-14775179 $21,780.29 Aircraft 20000 LB REC - Equipment 1549-14051513 $46,013.91 Aircraft 20000 LB REC - Equipment 1549-14033311 $20,503.32 Aircraft 20000 LB REC - Equipment 1549-14738249 $11,137.39 Aircraft 20000 LB REC - Equipment 1549-14075150 $7,354.29 Aircraft 20000 LB REC - Equipment 1549-14055545 $22,324.44 Aircraft 20000 LB REC - Equipment 1549-14024324 $17,117.17 Aircraft 20000 LB REC - Equipment 1549-14035265 $51,315.09 Aircraft 20000 LB REC - Equipment 1549-14760941 $27,523.45 Aircraft 20000 LB REC - Equipment 1549-14036964 $3,125.18 Aircraft 20000 LB REC - Equipment 1549-14054435 $13,333.85 Aircraft 20000 LB REC - Equipment 1549-14056538 $55,965.24 Aircraft 20000 LB REC - Equipment 1549-14042840 $23,276.40 Aircraft 20000 LB REC - Equipment 1549-14035437 $22,668.00 Aircraft 20000 LB REC - Equipment 1549-14015069 $47,835.82 Aircraft 20000 LB REC - Equipment 1549-14784061 $17,634.39 Aircraft 20000 LB REC - Equipment 1549-14042755 $17,772.48 Aircraft 20000 LB REC - Equipment 1549-14056827 $32,322.36 Aircraft 20000 LB REC - Equipment 1549-14046098 $35,723.94 Aircraft 20000 LB REC - Equipment 1549-14739166 $21,485.17 Aircraft 20000 LB REC - Equipment 1549-14012746 $51,667.17 Aircraft 20000 LB REC - Equipment 1549-14060323 $34,698.34 Aircraft 20000 LB REC - Equipment 1549-14029401 $38,302.55 Aircraft 20000 LB REC - Equipment 1549-14753245 $26,329.35 Aircraft 20000 LB REC - Equipment 1549-14797300 $54,791.00 Aircraft 20000 LB REC - Equipment 1549-14772012 $22,722.33 Aircraft 20000 LB REC - Equipment 1549-14049278 $19,648.64 Aircraft 20000 LB REC - Equipment 1549-14055340 $8,018.34 Aircraft A-19 20000 LB REC - Equipment 1549-14786472 $20,372.73 Aircraft 20000 LB REC - Equipment 1549-14045200 $29,277.60 Aircraft 20000 LB REC - Equipment 1549-14049747 $35,798.04 Aircraft 20000 LB REC - Equipment 1549-14076548 $18,126.94 Aircraft 20000 LB REC - Equipment 1549-14558673 $10,542.04 Aircraft 20000 LB REC - Equipment 1549-79300998 $8,839.40 Aircraft 20000 LB REC - Equipment 1549-14056212 $80,512.61 Aircraft 20000 LB REC - Equipment 1549-14037013 $58,876.46 Aircraft 20000 LB REC - Equipment 1549-14059230 $82,056.18 Aircraft 20000 LB REC - Equipment 1549-14023417 $83,868.76 Aircraft 20000 LB REC - Equipment 1549-14042215 $52,652.40 Aircraft 20000 LB REC - Equipment 1549-14056843 $2,134.12 Aircraft 20000 LB REC - Equipment 1549-14029294 $55,373.89 Aircraft 20000 LB REC - Equipment 1549-14053365 $54,183.31 Aircraft 20000 LB REC - Equipment 1549-14059761 $9,429.21 Aircraft 20000 LB REC - Equipment 1549-14025921 $9,117.48 Aircraft 20000 LB REC - Equipment 1549-14031505 $9,040.82 Aircraft 20000 LB REC - Equipment 1549-14051655 $16,492.24 Aircraft 20000 LB REC - Equipment 1549-14015056 $38,637.64 Aircraft 20000 LB REC - Equipment 1549-14061300 $33,188.41 Aircraft 20000 LB REC - Equipment 1549-14043042 $22,373.26 Aircraft 20000 LB REC - Equipment 1549-14043135 $13,482.66 Aircraft 20000 LB REC - Equipment 1549-14046156 $43,288.63 Aircraft 20000 LB REC - Equipment 1549-79336864 $31,336.86 Truck 20000 LB REC - Equipment 1549-79333553 $33,700.08 Truck 20000 LB REC - Equipment 1549-79336812 $176,683.30 Truck 20000 LB REC - Equipment 1549-79336799 $26,403.58 Truck 20000 LB REC - Equipment 1549-79336863 $13,609.29 Truck 20000 LB REC - Equipment 1549-79333069 $17,556.31 Truck 20000 LB REC - Equipment 1549-79330049 $14,952.88 Truck 20000 LB REC - Equipment 1549-79336804 $15,685.97 Truck 20000 LB REC - Equipment 1549-79336843 $12,887.37 Truck 20000 LB REC - Equipment 1549-79336842 $27,373.34 Truck 20000 LB REC - Equipment 1549-79336840 $15,833.60 Truck 20000 LB REC - Equipment 1549-79333412 $6,918.15 Truck 20000 LB REC - Equipment 1549-79322242 $17,517.50 Truck 20000 LB REC - Equipment 1549-79319686 $6,936.67 Truck 20000 LB REC - Equipment 1549-79320386 $25,934.97 Truck 20000 LB REC - Equipment 1549-79322479 $38,140.39 Truck 20000 LB REC - Equipment 1549-79330459 $8,680.84 Truck 20000 LB REC - Equipment 1549-79321990 $74,344.28 Truck 20000 LB REC - Equipment 1549-79336866 $21,973.30 Truck 20000 LB REC - Equipment 1549-79336865 $10,715.61 Truck 20000 LB REC - Equipment 1549-79336808 $21,623.49 Truck 20000 LB REC - Equipment 1549-79336828 $16,368.11 Truck A-20 20000 LB REC - Equipment 1549-79336825 $43,723.37 Truck 20000 LB REC - Equipment 1549-79336824 $70,422.90 Truck 20000 LB REC - Equipment 1549-79336822 $51,543.35 Truck 20000 LB REC - Equipment 1549-79336829 $52,132.86 Truck 20000 LB REC - Equipment 1549-79336855 $153,973.55 Truck 20000 LB REC - Equipment 1549-79336826 $41,315.81 Truck 20000 LB REC - Equipment 1549-79335760 $88,761.53 Truck 20000 LB REC - Equipment 1549-79332382 $76,873.75 Truck 20000 LB REC - Equipment 1549-79336878 $250,400.86 Truck 20000 LB REC - Equipment 1549-79336803 $48,631.02 Truck 20000 LB REC - Equipment 1549-79336801 $67,149.87 Truck 20000 LB REC - Equipment 1549-79336809 $31,868.41 Truck 20000 LB REC - Equipment 1549-79336814 $25,473.05 Truck 20000 LB REC - Equipment 1549-79336813 $59,476.60 Truck 20000 LB REC - Equipment 1549-79336811 $55,906.18 Truck 20000 LB REC - Equipment 1549-79336797 $53,674.62 Truck 20000 LB REC - Equipment 1549-79334870 $145,596.21 Truck 20000 LB REC - Equipment 1549-79336862 $42,977.86 Truck 20000 LB REC - Equipment 1549-79336861 $12,497.94 Truck 20000 LB REC - Equipment 1549-79336860 $37,752.22 Truck 20000 LB REC - Equipment 1549-79336859 $16,768.86 Truck 20000 LB REC - Equipment 1549-79336858 $49,588.37 Truck 20000 LB REC - Equipment 1549-79336857 $38,565.06 Truck 20000 LB REC - Equipment 1549-79336835 $53,773.85 Truck 20000 LB REC - Equipment 1549-79333792 $63,275.73 Truck 20000 LB REC - Equipment 1549-79331843 $44,668.16 Truck 20000 LB REC - Equipment 1549-79321792 $57,951.37 Truck 20000 LB REC - Equipment 1549-79336877 $33,250.00 Truck 20000 LB REC - Equipment 1549-79336876 $21,671.50 Truck 20000 LB REC - Equipment 1549-79336874 $90,728.79 Truck 20000 LB REC - Equipment 1549-79336873 $30,579.33 Truck 20000 LB REC - Equipment 1549-79336872 $13,901.70 Truck 20000 LB REC - Equipment 1549-79336870 $9,047.43 Truck 20000 LB REC - Equipment 1549-79336846 $50,166.60 Truck 20000 LB REC - Equipment 1549-79336844 $117,825.45 Truck 20000 LB REC - Equipment 1549-79336841 $39,526.12 Truck 20000 LB REC - Equipment 1549-79336839 $9,546.86 Truck 20000 LB REC - Equipment 1549-79336838 $107,381.07 Truck 20000 LB REC - Equipment 1549-79336819 $53,922.50 Truck 20000 LB REC - Equipment 1549-79333593 $24,185.72 Truck 20000 LB REC - Equipment 1549-79332372 $73,620.08 Truck 20000 LB REC - Equipment 1549-79330370 $54,674.83 Truck 20000 LB REC - Equipment 1549-79318926 $47,166.98 Truck 20000 LB REC - Equipment 1549-79302370 $5,350.96 Truck 20000 LB REC - Equipment 1549-79300422 $9,547.20 Truck A-21 20000 LB REC - Equipment 1549-79336848 $26,249.47 Truck 20000 LB REC - Equipment 1549-79336847 $56,984.34 Truck 20000 LB REC - Equipment 1549-79336834 $54,928.55 Truck 20000 LB REC - Equipment 1549-79336833 $42,069.31 Truck 20000 LB REC - Equipment 1549-79336562 $62,317.63 Truck 20000 LB REC - Equipment 1549-79333719 $71,147.15 Truck 20000 LB REC - Equipment 1549-79330673 $16,548.31 Truck 20000 LB REC - Equipment 1549-79330363 $73,302.71 Truck 20000 LB REC - Equipment 1549-79321538 $26,892.01 Truck 20000 LB REC - Equipment 1549-79336802 $31,385.42 Truck 20000 LB REC - Equipment 1549-79319428 $18,092.33 Truck 20000 LB REC - Equipment 1549-79336410 $95,544.26 Truck 20000 LB REC - Equipment 1549-79336820 $52,668.35 Truck 20000 LB REC - Equipment 1549-79332393 $33,026.53 Truck 20000 LB REC - Equipment 1549-79320956 $52,348.55 Truck 20000 LB REC - Equipment 1549-79336869 $27,453.59 Truck 20000 LB REC - Equipment 1549-79336868 $28,126.67 Truck 20000 LB REC - Equipment 1549-79336867 $62,933.94 Truck 20000 LB REC - Equipment 1549-79333316 $10,819.72 Truck 20000 LB REC - Equipment 1549-79336818 $9,399.36 Truck 20000 LB REC - Equipment 1549-79336810 $13,145.05 Truck 20000 LB REC - Equipment 1549-79336854 $40,098.38 Truck 20000 LB REC - Equipment 1549-79336853 $14,031.43 Truck 20000 LB REC - Equipment 1549-79336852 $59,834.30 Truck 20000 LB REC - Equipment 1549-79336850 $37,753.70 Truck 20000 LB REC - Equipment 1549-79318701 $56,675.18 Truck 20000 LB REC - Equipment 1549-79336849 $14,352.24 Truck 20000 LB REC - Equipment 1549-79336871 $33,009.57 Truck $15,499,063.21 Outstanding as of 1/28 ($14,100,000.00)
A-22
Lease number Remaining Receivable Remaining Unearned 7225863 55310 2594.15 7225753 94459.3 4774.27 7226352 108991.1 5507.33 7226505 3179 79.19 7228342 14227.07 797.78 7227494 796521.46 80609.98 7228336 23179.42 920.34 7228684 14756 945.53 7229712 49392.75 2116.33 7229721 46249.92 2672.96 7231610 9241.92 344.63 7232507 64673.07 2518.12 7232294 215611.2 20598.98 7232426 48253.09 4895.33 7232302 73037.91 5873.76 40277605/1 201697.12 27152.1 40289009/1 208473.51 36781.41 40278814/1 63364 2461.56 40280921/1 24864 1197.66 40287021/1 68143.5 5515.72 40295210/1 54980.28 4870.14 40297778/1 165265.65 20131.85 40297904/1 237498.92 28930.89 40300734/1 205309.8 37062.69 7229730 27750 1603.79 40052019/1 136606.42 18128.86 40070200/1 194748.18 29495.85 40080391/1 1844.69 177.97 40093148/1 73854.8 5811.52 40096162/1 145659.16 23229.12 40096549/1 145659.15 23229.12 40100316/1 67320.39 5113.27 40102360/1 186465.2 25466.07 40106363/1 129642.37 9862.98 40118194/1 92241.22 6239.27 40118861/1 352274.23 29519.03 40124245/1 176108.1 18333.01 40126130/1 52847.84 2371.16 40126211/1 35734.5 4220.56 40081991/1 25032.24 1599.14 40136938/1 88620.22 9277.57 40148583/1 13449.15 511.72 40150859/1 197426.15 28962.33 40150992/1 10374.54 591.91 40152517/1 206539.85 29760.3 A-23 40159233/1 195078.51 23242.71 40161393/1 6781.59 277.76 40161659/1 196258.32 32814.56 40161870/1 6020.85 197.8 40170591/1 168038.84 24733.21 40172694/1 57456 3996.33 40172758/1 98413.65 10389.86 40177114/1 28266.88 2220.03 40181147/1 15040 1320.84 40192185/1 0 0 40201325/1 167118.1 17819.97 40201474/1 418229.12 44450.38 40206445/1 8723.75 562.98 40206542/1 221664.19 34592.87 40210433/1 60099.69 4258.68 40210478/1 0 0 40212574/1 49104.64 4901.05 40219950/1 40715.24 2132.68 40232990/1 15901.02 1481.6 40233066/1 15901.02 1481.6 40233125/1 126935.34 16023.83 40251394/1 187048.58 29339.6 40256331/1 102549.16 5534.34 40256544/1 56398.86 3067.48 40256637/1 68480.86 2327.41 40258919/1 91470.37 9639.58 40260688/1 39518.29 974.14 40260937/1 119748.64 11331.18 40269549/1 15901.02 1591.87 40273695/1 91426 6418.27 40307105/1 16784.41 1711.79 40307213/1 16784.41 1711.79 40310398/1 76954.2 6875.18 40310685/1 65823.47 4896.66 40314720/1 234444.05 37099.69 40316681/1 51298.8 4583.5 40316745/1 37191 4215.82 40317966/1 8992.32 859.32 40346333/1 41968.24 3789.99 40351184/1 104121.9 8312.99 40361707/1 212460.38 34342.44 40365976/1 40097.5 1769.95 40370361/1 339734.07 37239.42 40372715/1 56628.62 8992.92 40382897/1 19579.77 1485.18 40390522/1 161833.98 12004.83 A-24 40400651/1 77922.72 4226.16 40403047/1 223389.9 14422.37 40403811/1 207790.66 31237.11 40409126/1 71747.6 4540.92 40411396/1 98111.19 9530.7 40412031/1 23546.9 1964.59 40424037/1 32875.18 1822.34 40431321/1 24883.95 2187.57 40436305/1 45503.76 4644.33 40442061/1 30600.24 2525.98 40443516/1 389157.65 52846.63 40446186/1 40820.77 3742.09 40454238/1 19055.4 1624.81 40454320/1 18476.4 1035.9 40456607/1 41470 4921.6 40457067/1 41069.38 3905.52 40460238/1 121633.2 13784.54 40461811/1 22418.26 1998.01 40462946/1 40420.84 4001.78 40465881/1 23546.9 2157.95 40465921/1 214139.51 31355.99 40473608/1 18563.07 2124.28 40476516/1 13571.53 1445.3 40478087/1 91177.59 10700.02 40484698/1 38780.3 4369.19 40487503/1 195906.81 29228.2 40491579/1 90687.24 8205.28 40493811/1 18563.07 2124.28 40493917/1 47299.2 4922.73 40494172/1 35356.6 3735.66 40494221/1 14681.79 1545.14 40499039/1 35282.02 3923.27 40505536/1 66562.34 5819.94 40510763/1 50813.72 4919.47 40512609/1 860697.2 106687.17 40513452/1 191178.72 29099.75 40513626/1 66890.04 5962.36 40516351/1 76164.18 6258.61 40516910/1 57233.66 4561.79 40524960/1 46721.46 3987.37 40528924/1 738098.4 104725.08 40532722/1 37219.9 2531.24 40538066/1 44467.25 5809.64 40540849/1 22987.2 1282.23 40536186/1 210026.67 33577.69 40544258/1 223500.13 18159.13 A-25 40546786/1 195349.52 30168.43 40546901/1 798859.13 118726.03 40546981/1 4048306.99 580976.72 40547111/1 40691.2 4486 40550772/1 188725.66 22824.58 40550820/1 312812.64 33790.22 40550931/1 14202.44 0 40550957/1 7811.3 0 40553078/1 129409.95 12343.38 40556751/1 61002.6 7672.77 40557492/1 242950.32 21951.29 40558407/1 62437.1 5457.39 40558565/1 381913.95 47079.13 40558769/1 39531 3604.23 40559035/1 799102.5 131746.04 40561261/1 202428.95 26089.97 40561300/1 628496 75586.88 40561473/1 113634.65 12505.2 40561616/1 45105.6 5558.26 40561660/1 41263.75 4066.23 40561714/1 189198.8 30072.18 40564964/1 712259.46 91758.11 40567629/1 43865.79 4118.95 40567778/1 28473.96 1451.83 40573652/1 60493.91 4580.97 40573713/1 219500.84 35917.56 40574139/1 39183.53 4566.35 40574218/1 83192.72 6261.81 40573806/1 151072.48 9622.19 40575311/1 283653.3 55083.46 40575748/1 37857.77 2859.88 40576037/1 441012 21651.68 40576057/1 20187.84 2111.49 40576074/1 130806.26 8296.82 40577264/1 166439.3 26796.7 40577310/1 2000 402.63 40577413/1 422744.75 47936.96 40577477/1 192321.6 29298.47 40577505/1 421472.96 65661.35 40577836/1 174649 23621.86 40580466/1 42222.18 5203.84 40580850/1 136072.32 15058.16 40583147/1 29722.8 2736.58 40588592/1 163088.25 13375.68 40595541/1 16701.29 2050.12 40601034/1 38838.72 3861.86 A-26 40601343/1 109089 10125.28 40604636/1 481296 67660.84 40612631/1 29456.16 3515.51 40629185/1 16819.67 1721.59 40635211/1 44340.26 5353.95 40635324/1 44015.75 4656.93 40640698/1 41892 4619.46 40652227/1 59787.6 6310.56 40658071/1 130480.2 12936.8 40658188/1 48650.32 5548.55 40661318/1 0 0 40661419/1 46575.3 4420.83 40661935/1 44880 4264.76 40666662/1 336036.6 51092.24 40669106/1 0 0 40671976/1 46783.71 4920.59 40678896/1 39020.25 3866.77 40679401/1 10558 1061.63 40682727/1 221264.4 35487.47 40684518/1 50090.18 3612.05 40684634/1 45549.84 5401.46 40690035/1 45470.16 3697.15 40698959/1 220239 35630.54 40704956/1 11064.82 1133.59 40705081/1 84998.73 7263.77 40708492/1 47740 4666.41 40710595/1 13542.75 1700.41 40713450/1 25390.72 2297.9 40717173/1 51258.58 5612.6 40719657/1 53269.23 6095.81 40719943/1 57424.32 6803.59 40721699/1 25129.4 5723.22 40725676/1 25045.16 2005.32 40730342/1 47059.65 5388.69 40730566/1 80706.24 10769.18 40738551/1 49103.84 10442.11 40739349/1 233640.4 32465.12 40741520/1 690211.32 82251.72 40741825/1 218638.56 36457.38 40744049/1 47975.75 5246.72 40747852/1 447484.97 65458.55 40750049/1 126010.22 18303.04 40755260/1 402713.1 60345.38 40756890/1 192480.08 26392.04 40760648/1 137208.51 20364.99 40760612/1 104738.56 16771.39 A-27 40760990/1 12465.9 1540.92 40761474/1 3834.7 283.59 40761521/1 254370.63 52755.66 40761649/1 75085.76 11252.18 40762905/1 106317.19 12074.6 40768455/1 4494.32 0 40768604/1 5685.84 168.37 40768747/1 5685.84 168.37 40770958/1 4781.63 289.33 40771136/1 198645 30866.62 40773254/1 52730.44 6420.02 40773688/1 190972.56 23788.51 40776169/1 43708 5103.42 40778622/1 210691.17 39241.86 40778862/1 11760.56 1799.93 40781626/1 39000.6 2811.56 40783482/1 40859.1 4144.3 40783700/1 88255.36 7798.88 40788018/1 34866.9 5341.12 40788178/1 43139.98 4641.5 40788370/1 2177.46 0 40788458/1 2177.46 0 40790642/1 2608.92 138.22 40792058/1 10056 490.87 40791009/1 62931.35 7483.28 40796789/1 40304.73 4013.19 40798540/1 14606.48 1469.58 40800926/1 48905.64 5169.26 40801005/1 11234.74 1393.21 40801050/1 84863.36 8545.34 40795922/1 41701.77 3731.43 40803342/1 166738.38 11198.8 40803614/1 56216.5 6926.75 40803898/1 70326.81 7457.52 40806752/1 91140 9276.36 40806785/1 56411.6 6328.1 40807347/1 32495.96 3953.19 40811585/1 26463.15 2811.58 40811753/1 73426.16 7810.53 40811897/1 41175 6339.27 40811957/1 51850 8215.36 40812258/1 81080.81 8378.14 40812561/1 6633.48 229.42 40812637/1 6633.48 229.42 40812710/1 6446.58 222.99 40812769/1 6446.58 222.99 A-28 40814559/1 50182.72 6041.5 40816241/1 357529.28 24702.36 40816418/1 55934.72 6184.27 40816337/1 52914.39 8632 40823205/1 54100.79 6729.81 40823274/1 49037.33 5830.35 40828783/1 60380.14 7269.96 40828849/1 47438.68 6276.14 40828992/1 23672.84 3388.23 40832059/1 138137.04 9453.17 40834192/1 48604.92 5661.84 40837915/1 262252.56 40286.55 40843056/1 554582 92079.18 40845198/1 114621.6 11680.2 40845365/1 64544.04 6084.77 40848800/1 12171.6 1624.41 40849006/1 36536.2 2849.44 40849082/1 42700 6339.27 40850708/1 93725.42 8163.53 40850855/1 45983.07 4826.13 40851231/1 62103.21 7385.74 40851560/1 57085.5 6429.13 40853420/1 51491.54 5578.7 40853480/1 90314.99 9621.96 40853601/1 53370.5 8215.36 40857565/1 175756.48 25898.12 40858333/1 58208.39 6375.58 40858675/1 511449.22 74970.74 40860317/1 68983.2 6406.06 40860501/1 82892.04 10120.62 40860757/1 53722.73 6412.7 40860776/1 48156.16 8197.72 40861463/1 25749.66 2739.44 40863328/1 66559.93 8031.09 40863410/1 50935.04 8594 40863455/1 50785.09 6808.18 40863748/1 283953.14 55522.13 40863720/1 47850 5592.04 40866148/1 23887.06 2099.86 40866245/1 48754.44 6359.93 40863900/1 49098.9 6357.23 40869484/1 222055.32 25750.58 40869648/1 52878.87 6152.66 40873304/1 34513.56 5566.54 40874948/1 98683.17 13550.92 40856858/1 123405.4 14502.51 A-29 40880105/1 12225.7 1573.82 40880170/1 50750.87 6314.95 40880240/1 44225 6698.08 40883608/1 67913.1 7405.33 40884187/1 354043.7 44319.69 40886382/1 30146.1 2724.71 40889410/1 15240.4 1799.21 40892027/1 8641.58 769.85 40892177/1 36536.2 2782.2 40895133/1 30146.1 2724.71 40903074/1 47703.04 2602.02 40903172/1 80036.4 8204.52 40903250/1 40432.96 4620.74 40891954/1 21453.87 2646.93 40919944/1 48678.37 6190.74 40920075/1 88366.5 11700.28 40923094/1 57324.76 8115.84 40925614/1 48295.41 6471.74 40925725/1 70873.44 8820.91 40928012/1 23995.44 1295.62 40933343/1 58833.92 7895.18 40933421/1 18462.9 2222.27 40933404/1 53393.4 6509.49 40937971/1 127036.86 9328.53 40938349/1 152885.13 14955.47 40939034/1 500350.5 72807.73 40940702/1 52447.66 6189.19 40940835/1 46081 6053.07 40941734/1 240300 42856.25 40942273/1 149468.28 7043.73 40943453/1 27114.9 2946.63 40943609/1 68641.51 7863.8 40944025/1 38273.4 4805.12 40944168/1 32406.74 3142.79 40944283/1 102351.68 13256.32 40944516/1 58465.77 7209.05 40945511/1 16515.87 2046.28 40947341/1 59922.06 7333.67 40947560/1 46917.25 3631.99 40947621/1 22436.12 1993.77 40947901/1 71384.23 8584.26 40949204/1 37143.2 2998.99 40949342/1 42556.34 5194.54 40951288/1 127040 19814.91 40951658/1 12577.32 1656.13 40951741/1 12577.32 1656.13 A-30 40954345/1 73285.52 9219.5 40957460/1 2419.72 0 40959801/1 275087.96 52401.26 40962137/1 33364.4 3166 40962808/1 161851.92 26993.63 40964383/1 309871.04 33864.77 40964493/1 45675.63 4129.11 40964565/1 11078.78 1555.76 40966675/1 372346.67 28765.47 40966820/1 217421.76 26405.75 40966896/1 100335.23 18394.22 40969442/1 63102.94 4582.41 40969601/1 66771 8307.85 40971504/1 27692.8 3693 40971554/1 13312 1761.55 40971611/1 65216 9598.03 40972313/1 259881.05 41872.26 40972362/1 752014.45 124022.4 40973788/1 9522 936.43 40976796/1 11078.78 1530.87 40978880/1 63912.96 5313.78 40979340/1 87895.5 10679.76 40981789/1 12049.52 1690.71 40981846/1 12049.52 1690.71 40982314/1 43352.26 5825.34 40987728/1 219450 38340.49 40990348/1 58122.83 7483.07 40995801/1 55523.93 6313.77 40995876/1 38704.68 3202.17 40996644/1 68513.38 5739.91 40997215/1 242031.16 11929.94 41003734/1 252815 43067.01 41003993/1 183330 30247.88 41004402/1 116792.4 8698.65 41007456/1 92678.48 9046.48 41007686/1 68454.44 7981.62 41008753/1 29463.39 3364.84 41010405/1 33236.65 4472.04 41010438/1 214480.94 20277.29 41010613/1 250213.2 27253.43 41010818/1 43032.1 5299.27 41011905/1 29498.9 1725.29 41014685/1 66856.35 8260.17 41015101/1 333426.25 28597.27 41015387/1 24594.5 2279.84 41015414/1 11436.16 1632.25 A-31 41017563/1 205580.37 28055.81 41017758/1 116954.63 13850.48 41017902/1 80281.17 8610.59 41017977/1 48420 7671.9 41020382/1 47591.1 5236.93 41020854/1 24594.5 2224.53 41020937/1 11436.16 1609.56 41023432/1 252780.18 43043.38 41023966/1 57277.11 7122.19 41025159/1 39743.63 3927.94 41028196/1 274050 52837.08 41030598/1 151009.65 20337.69 41032732/1 46158.38 5699.66 41039791/1 48490.88 6171.32 41042170/1 101142.03 10201.83 41042567/1 49189.14 4151.36 41042608/1 49189.14 4229.35 41045185/1 61244.76 15531.45 41047579/1 53971.52 5328.3 41050696/1 58077.88 7839.31 41050870/1 63571.53 8213.27 41052653/1 24875.29 2392.6 41055474/1 49598.58 5528.6 41055800/1 468000 46271.97 41057075/1 373961.6 35055.72 41059499/1 258210 49024.07 41060755/1 106829.12 12616.11 41061555/1 45125.21 6343.87 41064024/1 70581.2 6506.37 41067486/1 276712.2 50337.69 41067545/1 242580 45931.19 41069815/1 -5550.89 2473.45 41072333/1 13264 939.34 41073144/1 282750 51768.64 41075393/1 57750 6337.54 41075531/1 63700 7941.01 41075891/1 35490 3505.06 41075931/1 35490 3505.06 41075949/1 35490 3505.06 41075981/1 35490 3505.06 41076023/1 35490 3505.06 41076044/1 35490 3505.06 41078761/1 58250.28 7442.61 41079238/1 279315.75 39278.14 41084518/1 742690 127912.89 41086464/1 75911.77 10144.23 A-32 41088962/1 250441.28 35415.75 41089220/1 46820.07 5971.81 41089310/1 13812.88 978.16 41091732/1 97431.42 12739.41 41093854/1 336397.6 74129.91 41096825/1 282307.44 52758.65 41097464/1 22125.42 1480.03 41098318/1 527636.12 107543.69 41098708/1 251806.42 51355.41 41145436/1 65739.45 7674.16 41147306/1 140201.72 17414.96 41147588/1 65640.96 8615.67 41147730/1 13994.97 1973.86 41147772/1 13994.97 1961.75 41147795/1 13994.97 1946.01 41148044/1 268733.67 55638.22 41151077/1 59528.64 6632.44 41151303/1 223079 40627.38 41154807/1 49089.75 6848.21 41154939/1 277085.55 31723.89 41156156/1 545345.4 108943.74 41157845/1 34659.03 4281.3 41160066/1 54211.8 3696.21 41160256/1 249011.4 24385.19 41160802/1 65107.28 8469.91 41162241/1 47167.04 7478.43 41162365/1 13585.04 1802.13 41164920/1 160198.5 16929.37 41165080/1 50787.38 7038.47 41165099/1 25841.35 3777.15 41167352/1 98179.5 13512.27 41167474/1 96291.4 11362.57 41171738/1 26436.33 2479.94 41172319/1 187906.62 21324.22 41174153/1 48572.37 7383.3 41174396/1 10721.48 0 41174713/1 63750 7810.59 41174758/1 63750 7810.59 41174875/1 13984.6 1978.84 41175015/1 98179.5 13389.73 41175802/1 53698.5 7425.53 41177951/1 130567.5 18314.61 41181166/1 163467.98 43150.72 41183026/1 50281.65 7729.75 41187693/1 12484.8 1630.52 41187772/1 34529.46 3364.35 A-33 41187967/1 1293575 223036.66 41189747/1 113172.5 12788.24 41189934/1 394912.7 50761.87 41190053/1 256966.15 46132.11 41190080/1 288395.45 37070.15 41190819/1 68328.44 8718.11 41191536/1 192860.92 20906.52 41192185/1 37837.8 4433.72 41194980/1 182414.16 20793.79 41195231/1 46785.28 5607.26 41195295/1 46785.28 5607.26 41197380/1 72037.16 9277.09 41199400/1 5787.99 450.64 41202198/1 61768.08 7400.56 41202301/1 37140.26 3096.76 41204694/1 67573.98 8776.46 41204769/1 70270.18 9602.76 41205159/1 60148.9 7162.09 41210280/1 51638.68 8537.83 41210739/1 70374 8930.32 41210837/1 109850.4 11838.97 41211003/1 90234.87 13485.1 41211146/1 33230.05 4665 41212194/1 274566.86 52601.43 41213407/1 63625.32 8753.13 41216082/1 318312 35543.39 41222580/1 51003.72 6625.71 41222667/1 549781.68 54236.23 41222731/1 273341.52 31028.51 41225051/1 63784.52 7263.25 41225384/1 65762.98 7488.44 41225786/1 107299.9 12673.16 41226303/1 114928.5 14166.92 41228318/1 24928.96 2598.54 41236582/1 44754.66 4723.1 41240106/1 65444.75 8151.86 41242588/1 99779.75 12342.56 41245379/1 82245.1 10258.92 41245795/1 277223.45 40228.23 41252783/1 314975.24 33947.25 41256606/1 42023.53 4145.75 41257357/1 51902.24 4126.89 41262026/1 306944.28 32822.65 41262157/1 73325 10963.56 41262196/1 73325 10963.56 41264400/1 17925.6 1123.29 A-34 41267402/1 51929.64 10554.75 41269075/1 139034.7 16067.05 41271770/1 133403.97 30455.53 41272078/1 75278.61 7603.94 41272238/1 57575 9177.43 41274230/1 265731.41 48391.62 41276555/1 73398.45 3627.51 41276777/1 73398.45 3627.51 41276820/1 39145.76 1950.49 41282034/1 68568.84 8508.07 41282109/1 35278.71 4964.4 41284915/1 30982.35 2359.28 41282200/1 213861.7 33833.86 41287772/1 61070.35 8314.05 41287967/1 46780.67 4867.22 41284996/1 163093.19 17629.06 41291095/1 61091.88 8064.99 41292920/1 156499.2 21951.73 41293512/1 81651.96 11450.23 41295268/1 53205.92 6029.59 41296676/1 62786.78 7983.88 41307097/1 26292.88 3985.09 41307584/1 90731.55 12466.46 41352688/1 66620.86 8245.21 41354424/1 128530.85 13839.81 41357380/1 17564.64 2551.52 41354956/1 285152.04 40466.13 41357366/1 37725.83 5279.57 41358961/1 125056.8 10738.85 41361863/1 153562.08 38065.09 41364539/1 48220.12 4982.74 41364575/1 13483.91 1805.89 41367350/1 132138.84 21368.29 41367437/1 73804.7 9907.76 41367492/1 148084.53 20931.68 41367551/1 29667.24 4598.59 41368694/1 67562.37 9087.89 41369920/1 30945.72 3005.93 41372752/1 151700.4 19103.62 41372624/1 98616.24 14079.53 41372785/1 67230.11 9118.91 41373106/1 86693.25 11309.57 41373212/1 86693.25 11309.57 41378480/1 42788.64 4881.72 41380463/1 75419.4 10360.32 41383438/1 24795.12 2644.75 A-35 41388950/1 56729.51 8292.29 41388973/1 56057.59 8194.16 41391539/1 61583.18 7955.77 41407089/1 28130.78 3296.93 41422341/1 47452.6 5525.47 41436753/1 72731.2 9977.34 41436773/1 12256 1690.35 41441988/1 15835.63 2595.77 41454936/1 40640.67 3209.52 41461604/1 58367.62 9315.87 41462372/1 82065.9 13821.38 41469083/1 144470.01 28498.6 41479178/1 18476.68 1950.72 41528336/1 175986.85 23335.39 41574795/1 196922.23 32805.1 41919793/1 416593.33 91660.67 40036251/1 455259 64810.84 40269468/1 15901.02 1598.84 $72,377,451.72 ($38,000,000.00) Outstanding as of 1/28
A-36 EX-10.C MATERIAL CON 5 ex10c.txt EXHIBIT 10.C Exhibit 10.c AMENDMENT Reference is made to the Asset Assignment Agreement (as amended to date, the "Residual Agreement"), dated as of February 13, 1998, by and between Lehman ALI Inc. (the "Lender") as assignee of Lehman Commercial Paper Inc., and Green Tree Residual Finance Corp. I, a Minnesota corporation (the "Borrower"). WHEREAS, the parties entered into previous amendments of the Residual Agreement dated as of June 23, 1998, February 23, 2000, May 10, 2000, August 1, 2000, September 22, 2000, and September 28, 2001; WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Residual Agreement or, if so indicated, in the Master Repurchase Agreement, dated as of September 29, 1999 (such agreement, as amended to the date hereof, the "Repurchase Agreement") by and among Lehman Brothers Inc. and Green Tree Residual Finance Corp. I; WHEREAS, the Lender desires to increase, during the period and under the terms specified below, aggregate Loan Balance under the Residual Agreement for the purpose of financing a tender offer for Conseco Finance Corp.'s 10 1/4% Senior Subordinated Notes Due June 1, 2002 (the "Tendered Securities") which is currently contemplated by an Affiliate of the Borrower (the "Tender Offer"); and WHEREAS, the parties desire to further amend the Residual Agreement in the following respects; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree that the Residual Agreement is hereby amended as follows: 1. Notwithstanding anything in the Residual Agreement to the contrary, in no event may the aggregate Loan Balance under the Residual Agreement exceed the sum of (i) the applicable Additional Draw Amount and (ii) the difference between $600,000,000 minus the then current principal balance of the NIMS Note issued by the NIMS Trust and minus the aggregate Repurchase Price with respect to all outstanding Transactions (in each case as defined in the Repurchase Agreement) under the Repurchase Agreement. 2. The following new terms shall be added to Section 1: "Additional Draw Amount" means the lesser of $50,000,000 and the net funds payable to acquire the Tendered Securities in connection with the Tender Offer. The Additional Draw Amount shall be reduced by the Excess Proceeds of any completed Applicable Securitizations. In any event, after March 30, 2002, the Additional Draw Amount shall be zero. At any time prior to March 30, 2002, Borrower may elect to terminate its right hereunder to borrow all or any part of the unused portion of the Additional Draw Amount by providing written notice to Lender, any such election to be irrevocable on the part of Borrower. "Applicable Securitization" means any securitization or transfer of pooled whole loans made in lieu of a securitization in the normal course, which is closed by the Borrower or any of its Affiliates after the date hereof (other than the securitization of home equity loans which is contemplated as of the date hereof by an Affiliate of the Borrower and Deutsche Bank Securities, Inc., in the capacity of managing underwriter). "Excess Proceeds" means the net proceeds of a securitization after payment of any related customary securitization fees and repayment of indebtedness secured by the related securitized assets. "New Residual Assets" means (i) all securities, whether certificated or uncertificated, that are issued pursuant to any securitization closed by the Borrower or any of its Affiliates after the date hereof but before the full repayment by Borrower of any amounts due and payable with respect to any Additional Draw Amount which are not, as of their date of issuance, sold to an underwriter or through a placement agent and (ii) any fees, release amounts or other rights to cash flow, whether fixed or contingent, to which Borrower or any of its Affiliates is entitled under the terms of any such securitization. 3. The term "Lender Value" is hereby amended and restated as follows: "Lender Value" means the price at which the Pledged Assets could be sold as of a particular date of determination, to be determined by the Lender at its sole discretion; provided, however, the Lender, in its sole discretion can determine not to ascribe any value to any particular New Residual Assets. With respect to any New Residual Asset or Additional Asset, the Lender will upon request use reasonable efforts to establish the applicable Lender Value within 5 Business Days, or, if Lehman Brothers Inc. is not the lead managing underwriter on the related securitization, within 10 Business Days, in each case, after the issuance thereof. 4. If the Tender Offer is consummated and no Event of Default has occurred hereunder, Lender shall lend and Borrower shall borrow under the Residual Agreement an additional aggregate amount (the "Tender Offer Loan") up to the Additional Draw Amount. The Tender Offer Loan may be borrowed in one or more borrowings based on the funding of the Tender Offer but amounts advanced under the Tender Offer Loan may not be reborrowed. The Tender Offer Loan shall in all respects be part of and subject to the terms of the Loan and the Loan Balance outstanding under the Residual Agreement, and the additional provisions set forth herein. Upon one day's written notice by Borrower that the Tender Offer has been committed and Borrower requests to borrow funds, Lender will pay the requested portion of the unused Additional Draw Amount in immediately available funds to the account of the tender agent designated for the Tender Offer. Borrower agrees to repay the outstanding principal amount Tender Offer Loan together with 2 interest accrued thereon at the Interest Rate by applying thereto the full amount of any Excess Proceeds of any Applicable Securitization on the closing date thereof. Furthermore, Borrower, or its designee, agrees to instruct the lead underwriter of any Applicable Securitization to pay such amount by wire transfer in immediately available funds on the closing date of such Applicable Securitization to such account as the Lender shall instruct so long as any there are any amounts due and payable with respect to the Tender Offer Loan. In any event, on March 30, 2002, any outstanding unpaid principal amount of the Tender Offer Loan together with accrued interest thereon at the Interest Rate shall be absolutely due and payable and Borrower shall pay such amount in full to the Lender on such date. All principal payments made by the Borrower or any of its Affiliates to the Lender in repayment of any outstanding debt obligations hereunder shall be applied to the payment of the Tender Offer Loan and accrued interest thereon until it is reduced to zero and shall be not applied to the reduction of any other such outstanding debt obligation unless and until the Tender Offer Loan has been reduced to zero. 5. For all purposes of the Residual Agreement, the "Pledged Assets" thereunder shall include each New Residual Asset. The Borrower hereby pledges all of its right, title, and interest in, to and under and grants a first lien on, and security interest in all New Residual Assets, and all proceeds thereof, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, to the Lender to secure the repayment of principal and interest on the Loan and payment and performance of all other amounts or obligations owing to the Lender pursuant thereto. Lender agrees that no other additional collateral (except as provided in this paragraph 5) is required to be pledged in connection with the Additional Draw Amount. The New Residual Assets shall be returned to the Borrower upon repayment of the Tender Offer Loan, together with all interest thereon, and upon termination of Borrower's right to borrow all unused portion of the Additional Draw Amount, in each case so long as their return would not result in a Margin Deficit. 6. Borrower agrees that all New Residual Assets shall, unless otherwise agreed to by Lender, be issued in registered, certificated form and shall be registered in the name of Lender or in such other names as Lender may designate from time to time and that Lender, as pledgee, shall exercise all rights of a holder of such certificates under the related issuing agreement. Borrower agrees to deliver all such certificates within 5 Business Days after the issuance thereof to Lender or such custodian as Lender may designate or take whatever steps may be necessary or advisable to perfect the Lender's security interest in the New Residual Assets. Lender and Borrower acknowledge and agree that Lender takes and holds such certificates and the New Residual Assets as a secured party and not as principal and that such certificates and the New Residual Assets are Collateral under the Residual Agreement, subject to the terms of the Residual Agreement. 7. All collections on and proceeds of any kind of the New Residual Assets which are "Pledged Assets" pursuant to Section 5 hereof 3 shall be deposited immediately upon receipt into the Collection Account and shall be applied to the Tender Offer Loan and interest thereon for so long as it is outstanding as Cash Receipts pursuant to the Residual Agreement. 8. The term "Maturity Date" is hereby amended and restated as follows: "Maturity Date" means February 15, 2004 or such earlier date on which this Agreement shall terminate in accordance with the next sentence hereof or as otherwise provided in this Agreement. Lender may terminate this Agreement upon five Business Days' notice to Borrower of its exercise of its Termination Option. Lender's "Termination Option" is exercisable either: (a) on or after November 15, 2003 if Conseco, Inc. has not extended or repaid its Senior Credit Facility dated September 22, 2000 to 2005 or replaced it with a comparable facility; provided that, if Lender exercises its Termination Option pursuant to this subclause (a), it shall pay to Borrower a termination fee of $1,000,000; or (b) on or after December 15, 2003 if Conseco Inc. has not provided in form and substance satisfactory to Lender for the repayment, replacement or extension of the Conseco, Inc. 8.75% Notes due February 9, 2004; provided that, if Lender exercises its Termination Option pursuant to this subclause (b), it shall pay to Borrower a termination fee of $750,000. Borrower may deduct the amount of the applicable termination fee from the aggregate amount payable by Borrower to Lender upon the Maturity Date. 9. The parties confirm that additional borrowings hereunder, other than amounts representing the Tender Offer Loan are in all respects part of and subject to the Loan and the Loan Balance outstanding under the Residual Agreement and shall in no event be made if an Event of Default under the Residual Agreement has occurred and is continuing or if a Margin Deficit exists or would exist after giving effect to the borrowing. 10. The following shall be added to the Events of Default in Section 8 of the Residual Agreement and shall constitute an Event of Default thereunder: (s) failure to repay any amounts due and payable with respect to the Additional Draw Amount in the manner set forth in the amendment to this Agreement dated January 30, 2002. 11. The term "Secured Note" is hereby amended and restated as follows: 4 "Secured Note" means the promissory note in the form attached as an exhibit to the amendment to this Agreement dated January 30, 2002. 12. As of March 31, 2002, clause (k) of Section 7 (Borrower Covenants) of the Agreement is amended and restated in its entirety to read as follows: So long as the Lender shall be committed to lend hereunder, the Guarantor on a consolidated basis with its Subsidiaries shall: (i) at all times commencing March 31, 2002 maintain an Adjusted Tangible Net Worth of at least $1,500,000,000; (ii) commencing March 31, 2002, for the twelve-month period ending on the last day of each fiscal quarter, maintain a Fixed Charge Coverage Ratio of not less than 1.0:1.0; (iii) at all times commencing March 31, 2002 maintain a ratio of GAAP Net Worth to Total Managed Receivables of not less than 4:100; (iv) for each fiscal quarter commencing with the fiscal quarter beginning January 1, 2002 maintain a ratio of Non-Warehouse Debt to GAAP Net Worth of not more than 1.0:2.0; (v) for the twelve-month period ending on the last day of each fiscal quarter commencing March 31, 2002, maintain positive Operating Cash Flow; and (vi) at all times commencing March 31, 2002 maintain Liquidity of at least (i) $50,000,000 until September 30, 2002, (ii) $75,000,000 from October 1, 2002 to June 30, 2003 and (iii) $100,000,000 from and after July 1, 2003. For purposes of this clause (k): "Adjusted Tangible Net Worth" means, at any date, the sum of (a) GAAP Net Worth plus (b) the amount of intercompany indebtedness converted to Preferred Stock (to the extent such Preferred Stock is not included in GAAP Net Worth), plus (c) writedowns of Conseco and its subsidiaries, of all IOs, capitalized servicing rights and other retained interests (i.e. "B-2s") from securitizations in an aggregate amount over all periods commencing on January 1, 2002 not to exceed $150,000,000, plus (d) realized losses from discontinued operations relating to floor plan financing, aircraft financing, vehicle leasing, manufactured housing communities and other operations relating to business units involved in the origination of the Esoteric Assets in an aggregate amount over all periods commencing on January 1, 2002 not to exceed $125,000,000 minus (e) any indebtedness owing to Conseco Finance Corp. or any of its subsidiaries by Conseco, Inc., or any subsidiary thereof as of such date, minus (f) any amount that would be included on the consolidated balance sheet of Conseco as goodwill and deferred charges in accordance with GAAP. "Cash Equivalents" means (a) securities issued or fully guaranteed or insured by the United States government or any agency thereof, (b) 5 certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any commercial bank organized under the laws of the United States, any state thereof, the District of Columbia, any foreign bank, or its branches or agencies (fully protected against currency fluctuations) which, at the time of acquisition, are rated at least "A-1" by Standard & Poor's Rating Services ("S&P") or "P-1" by Moody's Investors Services, Inc. ("Moody's"), (c) commercial paper of an issuer rated at least "A-1" by S&P or "P-1" by Moody's, and (d) shares of any money market fund that (i) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (a) through (c) above, (ii) has net assets of not less than $500,000,000 and (iii) is rated at least "A-1" by S&P or "P-1" by Moody's; provided, however, that the maturities of all obligations of the type specified in clauses (a) through (c) above shall not exceed 180 days. "Fixed Charge Coverage Ratio" means, for any period, the ratio of (a) Pre Tax Operating Income for such period to (b) Interest Expense for such period. "GAAP Net Worth" means, at any date, the stockholders' equity that would be reflected on a consolidated balance sheet of Conseco and its subsidiaries at such date prepared in accordance with GAAP, inclusive of Preferred Stock, to the extent such Preferred Stock is not included in stockholders' equity in accordance with GAAP. "Interest Expense" means, for any period, all interest paid or accrued during such period by Conseco and its subsidiaries on a consolidated basis, determined in accordance with GAAP. "IOs" means interest only securities. "Liquidity" means, on any date, the sum of Unrestricted Cash and Cash Equivalents plus the aggregate amount available to be drawn under all committed and uncommitted facilities to which Conseco, Green Tree Residual, Green Tree Five or any other Affiliate is a party. With respect to warehouse facilities, the aggregate amount available shall be calculated on the basis of eligible excess collateral pledged to the lender thereunder multiplied by the advance rate applied by such lender to such collateral). For purposes hereof, Liquidity shall be calculated as of any date by determining the average of Unrestricted Cash, Cash Equivalents and other such available amounts for the 30-day period ending on and including such date. "Net Income" means, for any period, with respect to Conseco and its subsidiaries on a consolidated basis (other than any subsidiary which is prohibited from declaring or paying dividends or otherwise advancing funds to its parent whether by contract or otherwise), cumulative net income earned during such period as determined in accordance with GAAP. "Non-Warehouse Debt" means, at any time, all indebtedness of Conseco for borrowed money (including without limitation all liabilities in respect of deposit products, notes payable, note payables to Conseco (net of receivables due from Conseco), bonds and other indebtedness) less the sum of Unrestricted Cash and Cash Equivalents at such time plus the book value of all finance receivables and plus 85% of servicing advance receivables. "Operating Cash Flow" means, for any period, cash flow from the operations of Conseco for such period (as reported under "Cash Flow From Operations" in Conseco's statements of cash flow filed with the Securities and Exchange Commission) for such period. 6 "Pre Tax Operating Income" means, for any period, Net Income for such period, plus (a) income and franchise taxes paid or accrued during such period, (b) Interest Expense, (c) losses derived from discontinued operations relating to floor plan financing, aircraft financing, vehicle leasing, manufactured housing communities and other operations relating to business units involved in the origination of the Esoteric Assets in an aggregate amount over all periods commencing on January 1, 2002 of Conseco and its subsidiaries during such period not to exceed $125,000,000 (d) losses of Conseco and its subsidiaries in an amount with respect to write-downs of IOs and capitalized servicing rights of Conseco and its subsidiaries not to exceed $450,000,000 for the quarter ended March 31, 2002, $450,000,000 for the quarter ended June 30, 2002, and $225,000,000 on a four quarter rolling basis thereafter, (e) losses of Conseco and its subsidiaries in an amount with respect to write-downs of other retained interests from securitizations (i.e., "B-2s") in the aggregate over all periods commencing on January 1, 2002 not to exceed $25,000,000 and (f) minus income derived from discontinued operations of Conseco and its subsidiaries during such period and minus extraordinary gains and non-recurring gains of Conseco and its subsidiaries. "Total Managed Receivables" means, for any period, the "averaged managed receivables", as such term is reported in the related filing with the Securities and Exchange Commission for such period. "Unrestricted Cash" means, at any date, all available cash on deposit in bank accounts of Conseco, provided the accounts into which such cash is deposited are not subject to any lien, security interest or control agreement or otherwise encumbered (excluding customary rights of set-off) or restricted in any way. No new borrowings after September 22, 2000 from Conseco, Inc. or its subsidiaries shall constitute Unrestricted Cash other than the amounts not to exceed $200,000,000 in the aggregate received pursuant to subsections (a)(i)(x) and (a)(ii) of Section 4.09 of the Five-Year Credit Agreement as in effect on September 22, 2000. Prior to March 31, 2002, clause (k) of Section 7 (Borrower Covenants) as set forth in the amendment to the Residual Agreement dated as of September 22, 2000 shall continue in effect. 13. Conseco Finance agrees to use commercially reasonable efforts to complete the Applicable Securitizations currently contemplated of a manufactured housing loan pool and a high LTV home equity loan pool as market conditions permit. 14. The Lender may require an opinion of counsel concurrently with the execution of this Amendment as to its enforceability against the Borrower and Guarantor, and such other matters as the Lender may request. 15. Lender hereby waives any defaults under the Residual Agreement existing as of the date hereof. Other than as expressly stated in the preceding sentence, nothing herein shall be construed as a forfeiture of any of Lender's rights under the Residual Agreement and all Related Documents and Lender reserves all remedies afforded to it under the Residual Agreement and all related Documents. 16. The parties hereto affirm that notwithstanding that Lender is the registered holder of various items of the Collateral hereunder 7 that it assumes no responsibility, liability or obligation that may be associated therewith to any Person, including but not limited to any, responsibility, liability or obligation to prepare tax returns or pay taxes associated with either such Collateral of the trusts or other entities that issued them. 17. This Amendment may be executed in any number of counterparts, each of which counterparts shall be deemed an original, but all of which together will constitute one and the same instrument. 18. In all other respects, the provisions of the Residual Agreement shall remain unchanged and be of full force and effect. The Guaranty Agreement remains in full force and effect and is hereby reaffirmed. 8 IN WITNESS WHEREOF, the parties hereto have caused their names to be signed hereto by their respective officers thereunto duly authorized as of January 30, 2002. GREEN TREE RESIDUAL FINANCE CORP. I By: /s/ Charles H. Cremens ---------------------------------- Name: Charles H. Cremens Title: President LEHMAN ALI INC. By: /s/ Vincent Primiano ---------------------------------- Name: Vincent Primiano Title: Senior Vice President Approved: CONSECO FINANCE CORP. By: /s/ Charles H. Cremens ----------------------------------- Name: Charles H. Cremens Title: President 9 Exhibit SECURED NOTE January 30, 2002 FOR VALUE RECEIVED, the undersigned, GREEN TREE RESIDUAL FINANCE CORP. I, a Minnesota corporation, whose address is 1100 Landmark Towers, 345 St. Peter Street, St. Paul, MN 55102-1639 (the "Borrower"), promises to pay to the order of LEHMAN ALI INC., a Delaware corporation, whose address is 101 Hudson Street, Jersey City, New Jersey 07302, as assignee of Lehman Commercial Paper Inc. (the "Lender") on or before the Maturity Date, in lawful money of the United States of America, the principal sum of $650,000,000 (or such lesser amount as may in the aggregate have been advanced by Lender to Borrower pursuant to the Agreement referenced below and remains outstanding) plus interest, as follows: DEFINITIONS. Unless otherwise defined, capitalized terms used herein have the meanings assigned to them in the (a) Asset Assignment Agreement dated as of February 13, 1998 (such agreement, as amended to the date hereof, the "Agreement") by and between the Lender and Borrower named therein. GENERAL TERMS. (i) Principal is payable in accordance with the Agreement, provided the Facility Balance outstanding on the Maturity Date shall be due and payable on the Maturity Date. (ii) Interest shall accrue daily on the Facility Balance a rate per annum equal to the Interest Rate computed in accordance with the Agreement. MAXIMUM RATE OF INTEREST: If the Borrower shall have paid or agreed to pay any interest on the Facility Balance in excess of that permitted by law, then it is intended with respect thereto that (i) to the extent possible given the term of the Facility Balance, all excess amounts previously paid or to be paid by the Borrower be applied to reduce the Facility Balance and the provisions thereof immediately be deemed reformed and the amounts thereafter collectible thereunder reduced, without the necessity of the execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for thereunder and (ii) to the extent that the reduction of the Facility Balance and the reformation of the provisions thereof described in the immediately preceding clause (i) are not possible given the term of the Facility Balance, such excess amount shall be deemed to have been paid with respect to the Facility Balance as a result of an error and upon the Lender obtaining actual knowledge of such error, such amount shall be refunded to the Borrower. SECURITY: This Note is issued pursuant to the Agreement and is secured by a pledge of the Collateral described therein. DEFAULTS: Upon the happening of an Event of Default, the Lender shall have all rights and remedies set forth in the Agreement. The failure to exercise any of the rights and remedies set forth in the Agreement shall not constitute a waiver of the right to exercise the same or 1 any other option at any subsequent time in respect of the same event or any other event. The acceptance by the Lender of any payment hereunder which is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the foregoing rights and remedies at that time or at any subsequent time or nullify any prior exercise of any such rights and remedies without the express consent of Lender, except as and to the extent otherwise provided by law. WAIVERS: The Borrower waives diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time, and consents to the acceptance of further Collateral, the release of any Collateral for this Note, the release of any party primarily or secondarily liable hereon, and that it will not be necessary for the Lender, in order to enforce payment of this Note, to first institute or exhaust Lender's remedies against the Borrower or any other party liable hereon or against any collateral for this Note. None of the foregoing shall affect the liability of the Borrower and any endorsers or guarantors hereof. No extension of time for the payment of this Note, or any installment hereof, made by agreement by the Lender with any Person now or hereafter liable for the payment of this Note, shall affect the liability under this Note of the Borrower, even if the Borrower is not a party to such agreement; provided, however, the Lender and the Borrower, by written agreement between them, may affect the liability of the Borrower. TERMINOLOGY: Any reference herein to the Lender shall be deemed to include and apply to every subsequent holder of this Note. Words of masculine or neuter import shall be read as if written in the neuter or masculine or feminine when appropriate. GUARANTEE: Principal and interest and all other amounts due to Lender by Borrower under this Note or under the Agreement are fully and unconditionally guaranteed by Conseco Finance Corp. (the "Guarantor") pursuant to an Amended and Restated Guaranty Agreement, dated the date hereof, between Guarantor and the Lender. AGREEMENT: Reference is made to the Agreement for provisions as to mandatory prepayments, collateral and acceleration. REPLACEMENT NOTE: This Note amends and restates and replaces in its entirety each previous Note issued under the Agreement, each of which is hereby cancelled and of no further effect. THIS NOTE IS GOVERNED BY THE PROVISIONS OF THE AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE, AND IN THE EVENT ANY TERMS OF THIS NOTE ARE INCONSISTENT WITH THE TERMS OF THE AGREEMENT, THE TERMS OF THE AGREEMENT SHALL GOVERN THIS NOTE. NOTWITHSTANDING THE FOREGOING SENTENCE, NO REFERENCE HEREIN TO THE AGREEMENT AND NO PROVISION OF THIS NOTE OR OF THE AGREEMENT SHALL ALTER OR IMPAIR THE OBLIGATION OF THE BORROWER, WHICH IS ABSOLUTE AND UNCONDITIONAL, TO PAY THE PRINCIPAL OF AND INTEREST ON THIS NOTE AT THE RESPECTIVE TIMES AND AT THE RATES HEREIN AND THEREIN PRESCRIBED. 2 APPLICABLE LAW: This Note shall be governed by and construed under the laws of the State of New York, without regard to principles of conflicts of law, whose laws the Borrower expressly elects to apply to this Note. GREEN TREE RESIDUAL FINANCE CORP. I By: /s/ Charles H. Cremens ----------------------------------------- Name: Charles H. Cremens Title: President 3 EX-12 6 ex12.txt EXHIBIT 12 CONSECO FINANCE CORP. AND SUBSIDIARIES Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges for the years ended December 31, 2001, 2000 and 1999 (Dollars in millions)
2001 2000 1999 ---- ---- ---- Pretax income from operations: Net income (loss).................................................. $ (102.7) $ (525.3) $ 47.9 Add income tax benefit............................................. (56.4) (262.8) (16.4) Add extraordinary (gain) loss on extinguishment of debt............ (6.1) - 2.5 Add cumulative effect of accounting change......................... - 45.5 - -------- -------- ------ Pretax income (loss) from operations............................ (165.2) (742.6) 34.0 -------- -------- ------ Add fixed charges: Interest expense................................................... 1,234.4 1,152.4 341.3 Portion of rental (a).............................................. 6.9 9.4 7.2 -------- -------- ------ Fixed charges................................................... 1,241.3 1,161.8 348.5 -------- -------- ------ Adjusted earnings............................................... $1,076.1 $ 419.2 $382.5 ======== ======== ====== Ratio of earnings to fixed charges............................. (b) (c) 1.10X == == ===== - ------------------- (a) Interest portion of rental is estimated to be 33 percent. (b) For such ratio, adjusted earnings were $165.2 million less than fixed charges. Adjusted earnings for 2001 included impairment and special charges of $408.4 million as described in greater detail in the notes to the accompanying consolidated financial statements. (c) For such ratio, adjusted earnings were $742.6 million less than fixed charges. Adjusted earnings for 2000 included impairment and special charges of $910.0 million as described in greater detail in the notes to the accompanying consolidated financial statements.
EX-23 7 consent.txt EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Conseco Finance Corp. (File Nos. 333-48222, 333-85037, 333-92315, 333-92313, 333-75375, 333-91557 and 333-47662) of our report dated March 29, 2002, on our audits of the consolidated financial statements of Conseco Finance Corp. as of December 31, 2001 and 2000 and for the years ended December 31, 2001, 2000 and 1999, which report is included in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP -------------------------------- PricewaterhouseCoopers LLP Minneapolis, Minnesota March 29, 2002 -----END PRIVACY-ENHANCED MESSAGE-----