AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3, 2001
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONSECO PRIVATE LABEL CREDIT CARD
MASTER NOTE TRUST
(Issuer of the Notes)
CONSECO FINANCE CREDIT CARD
CONSECO BANK, INC. FUNDING CORP.
---------------------------------- ----------------------------------
(Originators of the Trust described herein)
(Exact Name of Registrants as Specified in their Charters)
UTAH 41-1889753 MINNESOTA PENDING
(State or Other (I.R.S. Employer (State or Other (I.R.S. Employer
Jurisdiction Identification Jurisdiction Identification
of Organization) Number) of Organization) Number)
2825 E. Cottonwood Parkway 1100 Landmark Towers
Suite 230 345 St. Peter Street
Salt Lake City, UT 84121 Saint Paul, MN 55102
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Office)
Brian F. Corey
1100 Landmark Towers
345 St. Peter Street
Saint Paul, MN 55102
(651) 293-3400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Charles F. Sawyer, Esq. Cameron L. Cowan, Esq.
Dorsey & Whitney Orrick, Herrington & Sutcliffe LLP
Pillsbury Center South 3050 K Street, N.W.
220 South Sixth Street Washington, D.C. 20007
Minneapolis, MN 55402 (202) 339-8488
(612) 343-7986
Approximate date of commencement of proposed sale to the public: from time
to time after this registration statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Title of Amount to be Proposed maximum Proposed maximum
securities to registered aggregate price aggregate Amount of
be registered (a) (b) per note offering price registration fee
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Asset Backed
Notes......... $1,000,000 100.00%(c) $1,000,000(c) $250
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(a) With respect to any Asset Backed Notes issued with original issue
discount, the amount to be registered is calculated based on the initial
public offering price thereof.
(b) With respect to any Asset Backed Notes denominated in any foreign
currency, the amount to be registered shall be the U.S. dollar equivalent
thereof based on the prevailing exchange rate at the time such Asset
Backed Note is first offered.
(c) Estimated solely for purposes of calculating the registration fee.
The registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act of 1933 or until this registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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Introductory Note
This registration statement includes:
. a representative form of prospectus supplement to the base prospectus
relating to the offering by Conseco Private Label Credit Card Master
Note Trust of a series of asset backed notes; and
. a base prospectus relating to asset backed notes of Conseco Private
Label Credit Card Master Note Trust.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus supplement and the accompanying Prospectus +
+is not complete and may be amended. We may not sell these Securities until we +
+deliver a final prospectus supplement and accompanying Prospectus. This +
+prospectus supplement and the accompanying prospectus are not an offer to +
+sell nor are they seeking an offer to buy these securities in any state where +
+the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Representative Form of Prospectus Supplement
Subject to Completion, dated [.], 2001
Prospectus Supplement to Prospectus dated , 2001
[Conseco Logo]Conseco Private Label Credit Card Master Note Trust
Issuer
Conseco Bank, Inc. and Conseco Finance Credit Card Funding Corp.
Transferors
Series 2001-[.] Asset Backed Notes
Class A notes Class B notes Class C notes
-------------------- -------------------- --------------------
Principal amount $[.] $[.] $[.]
Interest rate [One-Month LIBOR] [One-Month LIBOR] [One-Month LIBOR]
plus [.]% per year plus [.]% per year plus [.]% per year
Interest payment dates Monthly on the 15th Monthly on the 15th Monthly on the 15th
beginning [.], 2001 beginning [.], 2001 beginning [.], 2001
Expected principal
payment date 200[.] 200[.] 200[.]
Final maturity date 200[.] 200[.] 200[.]
Price to public $ [.] (or [.]%) $ [.] (or [.]%) $ [.] (or [.]%)
Underwriting discount $[.] (or [.]%) $[.] (or [.]%) $[.] (or [.]%)
Proceeds to issuer $[.] (or [.]%) $[.] (or [.]%) $[.] (or [.]%)
The Class B notes are subordinated to the Class A notes. The Class C notes are
subordinated to the Class A and Class B notes.
The primary assets of the trust are receivables in private label credit card
accounts.
We expect to issue your series of notes on or about [.], 2001.
You should consider carefully the risk factors
beginning on page [.] in this prospectus supplement
and on page of the accompanying prospectus.
A note is not a deposit and neither the notes nor the
underlying accounts or receivables are insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of Conseco Private Label
Credit Card Master Note Trust only and are not
obligations of Conseco Finance Credit Card Funding
Corp., Conseco Finance Corp., Conseco Bank, Inc.,
Green Tree Retail Services Bank, Inc. or any other
person. The notes are payable only from the assets of
the trust.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus
supplement or the prospectus is truthful, accurate or complete. Any
representation to the contrary is a criminal offense.
Underwriters of the Series 2001-[.] Notes
[.], 2001
Important Notice about Information Presented in This
Prospectus Supplement and the Accompanying Prospectus
We provide information to you about the notes in two separate documents:
(1) this prospectus supplement, which describes the specific terms of your
series of notes, and (2) the accompanying prospectus, which provides general
information, some of which may not apply to your series of notes.
You should rely only on the information provided in this prospectus
supplement and the accompanying prospectus, including the information
incorporated by reference. We have not authorized anyone to provide you with
different information. We are not offering the notes in any state where the
offer is not permitted.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents in the accompanying prospectus provide the pages on which these
captions are located.
S-2
Table of Contents
Page
----
Transaction Summary....................................................... S-5
Prospectus Supplement Summary............................................. S-6
The Issuer............................................................... S-6
The Receivables.......................................................... S-6
Private Label Program.................................................... S-6
The Series 2001-[.] Notes................................................ S-6
Interest................................................................ S-6
Principal............................................................... S-7
Credit Enhancement....................................................... S-7
Subordination........................................................... S-7
Spread Account.......................................................... S-7
Class D Notes............................................................ S-8
Amortization Events...................................................... S-8
Other Interests in the Trust............................................. S-9
Other Series of Notes................................................... S-9
The Transferors' Interest............................................... S-9
Allocations of Collections............................................... S-9
Groups................................................................... S-9
Reallocation Group One.................................................. S-10
Excess Finance Charge Sharing Group One................................. S-10
Principal Sharing Group One............................................. S-10
Application of Collections............................................... S-10
Finance Charge Collections.............................................. S-10
Principal Collections................................................... S-11
Optional Redemption...................................................... S-12
Denominations............................................................ S-12
Registration, Clearance and Settlement................................... S-12
Material Federal Income Tax Consequences................................. S-13
ERISA Considerations..................................................... S-13
Risk Factors............................................................. S-13
Exchange Listing......................................................... S-13
Additional Information................................................... S-13
Risk Factors.............................................................. S-14
Maturity Considerations................................................... S-16
The Glossary.............................................................. S-17
The Originators, The Transferors, The Servicer and Conseco Finance
Corp. .................................................................. S-17
Page
----
Green Tree Retail Services Bank, Inc. ................................... S-17
Conseco Bank, Inc. ...................................................... S-17
Conseco Finance Credit Card Funding Corp. ............................... S-18
Conseco Finance Corp. ................................................... S-18
General................................................................. S-18
Restructuring........................................................... S-19
Litigation Matters...................................................... S-19
The Conseco Private Label Portfolio....................................... S-20
Types of Accounts........................................................ S-20
Merchants in the Conseco Program......................................... S-21
Portfolio Experience..................................................... S-23
Loss and Delinquency Experience......................................... S-23
Revenue Experience...................................................... S-23
Payment Rates........................................................... S-24
The Trust Portfolio....................................................... S-25
Description of Series Provisions.......................................... S-29
General.................................................................. S-29
Interest Payments........................................................ S-29
Principal Payments....................................................... S-30
Revolving Period........................................................ S-31
Controlled Accumulation Period.......................................... S-31
Postponement of Controlled Accumulation Period.......................... S-32
Partial Amortization Events............................................. S-32
Early Amortization Period............................................... S-33
Principal Funding Account............................................... S-33
Reserve Account......................................................... S-34
Principal Sharing Group One............................................. S-36
Paired Series........................................................... S-36
Subordination............................................................ S-36
Events of Default........................................................ S-37
Amortization Events...................................................... S-37
Allocation Percentages................................................... S-39
Reallocation Group One................................................... S-39
Application of Collections............................................... S-40
S-3
Page
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Payment of Interest, Fees and Other Items............................... S-40
Payments of Principal................................................... S-41
Excess Finance Charge Sharing Group One.................................. S-42
Subordinated Principal Collections....................................... S-43
Defaulted Receivables; Investor Charge-Offs.............................. S-43
Spread Account........................................................... S-43
Page
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Spread Account Distributions.............................................. S-46
Servicing Compensation and Payment of Expenses............................ S-46
Reports To Noteholders.................................................... S-47
ERISA Considerations....................................................... S-47
Underwriting............................................................... S-49
Legal Matters.............................................................. S-51
Glossary................................................................... S-52
Annex I Other Series Issued And Outstanding................................ i
S-4
TRANSACTION SUMMARY
Conseco Private Label Credit Card Master Note
Trust: Trust
Conseco Bank, Inc. and Conseco Finance Credit Card
Transferors: Funding Corp.
Originators: Conseco Bank, Inc., Green Tree Retail Services
Bank, Inc. and Conseco Finance Corp.
Servicer: Conseco Bank, Inc.
Indenture Trustee: U.S. Bank Trust National Association
Owner Trustee: Wilmington Trust Company
Closing Date: [.], 2001
Clearance and Settlement: DTC/Clearstream/Euroclear
Primary Trust Assets: Receivables in private label credit card accounts
Annual Servicing Fee Rate: %
Principal Sharing Group: Group One
Reallocation Group: Group One
Excess Finance Charge
Sharing Group: Group One
Note Structure Amount % of Total Series
Class A $[.] [.]%
Class B $[.] [.]%
Class C $[.] [.]%
Class D $[.] [.]%
Class A Class B Class C Class D
------- ------- ------- -------
Anticipated Ratings: [.] [.] [.] Not Rated
[Moody's/Standard &
Poor's/Fitch]
Offered by this document Yes Yes Yes No
Credit Enhancement: subordination of subordination of spread account
Class B, Class C Class C and and Class D
and Class D Class D
Interest Rate: [One-Month [One-Month [One-Month Not interest
LIBOR] plus LIBOR] plus LIBOR] plus bearing
[.]% per year [.]% per year [.]% per year
Interest Accrual Method: [actual/360] [actual/360] [actual/360] --
Interest Payment Dates: monthly (15th) monthly (15th) monthly (15th) --
Interest Rate Index [2 London business [2 London business [2 London business --
Reset Date: days before each days before each days before each
interest payment interest payment interest payment
date] date] date]
First Interest Payment [.], 2001 [.], 2001 [.], 2001 --
Date:
Expected Principal [.], 200[.] [.], 200[.] [.], 200[.] --
Payment Date:
Commencement of [.], 200[.] [.], 200[.] [.], 200[.]
Accumulation Period
(subject to
adjustment):
Final Maturity Date: [.], 200[.] [.] 200[.] [.] 200[.]
The Class D Notes will be placed with the transferors. The Class D Notes
are not offered by this prospectus supplement and the accompanying prospectus.
S-5
Prospectus Supplement Summary
This summary highlights information about the notes and does not contain
all of the information that you need to consider in making your investment
decision. You should carefully read this entire document and the accompanying
prospectus before you purchase any notes.
The Issuer
The Series 2001-[.] notes will be issued by Conseco Private Label Credit
Card Master Note Trust, a Delaware business trust, from an indenture and Series
2001[.] supplement to the indenture, each between the trust and the indenture
trustee.
The indenture trustee is U.S. Bank Trust National Association.
The Receivables
The following information is as of [.] 2001:
. Finance charge receivables in the trust: $[.]
. Principal receivables in the trust: $[.]
. Accounts designated to the trust:
For more information, see "The Trust Portfolio" in this prospectus
supplement.
Private Label Program
As of , 2001, the Conseco private label portfolio included
approximately [ ] merchant and dealer programs.
The Series 2001-[.] Notes
The Series 2001-[.] Notes include four classes. Class A, Class B and Class
C are offered by this prospectus supplement and the accompanying prospectus.
The Class D Notes are being placed with the transferors and are not offered by
this document.
Interest
The Class A notes will bear interest at [one-month LIBOR as determined each
month] plus [.]% per annum.
The Class B notes will bear interest at [one-month LIBOR as determined each
month] plus [.]% per annum.
The Class C notes will bear interest at [one-month LIBOR as determined each
month] plus [.]% per annum.
For each class of the Series 2001-[.] notes, interest will be calculated as
follows:
Principal Number of
balance days in Interest
at end of X interest X rate
prior due period
period ---------
360
Each interest period begins on and includes a distribution date and ends on
but excludes the next distribution date. However, the first interest period
will begin on and include the closing date.
Interest on the Series 2001-[.] notes will be paid on each distribution
date, which will be [.] [15], 2001 and the 15th day of each following month if
the 15th is a business day and, if not, the following business day.
You may obtain the interest rates for the current interest period and the
immediately preceding interest period by telephoning the indenture trustee at
[.].
S-6
See "Description of Series Provisions--Interest Payments" in this
prospectus supplement for a description of how and when LIBOR will be
determined.
Principal
Principal of the Class A notes, the Class B notes and the Class C notes [is
expected to be paid in full on the []200[] distribution date.] However:
. no principal will be paid on the Class B notes until required payments are
made on the Class A notes; and
. no principal will be paid on the Class C notes until required payments are
made on the Class A and Class B notes are paid in full.
We are scheduled to begin accumulating collections of principal receivables
starting on [.]200[.] for payment to the Series 2001-[.] noteholders on the
expected principal payment date, but we may begin accumulating at a later date.
Principal of the Series 2001-[.] notes may be paid earlier or later than
the expected principal payment date. You will not be entitled to any premium
for early or late payment of principal.
If specified adverse events known as amortization events occur, principal
may be paid earlier than expected.
If the transferors are unable to designate additional accounts to maintain
the required minimum principal balance, a partial amortization of your series
may occur.
If collections of receivables are less than expected or are collected more
slowly than expected, then principal payments may be delayed.
If the Series 2001-[.] notes are not paid on the expected principal payment
date, collections of principal receivables will continue to be used to pay
principal on the Series 2001-[.] notes until the notes are paid or until [.],
200[.], whichever occurs first. [.]200[.] is the final maturity date for Series
2001-[.].
For more information about principal payments, see "Description of Series
Provisions--Principal Payments" and "--Allocation Percentages" in this
prospectus supplement.
Credit Enhancement
Subordination
Credit enhancement for the Class A notes is provided by the subordination
of the Class B notes, the Class C notes and the Class D notes.
Credit enhancement for the Class B notes is provided by the subordination
of the Class C notes and the Class D notes.
Credit enhancement for the Class C notes is provided by the subordination
of the Class D notes.
Spread Account
[A spread account will also provide credit enhancement for the Class C
notes. The spread account is not available to fund payments with respect to the
Class A notes or the Class B notes, except following an event of default and,
only after payment in full of the Class C notes. The spread account initially
will not be funded. After the Series 2001-[.] notes are issued,
S-7
deposits into the spread account will be made each month from reallocated
investor finance charge collections and, if necessary and available, excess
finance charge collections from other series in excess finance charge sharing
group one up to the required spread account amount as described in this
prospectus supplement under "Description of Series Provisions Spread Account."
The spread account will be used to make payments on the Class C notes if
collections of receivables allocated to the Series 2001-[.] notes are
insufficient to make required payments on the Class C notes.]
Credit enhancement for your series is for your series' benefit only, and
you are not entitled to the benefits of credit enhancement available to other
series.
For more information about credit enhancement, see "Description of Series
Provisions--Subordinated Principal Collections," "--Application of Collections"
and "--Defaulted Receivables; Investor Charge-Offs" in this prospectus
supplement.
Class D Notes
At the same time as the issuance of the Class A notes, Class B notes and
the Class C notes, the trust will issue $[.] of its Class D notes. The Class D
notes will be held by the transferors, will be subordinated to the Class A
notes, the Class B notes and the Class C notes and will not bear interest.
Amortization Events
Amortization events include trust amortization events which apply to all
series of notes secured by the trust and series amortization events which apply
to your series and may or may not also be an amortization event for other
series. If a trust amortization event occurs or a Series 2001-[.] amortization
event occurs, the trust will use collections of principal receivables allocated
to Series 2001-[.] each month to pay principal on the Series 2001-[.] notes.
Amortization events may occur if the transferors fail to make required
payments or deposits, violate other covenants and agreements or make
representations and warranties that are materially incorrect.
The following also are amortization events:
. [The average series portfolio yield for any three consecutive months is less
than the weighted average interest rate for Series 2001-[.], calculated by
taking into account the interest rate for the Class A notes, the Class B
notes and the Class C notes, plus the servicing fee rate for Series 2001-
[.];]
. The Class A notes, the Class B notes or the Class C notes are not paid in
full on their expected principal payment dates;
. Bankruptcy, insolvency or similar events relating to an account owner or
transferor, including any additional account owner or additional transferor,
or relating to Conseco Finance; provided that if the rating agency condition
is satisfied, events relating to any account owner may not result in an
amortization event;
. The transferors, including any additional transferor, are unable to transfer
receivables to the trust as required under the transfer and servicing
agreement;
. The transferors do not transfer receivables in additional accounts to the
S-8
trust within five business days of when required under the transfer and
servicing agreement;
. The occurrence of a servicer default that has an adverse effect on the
Series 2001-[.] noteholders;
. The trust becomes subject to regulation as an "investment company" under the
Investment Company Act of 1940; or
. An event of default occurs for the Series 2001-[.] notes and the notes are
accelerated.
For a more detailed discussion of the amortization events, see "Description
of Series Provisions--Amortization Events" in this prospectus supplement and
"Description of the Notes--Amortization Events" in the accompanying prospectus.
Other Interests in the Trust
Other Series of Notes
The trust will issue other series of notes secured by the assets of the
trust from time to time in the future. A summary of the outstanding series is
in "Annex I: Other Series Issued and Outstanding" included at the end of this
prospectus supplement. The issuance of future series will occur without prior
review or consent by you or any other noteholder.
The Transferors' Interest
The assets of the trust not securing your series or any other series
constitute the transferors' interest. The transferors' interest is owned by the
transferors. The transferors may, however, sell all or a portion of their
interest in the transferors' interest. The transferors' interest does not
provide credit enhancement for your series.
Allocations of Collections
Conseco Bank, as servicer, will collect payments on the receivables and
will deposit those collections in an account. It will keep track of those
collections that are finance charge receivables, those collections that are
principal receivables and those receivables that are written off as
uncollectible, called the defaulted amount.
Each month, the servicer will allocate collections received among:
. your series;
. other series outstanding; and
. the transferors' interest in the trust.
The amount allocated to your series will be determined based mainly upon
the size of the invested amount of your series compared to the total amount of
principal receivables in the trust. At the time of issuance of the Series 2001-
[.] notes, the invested amount for Series 2001-[.] will be $[.].
You are entitled to receive payments of interest and principal only from
collections of receivables and other trust assets allocated to your series. If
the invested amount of your series declines, amounts allocated and available
for payment to your series and to you may be reduced. For a description of the
allocation calculations and the events which may lead to these reductions, see
"Description of Series Provisions--Allocation Percentages" and "--Subordinated
Principal Collections" in this prospectus supplement.
Groups
This series will not share in principal collections allocated to the
transferors and will not be part of a shared enhancement group.
S-9
Reallocation Group One
This series will be included in a group of series designated as
reallocation group one. Collections of finance charge receivables allocated to
the Series 2001-[.] notes as described above will be combined with the
collections of finance charge receivables allocated to any other series
designated to be part of reallocation group one. The series, which belong to
reallocation group one, will share finance charge collections and other amounts
pro rata, based upon the relative size of the required payments to each series
in reallocation group one as compared to the total required payments of all
series in reallocation group one. This reallocated amount is called reallocated
investor finance charge collections. However, there can be no assurance that
the trust will issue additional series in reallocation group one. See
"Description of Series Provisions--Reallocation Group One" in this prospectus
supplement.
Excess Finance Charge Sharing Group One
This series will be included in a group of series designated as excess
finance charge sharing group one. If reallocated investor finance charge
collections available to this series exceed the amount necessary to make
required payments for this series, the excess collections may be applied to
cover shortfalls of collections of finance charge receivables or cover
shortfalls of reallocated investor finance charge collections allocable to
other series in excess finance charge sharing group one. In addition, you may
receive the benefits of excess collections of finance charge receivables or
excess collections of reallocated investor finance charge collections allocated
to other series in excess finance charge sharing group one. However, there can
be no assurance that the trust will issue additional series in excess finance
charge sharing group one. See "Description of the Notes--Groups--Excess Finance
Charge Sharing Group" in the accompanying prospectus.
Principal Sharing Group One
This series will be included in a group of series designated as principal
sharing group one. If collections of principal receivables allocated to your
series are not needed to make payments or deposits for your series, these
collections will be applied to cover principal payments for other series, if
any, in principal sharing group one. Any reallocation for this purpose will not
reduce the invested amount for your series. In addition, you may receive the
benefits of collections of principal receivables and other amounts allocated to
other series in principal sharing group one. However, there can be no assurance
that the trust will issue additional series in principal sharing group one.
See "Description of the Notes--Groups--Principal Sharing Group" in the
accompanying prospectus.
Application of Collections
Finance Charge Collections
The trust will apply reallocated investor finance charge collections each
month in the following order of priority:
. to pay interest on the Class A notes;
. to pay interest on the Class B notes;
S-10
. to pay to the servicer an amount equal to the monthly servicing fee due for
the related distribution date, and past due for any prior distribution date,
if Conseco Bank, Inc. or any of its affiliates is not the servicer;
. to pay to the administrator an amount equal to the monthly administration
fee for the related distribution date, and past due for any prior
distribution date, if Conseco Bank or any of its affiliates is not the
administrator;
. to pay interest on the Class C notes;
. to cover your series' allocation of defaulted receivables;
. to cover reductions in your series' invested amount resulting from investor
charge-offs allocated to your series and from subordinated principal
collections, in each case that have not been reimbursed;
. to pay to the servicer an amount equal to the monthly servicing fee due for
the related distribution date, and past due for any prior distribution date,
if Conseco Bank or any of its affiliates is the servicer;
. to pay to the administrator an amount equal to the monthly administration
fee due for the related distribution date, and past due for any prior
distribution date, if Conseco Bank or any of its affiliates is the
administrator;
. to fund, in limited circumstances, a reserve account to cover interest
payment shortfalls for the Class A, Class B and Class C notes during the
accumulation period;
. to make a deposit, if needed, to the spread account for Class C up to the
required spread account amount; and
. to other series in excess finance charge sharing group one or to the holders
of the transferors' interest.
For a more detailed description of these applications, see "Description of
Series Provisions--Application of Collections" in this prospectus supplement.
Principal Collections
The trust will apply your series' share of principal collections each month
as follows:
. During the revolving period, no principal will be paid to you or accumulated
in a trust account. Instead, your series' share of principal collections
will be treated as shared principal collections and may be available to make
principal payments for other series in principal sharing group one.
. The accumulation period for Series 2001-[.] is scheduled to begin on
[.]200[.], but may begin at a later date. During the accumulation period,
your series' share of principal collections will be deposited in a trust
account, up to a controlled deposit amount. On the expected principal
payment date, amounts on deposit in that account will be paid first to the
Class A noteholders, then to the Class B noteholders and then to the Class C
noteholders. After the Class A notes, Class B notes and Class C notes are
paid in full your series' share of principal collections will be used to pay
the Class D notes.
S-11
. If an amortization event occurs, the early amortization period will begin.
During the early amortization period, your series' share of principal
collections will be paid first to the Class A noteholders, then to the Class
B noteholders, then to the Class C noteholders and then to the Class D
noteholders until your series is paid in full.
. During any of the above periods, principal collections allocated to your
series may be reallocated, if necessary, to make required interest payments
on the Class A notes, the Class B notes and the Class C notes, and, if
Conseco Bank or any of its affiliates, is not the servicer or is not the
administrator, the servicing fee and the administration fee, in each case to
the extent not made from reallocated investor finance charge collections and
excess finance charge collections, if any, allocated from other series.
However, for any due period, the sum of these subordinated principal
collections cannot exceed [.]% of the initial invested amount of your
series, as reduced due to the writing off of receivables or for previously
subordinated principal collections, in each case that have not been
reimbursed.
. Any remaining principal collections will first be made available to other
series in principal sharing group one and then be paid to the holders of the
transferor certificates or deposited in the special funding account.
For a more detailed description of these applications, see "Description of
Series Provisions--Application of Collections" in this prospectus supplement.
Optional Redemption
The trust has the option to redeem your notes when the outstanding
principal amount of the Series 2001-[.] notes has been reduced to % or less
of the initial principal amount. See "Description of the Notes--Final Payment
of Principal; Termination" in the accompanying prospectus.
Denominations
Beneficial interests in the Series 2001-[.] notes may be purchased in
minimum denominations of $1,000 and multiples of $1,000 in excess of that
amount.
Registration, Clearance and Settlement
The Series 2001-[.] notes will be in book-entry form and will be registered
in the name of Cede & Co., as the nominee of The Depository Trust Company.
Except in limited circumstances, you will not receive a definitive instrument
representing your notes. See "Description of the Notes--Definitive Notes" in
the accompanying prospectus.
You may elect to hold your Series 2001-[.] notes through The Depository
Trust Company in the United States, or Clearstream Banking, societe anonyme or
the Euroclear System, in Europe.
Transfers will be made in accordance with the rules and operating
procedures of those clearing systems. See "Description of the Notes--Book-Entry
Registration" in the accompanying prospectus.
S-12
Material Federal Income Tax Consequences
Subject to important considerations described under "Material Federal
Income Tax Consequences" in the accompanying prospectus, Dorsey & Whitney LLP,
as counsel to the trust, is of the opinion that under existing law your Series
2001-[.] notes will be characterized as debt for federal income tax purposes,
and that the trust will not be classified as an association or publicly traded
partnership taxable as a corporation and accordingly will not be subject to
federal income tax. By your acceptance of a Series 2001-[.] note, you will
agree to treat your Series 2001-[.] notes as debt for federal, state and local
income and franchise tax purposes. See "Material Federal Income Tax
Consequences" in the accompanying prospectus for additional information
concerning the application of federal income tax laws.
ERISA Considerations
Subject to important considerations described under "ERISA Considerations"
in this prospectus supplement and in the accompanying prospectus, the Series
2001-[.] notes are eligible for purchase by persons investing assets of
employee benefit plans or individual retirement accounts. A fiduciary or other
person contemplating purchasing the Series 2001-[.] notes on behalf of or with
plan assets of any plan or account should consult with its counsel regarding
whether the purchase or holding of the Series 2001-[.] notes could give rise to
a transaction prohibited or not otherwise permissible under ERISA or Section
4975 of the Internal Revenue Code.
Risk Factors
Investment in the Series 2001-[.] notes involves risks. You should consider
carefully the risk factors beginning on page [.] in the prospectus and [.] in
this prospectus supplement.
Exchange Listing
We will apply to list the Series 2001-[.] notes on the Luxembourg Stock
Exchange. We cannot guarantee that the application for the listing will be
accepted.
Additional Information
For more information, you may call ( ) - and direct your inquiries
to .
S-13
Risk Factors
In the accompanying prospectus you will find a section called "Risk
Factors." The information in that section applies generally to all series,
including yours. The information in this section applies more specifically to
your series.
You should consider the risk factors discussed under the caption "Risk
Factors" in the prospectus and the risk factors discussed below in this section
before deciding whether to purchase any of the Series 2001-[.] notes.
Ability to Resell Series 2001- If you purchase Series 2001-[.] notes, you
[.] Notes Not Assured may not be able to sell them. There is
currently no secondary market for the notes.
A secondary market for your notes may not
develop. If a secondary market does develop,
it may not continue or it may not provide
sufficient liquidity to allow you to resell
all or a part of your notes if you want to do
so. The underwriters of the Class A notes,
and the underwriters of the Class B notes and
the underwriters of the Class C notes may
assist in resales of the notes, but they are
not required to do so.
Credit Enhancement May Not Be Credit enhancement provided for your series
Sufficient To Prevent Loss of notes is limited. The only sources of
payment for your notes are the assets of the
trust allocated to your series. If problems
develop with the receivables, such as an
increase in losses on the receivables or if
there are problems in the collection and
transfer of the receivables to the trust, it
is possible that you may not receive the full
amount of interest and principal that you
would otherwise receive.
Class B Notes Are Subordinated If you purchase a Class B note, your right to
To The Class A Notes; Class C receive principal payments is subordinated to
Notes Are Subordinated To The the payment of the Class A notes. No payment
Class A Notes And The Class B will be paid to you until the required amount
Notes; Trust Assets May Be of principal has been paid on the Class A
Diverted From Class B To Pay notes.
Class A
If you purchase a Class C note, your right to
receive principal payments is subordinated to
the payment of the Class A notes and the
Class B notes. No principal will be paid to
you until the required amount of principal
has been paid on the Class A notes and the
Class B notes.
S-14
In addition, collections of finance charge
receivables available to pay interest on the
notes will be used first to pay interest on
the Class A notes then the Class B notes,
[then to pay the servicing fee and
administration fee if the servicer or
administrator is no longer a Conseco entity]
and then will be used to pay interest on the
Class C notes. Therefore, if the collections
of finance charges receivables are not
sufficient to pay interest on the Class A,
Class B and Class C notes, all interest on
the Class A notes will be paid before
interest on the Class B notes is paid and
interest on the Class A notes and the Class B
notes and, if applicable, servicing fees and
administrative fees will be paid before
interest is paid on the Class C notes.
As a result of the subordination, you may
receive payments of interest or principal
later than you expect or you may not receive
the full amount of expected principal and
interest.
Ratings Can Be Lowered Or The ratings assigned to the Series 2001-[.]
Withdrawn After You Purchase notes are based upon many factors, including
Your Notes And The Market the credit quality of the receivables and the
Value Of Your Notes May Be amount of credit enhancement provided. The
Reduced ratings are not a recommendation to purchase,
hold or sell any of the Series 2001-[.]
notes. The ratings also are not intended and
should not be relied upon to determine the
marketability of the Series 2001-[.] notes,
the market value of the Series 2001-[.] notes
or whether the Series 2001-[.] notes are a
suitable investment for you.
Any rating agency may lower its rating or
withdraw its rating entirely if, in the sole
judgment of the rating agency, the credit
quality of the notes has declined or is in
question. If any rating assigned to your
notes is lowered or withdrawn, the market
value of your notes may be reduced.
S-15
Maturity Considerations
We expect that principal on the Class A, Class B and Class C notes will be
paid in full on the 200 distribution date. However, the Series 2001-
[.] supplement to the indenture will permit a partial amortization prior to
that date and, if an amortization event occurs, some or all of the notes may be
paid prior to that date. On the other hand, if collections of receivables are
slower than we expect, principal may be paid later than expected.
The final maturity date of the Series 2001-[.] notes is the distribution
date in , 200 .
The Series 2001-[.] provides that no principal will be paid on the Class B
notes until the Class A notes are paid in full, and no principal will be paid
on the Class C notes until the Class A notes and the Class B notes are paid in
full.
Series 2001-[.] will have a period of time called the controlled
accumulation period when monthly deposits are made into the principal funding
account. During the controlled accumulation period, amounts deposited in the
principal funding account will accumulate in an amount calculated to be
sufficient to pay the Class A notes, the Class B notes and the Class C notes on
the expected payment date. Unless an amortization event occurs, on each
distribution date for the controlled accumulation period, monthly deposits of
principal will be made into the principal funding account in an amount equal to
the least of:
. available investor principal collections for that distribution date;
. the applicable controlled deposit amount; and
. the adjusted invested amount prior to any deposits on that date.
We expect that principal collections will be sufficient to pay the Class A
notes, the Class B notes and the Class C notes in full on the distribution date
in 200 . However, payment rates vary and we cannot assure you that the
available investor principal collections will always be sufficient to make
required payments to the principal funding account or to make payments on your
notes when you expect.
On the other hand if a partial amortization event occurs or an amortization
event occurs, all or a portion of your principal may be paid to you earlier
than expected.
[A partial amortization event may occur if amounts have accumulated in the
[special funding account], the transferor is unable to designate additional
accounts to maintain the required minimum principal balance and the series
portfolio yield is insufficient.]
Upon the occurrence of an amortization event, whether that is a Series
2001-[.] amortization event or a trust amortization event, but not including a
partial amortization event, an early amortization period will begin for Series
2001-[.] and will continue until the earlier of:
. the payment in full of the Class A notes, the Class B notes, the Class
C notes and the Class D notes; and
S-16
. the Series 2001-[.] maturity date.
During the early amortization period, first the Class A notes and then,
following the payment in full of the Class A notes, the Class B notes and then,
following the Class A notes and the Class B notes, the Class C notes will be
entitles to receive monthly payments of principal. The monthly payments will be
equal to the available investor principal collections received by the trust
during the related due period, plus the principal amount on deposit in the
principal funding account, until the Class A notes, the Class B notes, the
Class C notes and, finally the Class D notes, are paid in full.
Principal collections available to pay the Series 2001-[.] notes will be
based on the fixed investor percentage.
The Glossary
This prospectus supplement uses defined terms. Definitions can be found in
the Glossary beginning on page S-[.] in this prospectus supplement and
beginning on page [.] in the accompanying prospectus.
The Originators, The Transferors, The Servicer and Conseco Finance Corp.
Green Tree Retail Services Bank
Green Retail Services Tree Bank, Inc. was chartered on June 14, 1996 as a
South Dakota banking corporation and is wholly owned by Conseco Finance
Servicing Corp. which is a wholly-owned subsidiary of Conseco Finance. The
principal executive office of Green Tree Bank is located at 1400 Turbine Drive,
Rapid City, South Dakota 57701 (telephone ( ) ). Green Tree Bank's
deposits are insured by the FDIC. It is regulated by the Division of Banking of
the South Dakota Department of Commerce and Regulation.
Green Tree Bank, Inc. has been originating accounts and transferring
receivables from those accounts to Conseco Bank. [We expect that those merchant
programs which are currently funded by Green Tree Bank will continue to be
funded at Green Tree Bank. Those programs include the largest Conseco private
label program--that for Menards, Inc.]
Conseco Bank, Inc.
Conseco Bank, is a Utah industrial loan corporation which was incorporated
on December 9, 1996. It was known as Green Tree Capital Bank, Inc. until
December 4, 1998 when its name was changed to Conseco Bank, Inc. The principal
executive office of Conseco Bank is located at 2825 East Cottonwood Parkway,
Suite 230, Salt Lake City, Utah 84121 (telephone (801) 733-2205). Its deposits
are insured by the FDIC. It is regulated by the Utah Department of Financial
Institutions. Under its articles of incorporation, Conseco Bank is authorized
to .
S-17
Conseco Bank will originate accounts, transfer receivables to the trust and
transfer receivables under only one or a few merchant programs to Conseco
Finance.
Conseco Bank will be the servicer for all receivables transferred to the
trust. Conseco Bank expects to perform some or all of its servicing functions
through subservicing agreements with its affiliates.
Conseco Finance Credit Card Funding Corp.
Credit Card Funding Corp. is a newly created special purpose Minnesota
corporation whose stock is held wholly by Conseco Finance. Credit Card Funding
Corp. was organized for the limited purposes of engaging in the type of
transactions described herein and other transactions entered into in connection
with the trust and any activities incidental to and necessary or convenient for
the accomplishment of its limited purpose. Neither Conseco Finance nor Credit
Card Funding Corp.'s board of directors intends to change the business purpose
of Credit Card Funding Corp. The transferor has its principal office located at
(telephone ( ) ).
Conseco Finance will transfer to Credit Card Funding Corp. receivables from
accounts under one merchant program transferred to Conseco Finance from Conseco
Bank. Conseco Finance will also transfer receivables from certain contractor
and commercial accounts it originated before 199 to Credit Card Funding Corp.
Conseco Finance Corp.
General
Conseco Finance was formerly known as Green Tree Financial Corporation. It
is a Delaware corporation which is a financial services holding company that
originates, securitizes and services manufactured housing, home equity, retail
credit and floor plan loans throughout the United States. Conseco Finance is a
wholly owned subsidiary of Conseco, Inc., a financial services holding company.
Conseco Finance and its affiliates are collectively referred to in this
prospectus supplement and in the accompanying prospectus as "Conseco."
Conseco Finance is involved in the development and marketing of the private
label credit card and consumer loan programs. Merchant agreements are generally
entered into by Conseco Finance and then assigned by Conseco Finance to Green
Tree Bank or to Conseco Bank. The respective bank then assumes the obligations
related to the agreement and funds the loans.
Through its principal offices in Saint Paul, Minnesota, and service centers
throughout the United States, Conseco Finance serves all 50 states. Conseco
Finance's principal executive offices are located at 1100 Landmark Towers, 345
St. Peter Street, Saint Paul, Minnesota 55102-1639 (telephone (651) 293-3400).
The SEC allows Conseco Finance to incorporate by reference some of the
information Conseco Finance files with it, which means that we can disclose
important information to you by referring you to those documents. The
information that Conseco Finance incorporates
S-18
by reference is considered to be part of this prospectus supplement and the
accompanying prospectus, and later information that Conseco Finance files with
the SEC will automatically update and supersede this information. Conseco
Finance is incorporating by reference the following documents into this
prospectus supplement and the accompanying prospectus:
[Documents to be listed.]
Conseco Finance will provide you, upon your written or oral request, a copy
of any or all of the documents incorporated by reference in this prospectus
supplement. Please direct your requests for copies to Tammy Hill, Senior Vice
President, Investor Relations, 11825 Pennsylvania Street, Carmel, Indiana
46032, telephone number (317) 817-6100.
All documents filed by Conseco Finance, on behalf of any trust, pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, after
the date of this prospectus supplement will be incorporated by reference into
this prospectus supplement.
Federal securities law requires the filing of information with the SEC,
including annual, quarterly and special reports (including those referred to
above as being incorporated by reference) and other information. You can read
and copy these documents at the public reference facility maintained by the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
You can also read and copy these reports and other information at the following
regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
Restructuring
During the year 2000, rating agencies lowered their ratings of the debt
obligations of Conseco Finance and placed some ratings of Conseco Finance's
debt obligations on review as the rating agencies analyze the impact of
developing events.
On July 27, 2000, Conseco, Inc. announced a restructuring program for
Conseco Finance that includes selling or running off five of Conseco Finance's
business units. On August 8, 2000, Moody's reduced the rating of the long-term
senior unsecured debt obligations of Conseco Finance to B1 from Ba3. We cannot
assure you that further downgrades will not occur.
Litigation Matters
Conseco Finance has been served with various lawsuits 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
S-19
common stock of Conseco Finance during alleged class periods that generally run
from February 1995 to January 1998. One of these lawsuits did not include class
action claims. In addition to Conseco Finance, some of Conseco Finance's
current and former officers and directors are named as defendants in one or
more of the lawsuits. The lawsuits have been consolidated into two complaints,
one relating to an alleged class of purchasers of Conseco Finance's common
stock and the other relating to an alleged class of traders in options for
Conseco Finance's common stock. In addition to these two complaints, a separate
non-class action lawsuit containing similar allegations was also filed.
Plaintiffs in the lawsuits assert claims under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934. In each case, plaintiffs allege that Conseco
Finance and the other defendants violated federal securities laws by making
false and misleading statements about Conseco Finance's current state and
Conseco Finance's future prospects, particularly about prepayment assumptions
and performance of some of our loan portfolios, which allegedly rendered
Conseco Finance's financial statements false and misleading. Conseco Finance
filed motions to dismiss these lawsuits. On August 24, 1999, Conseco Finance's
motions to dismiss were granted with prejudice. The plaintiffs subsequently
appealed the decision to the U.S. Court of Appeals for the 8th Circuit, and the
appeal is currently pending. Conseco Finance believes that the lawsuits are
without merit and intends to defend the lawsuits vigorously. However, the
ultimate outcome of these lawsuits cannot be predicted with certainty.
The Conseco Private Label Portfolio
The Conseco private label portfolio includes private label credit card
accounts owned by Green Tree Bank, private label credit card accounts owned by
Conseco Bank, and private label credit card accounts owned by Conseco Finance.
Accounts designated to the trust will be selected from the Conseco private
label portfolio. However, the Conseco private label portfolio will include
accounts which are not designated to the trust, therefore, the characteristics
and performance of the Conseco private label portfolio and the characteristics
and performance of the trust portfolio may be different.
The Conseco private label portfolio includes both accounts originated by a
Conseco entity and accounts which were originated by other financial
institutions and acquired by Conseco.
Types of Accounts
Each account in the Conseco private label portfolio is created under the
terms of a merchant agreement. The merchant agreement may be either:
. with a merchant and provide for the issuance of credit cards which can
be used primarily to purchase goods and services at that merchant's
stores; or
. with a dealer; the merchant agreements which are with dealers
generally relate to the products of a particular manufacturer or
producer which endorses the use of credit provided by Conseco; these
agreements usually provide for financing only specific products and
services.
S-20
As of [.], 2001
. % of the accounts in the Conseco private label portfolio and [.] %
of the receivables in the Conseco private label portfolio were related
to merchant agreements entered into with merchants; and
. % of the accounts in the Conseco private label portfolio and [.] %
of the receivables in the Conseco private label portfolio were related
to merchant agreements entered into with dealers.
The accounts in the Conseco private label portfolio include revolving
credit card accounts each opened under a cardholder agreement. A portion of the
accounts include provisions for financing major purchases with level principal
payments over a period of approximately [ ] months. Within an account, a
portion of the principal balance may be on a revolving basis and a portion on a
fixed monthly principal payment basis.
As of [.], 2001
. $ of the principal receivables in the Conseco private
label portfolio, representing [.] % of the principal receivables in
the portfolio, were on a revolving basis; and
. $ of the principal receivables in the Conseco private
label portfolio, representing [.] % of the principal receivables in
the portfolio, were on fixed payment schedules.
Merchants in the Conseco Program
As of , 2001, the Conseco private label portfolio included accounts
created under [ ] programs. Approximately % of the principal receivables
for that day related to [.] merchant programs.
Of the principal receivables in the Conseco private label portfolio as of
[.], 2001, as shown in the following table, % were in accounts opened
under one merchant program; in addition, another merchant program accounted for
% of the principal receivables and a third merchant program accounted for
% of the principal receivables. No other merchant program accounted for
more than % of the principal receivables.
S-21
Composition of Conseco Private Label Portfolio
by Approved Merchant Programs
Amount of
Receivables
in Private Percent of Receivables
Label in Private Label
Merchant Portfolio Portfolio
-------- ----------- ----------------------
%
---------- ------
100%
======
None of the merchants nor the dealers has any obligation with respect to
the accounts. The obligation to pay principal and interest on the accounts is
solely that of the customers who open the accounts.
Of the merchant agreements in effect on , 2001, the following table
shows the periods in which such agreements terminate. Most of the agreements
contain automatic renewal provisions; however, we cannot assure you that some
or all of the agreements may not be terminated at the end of the current term
or at the end of any extension period or will not be terminated by Conseco or
by the merchant at any time as a result of events described in the agreements.
Merchant Agreements
Term of Agreements
Amount of
Principal
Number Receivables
Year Current Term Expires of Agreements Represented
------------------------- ------------- -----------
2001............................................
2002............................................
2003............................................
2003............................................
2004............................................
2005............................................
Later...........................................
S-22
Portfolio Experience
The following tables set forth certain experience for each of the periods
shown for the Conseco private label portfolio. There can be no assurance that
the actual experience in the future will be similar to the historical
experience set forth in the following tables and there can be no assurance that
the experience of the trust portfolio will be similar to the Conseco private
label portfolio.
Loss and Delinquency Experience
The following tables set forth the loss and delinquency experience for the
Conseco private label portfolio for each of the periods shown.
Loss Experience
(Dollars in Thousands)
As of December 31
As of --------------------------------------------
Month Ended 2000 1999 1998 1997 1996
----------- -------- -------- -------- -------- --------
Average Receivables
Outstanding............
Total Net Charge-offs...
Total Net Charge-offs as
a Percent of Average
Receivables............
Delinquency Experience
(Dollars in Thousands)
Year Ended December 31
Month --------------------------------------------
Ended 2000 1999 1998 1997 1996
----- -------- -------- -------- -------- --------
1-29 days....................
30-59 days...................
60-89 days...................
90-119 days..................
120 days or more.............
Total........................
Revenue Experience
The revenues for the Conseco private label portfolio from finance charges
and fees billed to account holders are set forth in the following tables for
each of the periods shown.
The historical revenue figures in the table include interest on purchases
and fees accrued during the cycle. Cash collections on the receivables may not
reflect the historical experience in the table. During periods of increasing
delinquencies, billings of finance charges and fees may exceed cash payments as
amounts collected on credit card receivables lag behind amounts billed to
cardholders. Conversely, as delinquencies increase, cash payments may exceed
billings of finance charges and fees as amounts collected in a current period
may include amounts billed during prior periods. Revenues from finance charges
and
S-23
fees on both a billed and a cash basis will be affected by numerous factors,
including the periodic finance charges on the receivables, other fees paid by
account holders, the percentage of account holders who pay off their balances
in full each month and do not incur periodic finance charges on purchases and
changes in the level of delinquencies on the receivables.
Revenue Experience
(Dollars in Thousands)
Year Ended December 31
Months --------------------------------------------
Ended 2000 1999 1998 1997 1996
------ -------- -------- -------- -------- --------
Average Receivables
Outstanding...............
Total Finance Charges and
Fees Billed...............
Total Finance Charges and
Fees Billed as a
Percentage of Average
Receivables Outstanding...
The finance charges and fees shown in the preceding table are composed of
two components: finance charges based upon the applicable interest rates
charged on the accounts and fees and other services charges such as late
charges.
The revenues for the portfolio shown in the tables above are related to
finance charges together with fees, billed to holders of the accounts. The
revenues related to finance charges depend in part upon the collective
preference of cardholders to use their credit cards as revolving debt
instruments for purchases and who pay off credit card account balances over
several months as opposed to convenience use, where such cardholders prefer
instead to pay off their entire balance each month, thereby avoiding finance
charges on purchases, and upon other services for which cardholders to choose
to avail themselves and which are paid for by the use of the card. Revenues
related to finance charges and fees also depend on the types of charges and
fees assessed on the accounts in the portfolio. Accordingly, revenues will be
affected by future changes in the types of charges and fees assessed on the
accounts. Revenues could be adversely affected by future changes in the charges
and fees assessed by Conseco Bank, Conseco Finance and Green Tree Bank and
other factors.
Neither the servicer nor any of its affiliates has any basis to predict how
any future changes in the usage of accounts by account holders or in the terms
of accounts may affect the revenue for the portfolio.
Payment Rates
The following table sets forth for the Conseco private label portfolio the
highest and lowest monthly payment rates during any month in the periods shown
and the average monthly payment rates for all months in the periods shown, in
each case calculated as a percentage of total opening monthly account balances
during the periods shown. Payment rates shown in the table are based on amounts
which would be deemed payments of principal receivables and finance charge
receivables with respect to the accounts.
S-24
Monthly Payment Rates
Months Ended
Year Ended December 31
Months --------------------------------------------
Ended 2000 1999 1998 1997 1996
------ -------- -------- -------- -------- --------
Lowest Month................
Highest Month...............
Monthly Average.............
We cannot assure you that the monthly payment rates in the future will be
similar to the historical experience set forth above or that the monthly
payment rates for accounts in the trust portfolio will be the same as payment
rates for the Conseco private label portfolio.
The amount of collections of receivables may vary from month to month due
to seasonal variations, general economic conditions and payment habits of
individual cardholders. In addition, the payment rates set forth in the table
include collections of both principal receivables and finance charge
receivables.
The Trust Portfolio
The receivables conveyed to the trust arise in accounts selected from the
Conseco private label portfolio. The transferors represent that each account
selected is an eligible account.
Accounts are expected to be added to the trust from time to time and the
trust portfolio will change accordingly.
The transferors have the right to designate additional accounts for
inclusion in the trust portfolio and to transfer to the trust all receivables
of those additional accounts, whether the receivables already exist or arise
after the designation, if the conditions described under "The Transfer and
Servicing Agreement--Addition of Trust Assets" in the accompanying prospectus
are satisfied. In addition, the transferors will be required to designate
additional accounts, to the extent available, to maintain, for so long as notes
of any series remain outstanding, an aggregate amount of principal receivables
in the trust portfolio equal to or greater than the required minimum principal
balance, as adjusted for any series having a paired series as described in the
related indenture supplement.
The transferors also have the right to designate removed accounts and to
require the indenture trustee to transfer all receivables in the removed
accounts back to the transferors, whether the receivables already exist or
arise after the designation, if the conditions described in "The Transfer and
Servicing Agreement--Removal of Trust Assets" in the accompanying prospectus
are satisfied.
Throughout the term of the trust, the accounts from which the receivables
arise will be the accounts designated by the transferors at the time the trust
is established plus any additional accounts minus any removed accounts. As a
result, the composition of the trust
S-25
assets is expected to change over time. For a general description of the
receivables in the trust, see "The Trust Portfolio" in the accompanying
prospectus.
The following is particular information about the accounts and the
receivables in the trust portfolio as of the beginning of the day on
:
. The receivables in the trust portfolio included $ of
principal receivables and $ of finance charge receivables.
. The accounts designated to the trust had an average principal
receivable balance of $ and an average credit limit of
$ .
. The percentage of the aggregate total receivable balance to the
aggregate total credit limit was %. The average age of the accounts
was approximately months.
. As of the beginning of the day on , cardholders whose accounts
are designated for the trust portfolio had billing addresses in
states.
The following tables summarize the trust portfolio by various criteria as
of the beginning of the day on . Because the future composition of the
trust portfolio will change over time, these tables are not necessarily
indicative of the composition of the trust portfolio at any subsequent time.
Composition of Accounts by Industry
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Industry Accounts Accounts Outstanding Outstanding
- -------- --------- ---------- ----------- -----------
-------- ---- --------- ----
Total............................ % $ %
======== ==== ========= ====
Composition by Type of Account
Percentage
Number of of Total Percentage
Accounts Number of Receivables of Total
Type of Account (1,000s) Accounts ($1,000s) Receivables
- --------------- --------- ---------- ----------- -----------
Revolving credit card accounts....
Fixed payment accounts
Final payment due within one
year...........................
Final payment due within three
years..........................
Final payment due within five
years..........................
S-26
Composition by Account Balance
Trust Portfolio
Percentage
Number of of Total Percentage
Accounts Number of Receivables of Total
Account Balance Range (1,000s) Accounts ($1,000s) Receivables
- --------------------- --------- ---------- ----------- -----------
Less than or equal to $1,000.00...
$1,000.01 to $2,000.00............
$2,000.01 to $3,000.00............
$3,000.01 to $4,000.00............
$4,000.01 to $5,000.00............
$5,000.01 to $6,000.00............
$6,000.01 to $7,000.00............
$7,000.01 to $8,000.00............
$8,000.01 to $9,000.00
$9,000.01 to $10,000.00...........
Over $10,000.00...................
Total...........................
Composition by Credit Limit
Trust Portfolio
Percentage
Number of of Total Percentage
Accounts Number of Receivables of Total
Credit Limit Range (1,000s) Accounts ($1,000s) Receivables
- ------------------ --------- ---------- ----------- -----------
Less than or equal to $1,000.00...
$1,000.01 to $2,000.00............
$2,000.01 to $3,000.00............
$3,000.01 to $4,000.00............
$4,000.01 to $5,000.00............
$5,000.01 to $6,000.00............
$6,000.01 to $7,000.00............
$7,000.01 to $8,000.00............
$8,000.01 to $9,000.00............
$9,000.01 to $10,000.00...........
Over $10,000.00...................
Total...........................
Composition by Period of Delinquency
Trust Portfolio
Percentage
Number of of Total Percentage
Period of Delinquency Accounts Number of Receivables of Total
(Days Contractually Delinquent) (1,000s) Accounts ($1,000s) Receivables
- ------------------------------- --------- ---------- ----------- -----------
Up to 29 days.....................
30 to 59 Days.....................
60 to 89 Days.....................
90 to 119 Days....................
120 or More Days..................
Total...........................
S-27
Composition by Account Age
Trust Portfolio
Percentage
Number of of Total Percentage
Accounts Number of Receivables of Total
Account Age (1,000s) Accounts ($1,000s) Receivables
- ----------- --------- ---------- ----------- -----------
Not More than 6 Months............
Over 6 Months to 12 Months........
Over 12 Months to 24 Months.......
Over 24 Months to 48 Months.......
Over 48 Months to 72 Months.......
Over 72 Months to 96 Months.......
Over 96 Months to 120 Months......
Over 120 Months...................
Total...........................
Geographic Distribution of Accounts
Trust Portfolio
Percentage
Number of of Total Percentage
Accounts Number of Receivables of Total
State (1,000s) Accounts ($1,000s) Receivables
- ----- --------- ---------- ----------- -----------
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Description of Series Provisions
The following is a summary of the material provisions of the terms unique
to the Series 2001-[.] notes and the indenture supplement. You also should
refer to the accompanying prospectus for a further discussion of material
provisions common to all notes issued under the indenture. The form of each of
the transfer and servicing agreement, the indenture and an indenture supplement
has been filed with the SEC as an exhibit to the registration statement
relating to the notes.
General
The Class A notes, Class B notes, Class C notes and the Class D notes
comprise the Series 2001-[.] notes and will be issued under the indenture, as
supplemented by the indenture supplement relating to the Series 2001-[.] notes,
in each case between the trust and the indenture trustee. As described under
"Description of the Notes--New Issuances" in the accompanying prospectus, the
transferors may cause the owner trustee, on behalf of the trust, and the
indenture trustee to execute further indenture supplements in order to issue
additional series.
The closing date for Series 2001-[.] is expected to be [.], 2001. The Class
A, Class B and Class C notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede, as nominee of DTC. As described under
"Description of the Notes--General," "--Book-Entry Registration" and "--
Definitive Notes" in the accompanying prospectus. Unless definitive notes are
issued, you will be able to transfer your interest in the notes only through
the facilities of DTC. You will receive payments and notices through DTC and
its participants. Payments of interest and principal will be made on each
distribution date to the noteholders in whose names Series 2001-[.] notes were
registered on the record date.
[Application will be made to list the notes on the Luxembourg Stock
Exchange; however, we cannot assure you that the listing will be obtained. You
should consult with [.], the Luxembourg listing agent for the notes, [Address]
Luxembourg, phone number ([.])[.], for the status of the listing].
The Class D notes will be held by the Transferors and are not being offered
under this prospectus supplement. The Class D notes are being issued for credit
enhancement purposes only.
Interest Payments
The Class A notes will accrue interest from and including the closing date
through but excluding [.], 2001, and for each following interest period, at a
rate of [.]% per annum above LIBOR for the related LIBOR determination date.
The Class B notes will accrue interest from and including the closing date
through but excluding [.], 2001, and for each following interest period, at a
rate of [.]% per annum above LIBOR for the related LIBOR determination date.
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The Class C notes will accrue interest from and including the closing date
through but excluding [.], 2001, and for each following interest period, at a
rate of [.]% per annum above LIBOR for the related LIBOR determination date.
The indenture trustee will determine LIBOR for each interest period on the
LIBOR determination date.
The Class A note interest rate, the Class B note interest rate and the
Class C note interest rate applicable to the then current and immediately
preceding interest period may be obtained by telephoning the indenture trustee
at its corporate trust office at [.].
Interest on the notes will be calculated on the basis of the actual number
of days in the related interest period and a 360-day year.
Interest will be paid on each distribution date, which will be [.], 2001
and the 15th day of each following month or, if the 15th day is not a business
day, the following business day.
Interest payments on the Class A notes, the Class B notes and the Class C
notes on any distribution date will be calculated on the aggregate principal
balance of the Class A notes, the Class B notes and the Class C notes, as
applicable, as of the preceding record date, except that interest for the first
distribution date will accrue at the applicable note interest rate on the
initial aggregate principal balance of the Class A notes, the Class B notes and
the Class C notes, as applicable, from the closing date.
Interest due on the Class A notes, the Class B notes and the Class C notes
but not paid on any distribution date will be payable on the following
distribution date, together with additional interest on that amount at the
applicable note interest rate. Additional interest will accrue on the same
basis as interest on the Series 2001-[.] notes, and will accrue from the
distribution date on which the overdue interest became due, to but excluding
the distribution date on which the additional interest is paid.
Interest payments on the Series 2001-[.] notes on any distribution date
will be paid from reallocated investor finance charge collections for the
related due period and, to the extent reallocated investor finance charge
collections are insufficient to pay the interest, from excess finance charge
collections and subordinated principal collections, to the extent available,
for the related due period. Interest payments on the Class C notes on any
distribution date will also be paid from available amounts on deposit in the
spread account to the extent needed.
The Class D notes will not bear interest.
Principal Payments
You are expected to receive payment of principal in full on [.], 200[.].
You may, however, receive payments of principal earlier than the expected
principal payment date if an amortization event occurs and the early
amortization period begins or if a partial
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amortization event occurs. The holders of the Class B notes will not begin to
receive payments of principal until the final principal payment on the Class A
notes has been made. The holders of the Class C notes will not begin to receive
payments of principal until the final principal payments on the Class A notes
and Class B notes have been made.
The holders of the Class D notes will not receive any payments of principal
until the final principal payments on the Class A notes, the Class B notes and
the Class D notes have been made.
Revolving Period
The revolving period for the Series 2001-[.] notes begins on the closing
date and ends on the earlier of the date the controlled accumulation period or
the early amortization period begins. During the revolving period, the investor
percentage of collections of principal receivables will, subject to
limitations, including the allocation of any subordinated principal collections
for that due period, be treated as shared principal collections and used to pay
principal to other series in principal sharing group one or will be paid to the
holders of the transferor certificates. In the event that the transferors are
unable to designate additional accounts to the trust when required, a partial
amortization of Series 2001-[.] notes may occur. If the servicer determines
that the series portfolio yield is insufficient, funds on deposit in the
special funding account will be allocated to Series 2001-[.] noteholders, as
discussed under "Application of Collections" in the prospectus.
Controlled Accumulation Period
Principal for payment to the Series 2001-[.] noteholders will accumulate
during the controlled accumulation period in the principal funding account
established by the indenture trustee. The controlled accumulation period for
the Series 2001-[.] notes is scheduled to begin on [.], 200[.], but may be
postponed, as discussed under "Description of Series Provisions--Principal
Payments--Postponement of Controlled Accumulation Period" in this prospectus
supplement, and ends on the earliest of:
(1) the beginning of the early amortization period;
(2) the payment in full of the aggregate principal balance of the notes;
and
(3) the Series 2001-[.] final maturity date.
If an amortization event occurs before the controlled accumulation period
begins, there will be no controlled accumulation period and the early
amortization period will begin.
On each distribution date relating to the controlled accumulation period,
the indenture trustee will deposit in the principal funding account an amount
equal to the least of:
(1) available investor principal collections with respect to that
distribution date;
(2) the applicable controlled deposit amount; and
(3) the adjusted invested amount prior to any deposits on that date.
Amounts in the principal funding account will be paid:
first, to Class A noteholders, up to the aggregate principal balance of
the Class A notes;
S-31
second, to Class B noteholders, up to the aggregate principal balance of
the Class B notes; and
third, to Class C noteholders, up to the aggregate principal balance of
the Class C notes;
in each case, on the expected principal payment date unless paid earlier due to
the commencement of the early amortization period.
During the controlled accumulation period, the portion of available
investor principal collections not applied for the payment of principal on the
Class A notes, the Class B notes or the Class C notes on a distribution date
generally will be treated as shared principal collections.
We expect, but cannot assure you, that the amounts available in the
principal funding account on the expected principal payment date will be
sufficient to pay in full the aggregate principal balance of the Class A notes,
the Class B notes and the Class C notes. If these amounts are not available on
the expected principal payment date, an amortization event will occur and the
early amortization period will begin.
Postponement of Controlled Accumulation Period
The controlled accumulation period is scheduled to last [.] months.
However, the servicer may elect to extend the revolving period and postpone the
controlled accumulation period by providing a notice to the indenture trustee.
The servicer can make this election only if the number of months needed to fund
the principal funding account based on expected principal collections needed to
pay principal on the Series 2001-[.] notes is less than [.] months.
On each determination date beginning in [.], 200[.] and ending when the
controlled accumulation period begins, the servicer will review the amount of
expected principal collections and determine the number of months expected to
be required to fully fund the principal funding account by the expected
principal payment date and may elect to postpone the controlled accumulation
period. In making its decision, the servicer is required to assume that the
principal payment rate will be no greater than the lowest monthly payment rate
for the prior 12 months and will consider the amount of principal expected to
be allocable to noteholders of all other series, if any, in principal sharing
group one which are expected to be amortizing or accumulating principal during
the controlled accumulation period for Series 2001-[.]. In no case will the
controlled accumulation period be reduced to less than one month.
The method for determining the number of months required to fully fund the
principal funding account may be changed upon receipt of written confirmation
that the change will not result in the reduction or withdrawal by any rating
agency of its rating of any outstanding series or class.
Partial Amortization Events
[Description to be added if applicable to series.]
S-32
Early Amortization Period
The early amortization period for the Series 2001-[.] notes will begin on
the day on which an amortization event with respect to Series 2001-[.] occurs
and ends on the Series 2001-[.] final maturity date.
If an amortization event occurs during the controlled accumulation period,
on the next distribution date any amount on deposit in the principal funding
account will be paid to the Class A noteholders and, after the principal
balance of the Class A notes has been paid in full, any remaining amount will
be paid to the Class B noteholders and, after the principal balance of the
Class B notes has been paid in full, any remaining amount will be paid to the
Class C noteholders, up to the principal balance of the Class C notes.
In addition, if the principal balance of the Class A notes has not been
paid in full, available investor principal collections will be paid to the
Class A noteholders on each distribution date until the earlier of:
(1) the date the Class A notes are paid in full; and
(2) the Series 2001-[.] final maturity date.
After the Class A notes have been paid in full, and if the Series 2001-[.]
termination date or the trust termination date has not occurred, available
investor principal collections will be paid to the Class B noteholders on each
distribution date until the earlier of:
(1) the date the Class B notes are paid in full; and
(2) the Series 2001-[.] final maturity date.
After the Class B notes have been paid in full, and if the Series 2001-[.]
final maturity date or the trust termination date has not occurred, available
investor principal collections will be paid to the Class C noteholders on each
distribution date until the earlier of:
(1) the date the Class C notes are paid in full; and
(2) the Series 2001-[.] final maturity date.
See "--Amortization Events" below for a discussion of events that might
lead to the commencement of the early amortization period.
Principal Funding Account
The indenture trustee will establish and maintain with an eligible
institution a segregated trust account held for the benefit of the noteholders
to serve as the principal funding account. During the controlled accumulation
period, the indenture trustee at the direction of the servicer will transfer
available investor principal collections from the collection account to the
principal funding account as described under "--Application of Collections" in
this prospectus supplement.
S-33
Funds on deposit in the principal funding account will be invested to the
following distribution date by the indenture trustee at the direction of the
servicer in eligible investments. Principal funding investment proceeds will be
deposited in the collection account and included in available investor finance
charge collections for the related due period.
Reserve Account
The indenture trustee will establish and maintain with an eligible
institution a segregated trust account held for the benefit of the noteholders
to serve as the reserve account. The reserve account is established to assist
with the subsequent distribution of interest on the notes during the controlled
accumulation period and on the first distribution date with respect to the
early amortization period. On each distribution date from and after the reserve
account funding date, but prior to the termination of the reserve account, the
indenture trustee, acting in accordance with the servicer's instructions, will
apply reallocated investor finance charge collections and excess finance charge
collections allocated to the Series 2001-[.] notes (to the extent described
under "--Application of Collections--Payment of Interest, Fees and Other
Items") to increase the amount on deposit in the reserve account, to the extent
that amount is less than the required reserve account amount.
As long as no event of default for your series has occurred and is
continuing, on each distribution date, after giving effect to any deposit to be
made to, and any withdrawal to be made from, the reserve account on that
distribution date, the indenture trustee will withdraw from the reserve account
an amount equal to the excess, if any, of the amount on deposit in the reserve
account over the required reserve account amount and will distribute that
excess to the owner trustee for distribution to the holders of the transferor
certificates. Any amounts withdrawn from the reserve account and distributed to
the owner trustee as described above will not be available for distribution to
the noteholders. On any day following an event of default and an acceleration
of the notes, funds available in the reserve account will be used to fund any
amounts owed to the noteholders.
So long as the reserve account is not terminated, all amounts on deposit in
the reserve account on any distribution date, after giving effect to any
deposits to, or withdrawals from, the reserve account to be made on that
distribution date, will be invested to the following distribution date by the
indenture trustee at the direction of the servicer in eligible investments. The
interest and other investment income, net of investment expenses and losses,
earned on these investments will be retained in the reserve account, to the
extent the amount on deposit is less than the required reserve account amount,
or deposited in the collection account and treated as available investor
finance charge collections.
On or before each distribution date with respect to the controlled
accumulation period and on the first distribution date with respect to the
early amortization period, a withdrawal will be made from the reserve account,
and the amount of this withdrawal will be deposited in the collection account
and included as available investor finance charge collections, as
S-34
provided in the Series 2001-[.] indenture supplement, for that distribution
date in an aggregate amount equal to the least of:
(1) the amount then on deposit in the reserve account with respect to
that distribution date
(2) the required reserve account amount; and
(3) the reserve draw amount with respect to that distribution date.
However, the amount of the withdrawal will be reduced to the extent that funds
otherwise would be available to be deposited in the reserve account on that
distribution date.
If, for any distribution date, the principal funding investment proceeds
are less than the sum of:
(1) the product of (a) the balance of the principal funding account, up to
the principal balance of the Class A notes, on the record date
immediately preceding that distribution date, (b) the Class A note
interest rate for the related interest period, and (c) the number of
days in the related interest period divided by 360,
(2) the product of (a) the lesser of (1) the balance of the principal
funding account in excess of the principal balance of the Class A
notes and (2) the principal balance of the Class B notes on the
record date immediately preceding that distribution date, (b) the
Class B note interest rate for the related interest period, and (c)
the number of days in the related interest period divided by 360, and
(3) the product of (a) the balance of the principal funding account in
excess of the aggregate principal balance of the Class A notes and
the Class B notes on the record date immediately preceding that
distribution date, (b) the Class C note interest rate for the related
interest period, and (c) the number of days in the related interest
period divided by 360,
then the indenture trustee will withdraw the shortfall, called the "reserve
draw amount," to the extent required and available, from the reserve account
and deposit it in the collection account for use as available investor finance
charge collections.
The reserve account will be terminated upon the earliest to occur of:
(1) the first distribution date for the early amortization period;
(2) the expected principal payment date; and
(3) the termination of the trust.
Upon the termination of the reserve account, all amounts on deposit in the
reserve account (after giving effect to any withdrawal from the reserve account
on that date as described above) will be distributed to the owner trustee for
further distributions to the holders of the transferor certificates. Any
amounts withdrawn from the reserve account and distributed to the owner trustee
as described above will not be available for distribution to the noteholders.
S-35
Principal Sharing Group One
This series will be included in a group of series designated as principal
sharing series group one. Collections of principal receivables for any due
period allocated to the invested amount will first be used to cover, during the
controlled accumulation period, deposits of the applicable controlled deposit
amount to the principal funding account, and during the early amortization
period, payments to the noteholders. Shared principal collections will be
determined and allocated by the servicer to cover principal shortfalls. Shared
principal collections will not be used to cover investor charge-offs or
unreimbursed subordinated principal collections for any series. If principal
shortfalls exceed shared principal collections for any due period, shared
principal collections will be allocated pro rata among the applicable series in
principal sharing group one based on the relative amounts of principal
shortfalls. To the extent that shared principal collections exceed principal
shortfalls, the balance will, subject to limitations described under
"Description of the Notes--Special Funding Account" and "--Application of
Collections" in the accompanying prospectus, be paid to the holders of the
transferor certificates.
Paired Series
Your series of notes may be paired with one or more series of notes issued
at a later time once the controlled accumulation period or the early
amortization period for your series begins. We call each of these later issued
series a paired series. All or a portion of a paired series may be pre-funded
with an initial deposit to a funding account that is for the sole benefit of
the paired series; in the alternative, a paired series may have a principal
amount that can be increased. As your series amortizes, if there have been no
unreimbursed investor charge-offs for any paired series, the invested amount of
the paired series will be increased by an amount equal to the related amortized
amount. The issuance of the paired series will be subject to the conditions
described under "Description of the Notes--New Issuances" in the accompanying
prospectus.
We cannot assure you that the terms of any paired series will not have an
impact on the calculation of the investor percentage or the timing or amount of
payments received by you as a Series 2001-[.] noteholder. The extent to which
the timing or amount of payments received by you may be affected will depend on
many factors, only one of which is a change in the calculation of the investor
percentage.
Subordination
The Class B notes and the Class C notes are subordinated to the Class A
notes. Interest payments will be made on the Class A notes prior to being made
on the Class B notes and the Class C notes. Interest payments will be made on
the Class B notes prior to interest payments being made on the Class C notes.
Principal payments on the Class B notes will not begin until the Class A notes
have been paid in full. Principal payments on the Class C notes will not begin
until the Class A notes and the Class B notes have been paid in full. If
principal collections allocated to your series are reallocated to pay the
interest on the Class A notes, the principal amount of the Class B notes and
the Class C notes may not be repaid. If principal collections allocated to your
series are reallocated to pay interest on the
S-36
Class B notes or to pay the monthly servicing fee, if Conseco Bank or any of
its affiliates is not the servicer, the principal amount of the Class C notes
may not be repaid. If a foreclosure and sale of trust assets after an event of
default occurs, the net proceeds of that sale which are available to pay
principal and interest on the Series 2001-[.] notes would be paid first to the
Class A notes before any remaining net proceeds would be available for payments
due to the Class B notes or the Class C notes.
The Class D notes are subordinated to the Class A notes, the Class B notes
and the Class C notes. The Class D notes will not bear interest. Principal
payments on the Class D notes will not begin until the Class A notes, the Class
B notes and the Class C notes have been paid in full.
Events Of Default
The events of default for Series 2001-[.], as well as the rights and
remedies available to the indenture trustee and the Series 2001-[.] noteholders
when an event of default occurs, are described under "The Indenture--Events of
Default; Rights Upon Event of Default" in the accompanying prospectus.
If an event of default for Series 2001-[.] occurs, the indenture trustee or
the holders of a majority of the outstanding principal amount of the Series
2001-[.] notes may declare the Series 2001-[.] notes to be immediately due and
payable. If the Series 2001-[.] notes are accelerated, you may receive
principal prior to the expected principal payment date for your notes.
Amortization Events
As described above, the revolving period will continue through [.], 200[.]
(unless that date is postponed as described under "--Principal Payments--
Postponement of Controlled Accumulation Period" in this prospectus supplement),
unless an amortization event occurs prior to that date.
An "amortization event" refers to any of the following events:
(1) failure by the transferors (a) to make any payment or deposit on
the date required under the transfer and servicing agreement, the
indenture or the Series 2001-[.] indenture supplement, or within the
applicable grace period which shall not exceed five days or (b) to observe
or perform in any material respect any other covenants or agreements of
the transferors set forth in the transfer and servicing agreement, the
indenture or the Series 2001-[.] indenture supplement, which failure has
an Adverse Effect on the Series 2001-[.] noteholders and which continues
unremedied for a period of 60 days after written notice of the failure,
requiring the same to be remedied, and continues to materially and
adversely affect the interests of the noteholders for the designated
period;
(2) any representation or warranty made by the transferors in the
transfer and servicing agreement, the indenture or the Series 2001-[.]
indenture supplement, or any information required to be given by the
transferors to the indenture trustee to identify
S-37
the accounts proves to have been incorrect in any material respect when
made or delivered and which continues to be incorrect in any material
respect for a period of 60 days after written notice of the failure,
requiring the same to be remedied, and as a result of which the interests
of the noteholders are materially and adversely affected and continue to
be materially and adversely affected for the designated period; except
that an amortization event described in this subparagraph (2) will not
occur if the transferors have accepted reassignment of the related
receivable or all related receivables, if applicable, during the
designated period in accordance with the provisions of the transfer and
servicing agreement;
(3) any servicer default occurs which would have an Adverse Effect on
the Series 2001-[.] noteholders;
(4) the average of the series portfolio yields for any three
consecutive due periods is less than the average of the base rates for the
same due periods;
(5) insufficient moneys are available to pay in full the aggregate
principal balances of all the Series 2001-[.] notes on the expected
principal payment date;
(6) a failure by a transferor to convey receivables in additional
accounts or participations to the trust within 5 business days after the
date required by the transfer and servicing agreement;
(7) bankruptcy, insolvency, liquidation, conservatorship, receivership
or similar events relating to the transferors, including any additional
transferor, Conseco Finance, Green Tree Bank or other account owner,
unless written confirmation from each rating agency that the removal of
Green Tree Bank, Conseco Bank or another account owner from this
amortization event will not result in a reduction or withdrawal of its
rating of any outstanding series or class;
(8) a transferor is unable for any reason to transfer receivables to
the trust in accordance with the provisions of the transfer and servicing
agreement;
(9) the trust becomes subject to regulation as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended; or
(10) an event of default and acceleration of the notes for Series
2001-[.] occurs under the indenture.
In the case of any event described in clause (1), (2), (3) or (5) above, an
amortization event will be deemed to have occurred with respect to the notes
only if, after any applicable grace period, either the indenture trustee or the
Series 2001-[.] noteholders evidencing interests aggregating not less than 50%
of the aggregate unpaid principal amount of the Series 2001-[.] notes, by
written notice to the transferors and the servicer (and to the indenture
trustee if given by the Series 2001-[.] noteholders), declare that an
amortization event has occurred with respect to the Series 2001-[.] notes as of
the date of the notice.
In the case of any event described in clause (6), (7), (8) or (9), an
amortization event with respect to all series then outstanding, and in the case
of any event described in clause (4), or (10), an amortization event with
respect to only the Series 2001-[.] notes, will occur without any notice or
other action on the part of the indenture trustee or the Series 2001-[.]
noteholders immediately upon the occurrence of the event.
S-38
On the date on which an amortization event is deemed to have occurred, the
early amortization period will begin.
See "Description of the Notes--Amortization Events" in the accompanying
prospectus for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the transferors.
Allocation Percentages
Under the indenture, with respect to each due period, the servicer will
allocate among the invested amount, the invested amount for all other series
issued and outstanding and the transferor amount, all amounts collected on
finance charge receivables, all amounts collected on principal receivables and
all defaulted amounts with respect to that due period. These amounts will be
allocated based on the investor percentage. Available investor finance charge
collections will be reallocated among all series in reallocation group one as
described in "--Reallocation Group One" in this prospectus supplement.
Defaulted amounts and collections of finance charge receivables at any
time, and principal receivables during the revolving period will be allocated
to the invested amount based on the floating investor percentage.
Collections of principal receivables during the controlled accumulation
period and early amortization period will be allocated to the invested amount
based on the fixed investor percentage.
Interest payments on Series 2001-[.] notes will be paid from reallocated
investor finance charge collections and excess finance charge collections.
Principal payments on the Series 2001-[.] notes will be paid from available
investor principal collections.
Reallocation Group One
Collections of finance charge receivables to be allocated to the Series
2001-[.] notes as described above will then be combined with the collections of
finance charge receivables allocated to any other series which is designated to
be part of reallocation group one. Each series in reallocation group one, will
share finance charge collections and other amounts pro rata, based upon the
relative size of the required payments to each series in reallocation group one
as compared to the aggregate required payments of all series in reallocation
group one plus, to the extent these collections exceed the aggregate required
payments of all series in reallocation group one, a share of that excess based
upon the adjusted invested amount of each series in reallocation group one as
compared to the aggregate adjusted invested amount for all series in
reallocation group one.
For each monthly period, the servicer will calculate reallocation group one
investor finance charge collections and, on the following distribution date,
will allocate the amount of reallocation group one investor finance charge
collections among the noteholders' interest for all series in reallocation
group one in the following priority:
(1) reallocation group one monthly interest;
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(2) reallocation group one investor default amount;
(3) reallocation group one monthly fees;
(4) reallocation group one investor additional amounts; and
(5) the balance pro rata among each series in reallocation group one
based on the current adjusted invested amount of that series.
If the amount of reallocation group one investor finance charge collections
is not sufficient to cover the amounts described in clauses (1) though (4) in
full, the amount available will be allocated among the series in reallocation
group one pro rata based on the claim that each series has under the applicable
clause. This means, for example, that if the amount of reallocation group one
investor finance charge collections is not sufficient to cover reallocation
group one monthly interest, each series in reallocation group one will share
that amount pro rata and any other series in reallocation group one with a
claim with respect to monthly interest, overdue monthly interest and interest
on overdue monthly interest, if applicable, which is larger than the claim for
those amounts for any other series in reallocation group one offered hereby,
due to a higher note interest rate, will receive a proportionately larger
allocation.
Application of Collections
Payment of Interest, Fees and Other Items
On each distribution date, the servicer will direct the indenture trustee
to apply reallocated investor finance charge collections and excess finance
charge collections on deposit in the collection account in the following order:
(1) an amount equal to the Class A monthly interest plus Class A
additional interest due for the related distribution date, and past due
for any prior distribution dates, will be paid to the Class A noteholders
on that distribution date;
(2) an amount equal to the Class B monthly interest plus Class B
additional interest due for the related distribution date, and past due
for any prior distribution dates, will be paid to the Class B noteholders
on that distribution date;
(3) if Conseco Bank or any of its affiliates is not the servicer, an
amount equal to the monthly servicing fee due for the related distribution
date, and past due for any prior distribution date, will be paid to the
servicer and if Conseco Bank or any of its affiliates is not the
administrator, an amount equal to the monthly administration fee for the
related distribution date, and past due for any prior distribution date,
will be paid to the administrator;
(4) an amount equal to the Class C monthly interest plus Class C
additional interest due for the related distribution date, and past due
for any prior distribution dates, will be paid to the Class C noteholders
on that distribution date;
(5) an amount equal to the investor default amount, if any, for the
related due period, will be treated as available investor principal
collections;
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(6) an amount equal to the sum of the investor charge-offs and the
amount of unreimbursed subordinated principal collections will be treated
as available investor principal collections;
(7) if Conseco Bank or any of its affiliates is the servicer, an
amount equal to the monthly servicing fee due for the related distribution
date, and past due for any prior distribution date, will be paid to the
servicer;
(8) if Conseco Bank or any of its affiliates is the administrator, an
amount equal to the monthly administration fee due for the related
distribution date, and past due for any prior distribution date, will be
paid to the administrator;
(9) on and after the reserve account funding date, an amount equal to
the excess, if any, of the required reserve account amount over the amount
then on deposit in the reserve account will be deposited into the reserve
account;
(10) an amount equal to the excess, if any, of the required spread
account amount over the amount then on deposit in the spread account will
be deposited into the spread account; and
(11) all remaining amounts will be treated as excess finance charge
collections and will be available to cover any shortfalls in finance
charge collections for other outstanding series in excess finance charge
sharing group one and, after payment of these shortfalls, the remaining
amount will be paid to the owner trustee to be applied in accordance with
the trust agreement.
In the event that reallocated investor finance charge collections and
excess finance charge collections for any due period are insufficient to pay
Class C monthly interest when due, a draw will be made from amounts available
in the spread account and will be paid to the Class C noteholders on the
related distribution date.
Payments of Principal
On each distribution date, the servicer will direct the indenture trustee
to apply available investor principal collections on deposit in the collection
account in the following priority:
. on each distribution date with respect to the revolving period, all
available investor principal collections will be treated as shared
principal collections and applied as described under "Description of
Series Provisions--Principal Payments--Principal Sharing Group One" in
this prospectus supplement and "Description of the Notes--Group--Principal
Sharing Group" in the accompanying prospectus;
. on each distribution date with respect to any partial amortization
period, all available investor principal collections will be distributed
to the payment agent for payment to the Class A notes, Class B notes and
Class C notes until the outstanding amount of the Series 2001- notes is
reduced to a specified level;
. on each distribution date with respect to the controlled
accumulation period and the early amortization period, all available
investor principal collections will be distributed or deposited in the
following priority:
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(1) during the controlled accumulation period and prior to the
payment in full of the Class A, Class B and Class C notes, an amount
equal to monthly principal will be deposited in the principal funding
account; when the Class A, Class B and Class C notes are paid in full,
an amount equal to the monthly principal will be paid on the Class D
notes until the Class D notes are paid in full;
(2) during the early amortization period, an amount equal to the
monthly principal will be distributed to the paying agent for payment
to the Class A noteholders until the principal balance of the Class A
notes has been paid in full;
(3) during the early amortization period, an amount equal to
monthly principal will, after the principal balance of the Class A
notes has been paid in full, be distributed to the paying agent for
payment to the Class B noteholders until the principal balance of the
Class B notes has been paid in full;
(4) during the early amortization period, an amount equal to
monthly principal will, after the principal balances of the Class A
notes and the Class B notes have been paid in full, be distributed to
the paying agent for payment to the Class C noteholders until the
principal balance of the Class C notes has been paid in full;
(5) during the early amortization period, an amount equal to
monthly principal will, after the principal balances of the Class A
notes, the Class B notes and the Class C notes have been paid in full,
be distributed to the paying agent for payment to the Class D
noteholders until the principal balance of the Class D notes has been
paid in full; and
(6) on each distribution date with respect to the controlled
accumulation period and the early amortization period, the balance of
available investor principal collections not applied as described in
clauses (1) through (5) above, if any, will be treated as shared
principal collections with respect to principal sharing group one and
applied as described under "Description of Series Provisions--
Principal Payments--Principal Sharing Group One" in this prospectus
supplement and "Description of the Notes--Groups--Principal Sharing
Group" in the accompanying prospectus; and
. On the earlier to occur of (1) the first distribution date for the
early amortization period and (2) the expected principal payment date, the
indenture trustee will withdraw from the principal funding account and
distribute first, to the Class A noteholders up to the Class A note
principal balance, second, to the Class B noteholders up to the Class B
note principal balance, and third, to the Class C noteholders up to the
Class C note principal balance, the amounts deposited into the principal
funding account.
Excess Finance Charge Sharing Group One
This series will be included in a group of series designated as excess
finance charge sharing group one. Reallocated investor finance charge
collections, and other amounts treated like finance charge collections, in
excess of the amount required to make payments or
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deposits for your series will be made available to other series included in
excess finance charge sharing group one whose allocation of reallocated
investor finance charge collections (or, if those series are not part of a
reallocation group, investor finance charge collections) is not sufficient to
make its required payments or deposits. If reallocated investor finance charge
collections are insufficient to make all required payments, your series will
have access to finance charge collections--and other amounts treated like
finance charge collections--from other series in excess finance charge sharing
group one. Each series that is part of excess finance charge sharing group one
and has a shortfall will receive a share of the total amount of excess finance
charge collections available for that month based on the amount of shortfall
for that series divided by the total shortfall for all series for that same
month.
Subordinated Principal Collections
On each distribution date, if the sum of Class A interest, Class B interest
and the monthly servicing fee, if Conseco Bank or any of its affiliates are not
the servicer, cannot be paid from reallocated investor finance charge
collections and excess finance charge collections as described under "--
Application of Collections," then collections of principal receivables
allocated to the invested amount will be available to pay these amounts, in an
amount equal to the subordinated principal collections, and the invested amount
will be reduced accordingly. A reduction in the invested amount will reduce the
allocation of collections of finance charge receivables and principal
receivables to your series.
Defaulted Receivables; Investor Charge-Offs
The investor default amount represents the series' share of losses from the
trust portfolio. On each distribution date, the servicer will calculate the
investor default amount. If the investor default amount exceeds the amount of
reallocated investor finance charge collections and excess finance charge
collections allocated to fund this amount for the prior month, then the
invested amount will be reduced by the excess. The invested amount will also be
reduced by the amount of any subordinated principal collections. In no event,
however, will the invested amount be reduced below zero. Reductions in the
invested amount from both of these items may be reimbursed from subsequent
reallocated investor finance charge collections and excess finance charge
collections allocated for reimbursement, if available. If the invested amount
is reduced to zero, your series will not receive any further allocations of
collections of finance charge receivables or principal receivables.
Spread Account
The indenture trustee will establish and maintain with an eligible
institution the spread account as a segregated account held as security for the
benefit of the Class C noteholders. Amounts on deposit in the spread account
will be used to fund shortfalls in interest payments on the Class C notes, and
on the Series 2001-[.] final maturity date, to fund any shortfall in payment of
the principal balance of the Class C notes.
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The spread account initially will not be funded, but will be funded by
reallocated investor finance charge collections and excess finance charge
collections, as described above under "--Application of Collections--Payment of
Interest, Fees and Other Items," deposited into the spread account on any
distribution date to the extent that the funds available in the spread account
are less than the required spread account amount on that distribution date.
The "required spread account amount" will be determined on each
distribution date, and, in general, for any date of determination, will be
equal to the product of:
(1) the spread account percentage in effect on the date of determination,
and
(2) the initial invested amount.
However, the required spread account amount will not exceed the principal
balance of the Class C notes minus the excess, if any, of the principal funding
account balance over the sum of the principal balances of the Class A notes and
the Class B notes on the date of determination.
Once an event of default for your series occurs and is continuing, the
required spread account amount for any distribution date will automatically
increase to the sum of:
(1) the amount on deposit in the spread account on that distribution date,
and
(2) reallocated investor finance charge collections and excess finance
charge collections for that distribution date available immediately
after funding the reserve account.
However, following an event of default for your series, if the maturity of your
notes is not accelerated, the increase in the required spread account amount
will be limited to an amount equal to the aggregate principal balance of your
series of notes.
"spread account percentage" will be determined as follows:
If the
Quarterly
Excess
Spread then, the
Percentage Spread
is Account
greater Percentage
than or less will
equal to: than: equal:
---------- and ----- ----------
[.]% [.]% 0
[.]% [.]% [.]%
[.]% [.]% [.]%
[.]% [.]% [.]%
[.]% [.]% [.]%
After the spread account percentage has been increased above zero as
specified in the table above, it will remain at the specified percentage until:
(1) further increased to a higher required percentage as specified
above, or
(2) the distribution date on which the quarterly excess spread
percentage has increased to a level above that for the then current spread
account percentage, in which case the spread account percentage will be
decreased to the appropriate percentage as
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specified above or, if the quarterly excess spread percentage is greater
than or equal to [.]%, the spread account percentage will be zero and the
required spread account amount will be zero.
However, if an amortization event, other than an amortization event
resulting from the occurrence of an event of default, with respect to Series
2001-[.] has occurred, the spread account percentage will equal [.]%, as
provided in the definition of spread account percentage above, and may not be
subsequently reduced.
The "quarterly excess spread percentage" will be determined as follows:
For the [Month 1] 2001 The modified excess spread percentage
distribution date:
For the [Month 2] 2001 The modified excess spread percentage for the first due
distribution date: period, plus
the excess spread percentage for the [Month 1] 2001
due period
2
For the [Month 3] 2001 The modified excess spread percentage for the first due
distribution date: period, plus
the excess spread percentage for the [Month 1] 2001 due
period plus
the excess spread percentage for the [Month 1] 2001
due period
3
For each following The sum of the excess spread percentage for the three
distribution date: prior due periods
3
The "excess spread percentage" for any due period will be determined as
follows:
Reallocated investor finance charge collections and excess finance charge
collections allocated to Series 2001-[.] for that due period available
immediately prior to making the required deposit into the reserve account
times 12
------------------------------------------------------
The adjusted invested amount on the first day of that due period
The "modified excess spread percentage" will be calculated for the first
due period in accordance with the Series 2001-[.] indenture supplement based
on reallocated investor finance charge collections and excess finance charge
collections for that due period in relation to the amount of interest,
investor default amount, monthly servicing fee and monthly administration fee
accrued for the first distribution date and the initial invested amount.
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Funds on deposit in the spread account will be invested at the direction of
the servicer in eligible investments. For purposes of the spread account, the
reference in the definition of eligible investments to a rating in the "highest
rating category" refers to a rating of at least A-2 by Standard & Poor's, P-2
by Moody's or F2 by Fitch. Investment earnings, net of losses and investment
expenses, will, except as otherwise indicated in this prospectus supplement,
not be deposited into the spread account and will be paid to owner trustee for
distribution to the holders of the transferor certificates. However, after an
event of default relating to your series of notes, these investment earnings
will be available for payment first to holders of the Class C notes and
thereafter to the Class A notes and the Class B notes.
Spread Account Distributions
If on any distribution date, the interest to be paid on the Class C notes
exceeds the amount allocated to pay that interest, the indenture trustee, at
the instruction of the servicer, will withdraw from the spread account the
lesser of (1) the amount on deposit in the spread account, including investment
earnings to the extent necessary to fund that excess, and (2) the amount of the
excess, and will deposit that amount into the collection account for payment of
interest on the Class C notes.
On the Series 2001-[.] final maturity date, funds available in the spread
account, after giving effect to any withdrawals to be made as discussed in the
preceding paragraph, will be used to fund any shortfall in the payment of the
principal balance of the Class C notes. On any day following an event of
default and an acceleration of the notes, funds available in the spread account
will be used to fund any amounts owed first on the Class C notes and then the
Class A notes and the Class B notes, in that order of priority.
Funds on deposit in the spread account on any distribution date in excess
of the required spread account amount on that date will be paid to the owner
trustee for distribution to the holders of the transferor certificates. On the
date on which all amounts due to the noteholders from the spread account have
been paid in full, all amounts, if any, then remaining in the spread account
will be distributed to the owner trustee for further distribution to the
holders of the transferor certificates.
Servicing Compensation and Payment of Expenses
The share of the servicing fee allocable to the invested amount with
respect to any distribution date is the monthly servicing fee.
The servicer will pay from its servicing compensation expenses incurred in
connection with servicing the receivables including, without limitation,
payment of the fees and disbursements of the indenture trustee and independent
certified public accountants and other fees which are not expressly stated in
the transfer and servicing agreement, the indenture or the Series 2001-[.]
indenture supplement to be payable by the trust or the noteholders other than
federal, state and local income and franchise taxes, if any, of the trust.
S-46
Reports To Noteholders
On each distribution date, the paying agent, on behalf of the indenture
trustee will forward to each noteholder of record, a statement prepared by the
servicer setting forth the items described in "Description of the Notes--
Reports to Noteholders" in the accompanying prospectus.
ERISA Considerations
The Employee Retirement Income Security Act of 1974, as amended, and
Section 4975 of the Code impose requirements on employee benefit plans and
other plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and most collective investment funds or insurance
company general or separate accounts in which the plans, accounts or
arrangements are invested, that are subject to the fiduciary responsibility
provisions of ERISA and/or Section 4975 of the Code, and on persons who are
fiduciaries with respect to Plans, in connection with the investment of "plan
assets" of any Plan. ERISA generally imposes on Plan fiduciaries general
fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("parties in interest" under ERISA and
"disqualified persons" under the Code) who have specified relationships to a
Plan or its Plan Assets, unless a statutory or administrative exemption is
available. Parties in Interest that participate in a prohibited transaction may
be subject to a penalty imposed under ERISA and/or an excise tax imposed under
Section 4975 of the Code, unless a statutory or administrative exemption is
available. These prohibited transactions generally are set forth in Section 406
of ERISA and Section 4975 of the Code.
Subject to the considerations described in this section and in the
accompanying prospectus, the notes are eligible for purchase with Plan Assets
of any Plan.
Any fiduciary or other Plan investor considering whether to purchase the
notes with Plan Assets of any Plan should determine whether that purchase is
consistent with its fiduciary duties and whether that purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section
4975 of the Code because any of the transferors, the servicer, the indenture
trustee, the owner trustee or any other party may be Parties in Interest with
respect to the investing Plan and may be deemed to be benefiting from the
issuance of the notes. If either of the transferors or the servicer is a Party
in Interest with respect to the prospective Plan investor, any fiduciary or
other Plan investor considering whether to purchase or hold the notes should
consult with its counsel regarding the availability of exemptive relief under
U.S. Department of Labor Prohibited Transaction Class Exemption 96-23 (relating
to transactions determined by "in-house asset managers"), 95-60 (relating to
transactions involving insurance company general accounts), 91-38 (relating to
transactions involving bank collective investment funds), 90-1 (relating to
transactions involving insurance company pooled separate accounts) or 84-14
(relating to transactions
S-47
determined by independent "qualified professional asset managers") or any other
prohibited transaction exemption issued by the DOL. A purchaser of the notes
should be aware, however, that even if the conditions specified in one or more
of the above-referenced exemptions are met, the scope of the exemptive relief
provided by the exemption might not cover all acts which might be construed as
prohibited transactions.
In addition, under DOL Regulation Section 2510.3-101, the purchase with
Plan Assets of equity interests in the issuer could, in many circumstances,
cause the receivables and other assets of the issuer to be deemed Plan Assets
of the investing Plan which, in turn, would subject the issuer and its assets
to the fiduciary responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and Section 4975 of the Code. Nevertheless,
because the notes (a) are expected to be treated as indebtedness under local
law and will, in the opinion of Special Tax Counsel, be treated as debt, rather
than equity, for federal tax purposes (see "Federal Income Tax Consequences--
Tax Characterization of the Trust and the Notes--Treatment of the Notes as
Debt" in the accompanying prospectus), and (b) should not be deemed to have any
"substantial equity features," purchases of the notes with Plan Assets should
not be treated as equity investments and, therefore, the receivables and other
assets included as assets of the issuer should not be deemed to be Plan Assets
of the investing Plans. Those conclusions are based, in part, upon the
traditional debt features of the notes, including the reasonable expectation of
purchasers of the notes that the notes will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features.
The notes may not be purchased or held by any Plan, or any person investing
Plan Assets of any Plan, if any of the transferors, the servicer, the indenture
trustee, the owner trustee or any of their respective affiliates (a) has
investment or administrative discretion with respect to the Plan Assets used to
effect the purchase; (b) has authority or responsibility to give, or regularly
gives, investment advice with respect to the Plan Assets, for a fee and under
an agreement or understanding that the advice (1) will serve as a primary basis
for investment decisions with respect to the Plan Assets, and (2) will be based
on the particular investment needs of that Plan; or (c) unless PTCE 95-60, 91-
38 or 90-1 is applicable, is an employer maintaining or contributing to that
Plan. Each purchaser or holder of the notes or any interest in the notes will
be deemed to have represented by its purchase and holding of its notes that it
is not subject to the foregoing limitation.
Any fiduciary or other Plan investor considering whether to purchase any
notes on behalf of or with Plan Assets of any Plan should consult with its
counsel and refer to this prospectus supplement for guidance regarding the
ERISA considerations applicable to the notes offered by this prospectus
supplement and the accompanying prospectus.
S-48
Underwriting
Subject to the terms and conditions set forth in the Class A underwriting
agreement between the transferors and the Class A underwriters named below, the
terms and conditions set forth in the Class B underwriting agreement between
the transferors and the Class B underwriters named below and the terms and
conditions set forth in the Class C underwriting agreement between the
transferors and the Class C underwriters named below, the transferors have
agreed to sell to the underwriters, and each of the underwriters has severally
agreed to purchase, the principal amount of the notes set forth opposite its
name:
Principal
Class A balance of
underwriters Class A notes
- ------------ -------------
$[.]
Total........................................................... $[.]
====
Principal
Class B balance of
underwriters Class B notes
- ------------ -------------
$[.]
Total........................................................... $[.]
====
Principal
Class C balance of
underwriters Class C notes
- ------------ -------------
$[.]
Total........................................................... $[.]
====
In the Class A underwriting agreement, the Class A underwriters have
agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the Class A notes offered hereby if any of the Class A notes
are purchased. In the Class B underwriting agreement, the Class B underwriters
have agreed, subject to the terms and conditions set forth in that agreement,
to purchase all of the Class B notes offered hereby if any of the Class B notes
are purchased. In the Class C underwriting agreement, the Class C underwriters
have agreed, subject to the terms and conditions set forth in that agreement,
to purchase all of the Class C notes offered hereby if any of the Class C notes
are purchased.
The Class A underwriters propose initially to offer the Class A notes to
the public at [.]% of their principal amount and to dealers at that price less
concessions not in excess of [.]% of the principal amount of the Class A notes.
The Class A underwriters may allow, and the dealers may reallow, concessions
not in excess of [.]% of the principal amount of the Class A notes to brokers
and dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class A underwriters.
The Class B underwriters propose initially to offer the Class B notes to
the public at [.]% of their principal amount and to dealers at that price less
concessions not in excess of [.]% of the principal amount of the Class B notes.
The Class B underwriters may allow, and the dealers may reallow, concessions
not in excess of [.]% of the principal amount of the Class B notes to brokers
and dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class B underwriters.
S-49
The Class C underwriters propose initially to offer the Class C notes to
the public at [.]% of their principal amount and to dealers at that price less
concessions not in excess of [.]% of the principal amount of the Class C notes.
The Class C underwriters may allow, and the dealers may reallow, concessions
not in excess of [.]% of the principal amount of the Class C notes to brokers
and dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class C underwriters.
We will receive proceeds of approximately $[.] from the sale of the notes,
representing [.]% of the principal amount of each Class A note, [.]% of the
principal amount of each Class B note and [.]% of the principal amount of each
Class C note, after paying the underwriting discount of $[.], representing [.]%
of the principal amount of each Class A note, [.]% of the principal amount of
each Class B note and [.]% of the principal amount of each Class C note.
Additional offering expenses are estimated to be $[.].
Each underwriter has represented and agreed that:
(1) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the notes in, from or otherwise involving the United Kingdom;
(2) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the
issue or sale of the notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom that
document may otherwise lawfully be issued or passed on;
(3) if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this prospectus supplement and the
accompanying prospectus if that person is of a kind described either in
Section 76(2) of the Financial Services Act 1986 or in Regulation 1.04 of
the Financial Services (Promotion of Unregulated Schemes) Regulations
1991; and
(4) it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
The transferors will indemnify the underwriters against liabilities,
including liabilities under the Securities Act, or contribute to payments the
underwriters may be required to make in respect of those liabilities.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the notes so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the notes in the
S-50
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the underwriters to reclaim a
selling concession from a syndicate member when the notes originally sold by
that syndicate member are purchased in a syndicate covering transaction. Over-
allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the prices of the notes to be higher
than they would otherwise be in the absence of those transactions. Neither the
transferors nor the underwriters represent that the underwriters will engage in
any of these transactions or that those transactions, once commenced, will not
be discontinued without notice at any time.
The underwriters may purchase and sell notes in the open market. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of notes than they are required to purchase in
the offering. "Covered" short sales are sales made in an amount not greater
than the underwriters' option to purchase additional notes from the issuer in
the offering. The underwriters may close out any covered short position by
either exercising their option to purchase additional notes or purchasing notes
in the open market. In determining the source of notes to close out the covered
short position, the underwriters will consider, among other things, the price
of notes available for purchase in the open market as compared to the price at
which they may purchase notes through the over-allotment option. "Naked" short
sales are any sales in excess of that option. The underwriters must close out
any naked short position by purchasing notes in the open market. A naked short
position is more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the notes in the open market
after pricing that could adversely affect investors who purchase in the
offering. Stabilizing transactions consist of various bids for or purchases of
notes made by the underwriters in the open market prior to the completion of
the offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased notes sold
by or for the account of that underwriter in stabilizing or short covering
transactions.
Similar to other purchase transactions, the underwriters' purchases to
cover the syndicate short sales may have the effect of raising or maintaining
the market price of the notes or preventing or retarding a decline in the
market price of the notes. As a result, the price of the notes may be higher
than the price that might otherwise exist in the open market.
Legal Matters
Legal matters relating to the issuance of the notes will be passed upon for
the transferors, the servicer and Conseco Finance by Dorsey & Whitney LLP,
counsel to the transferors. Legal matters relating to the federal tax
consequences of the issuance of the notes will be passed upon for the
transferors by Dorsey & Whitney LLP. Legal matters relating to the issuance of
the Notes will be passed upon for the underwriters by
.
S-51
Glossary
"additional amounts" means, for any distribution date, the aggregate amount
of the investor charge-offs and subordinated principal collections with respect
to your series which have not been previously reimbursed.
"adjusted invested amount" means, for any date of determination, an amount
equal to:
(1) the invested amount as of that date, minus
(2) the amount on deposit in the principal funding account for that date.
"adjusted principal balance" means an amount equal to the greater of:
(1) the sum of (a) the total amount of principal receivables as of the
close of business on the last day of the immediately preceding due
period, or with respect to the first due period, the total amount of
principal receivables as of the closing date, and (b) the principal
amount on deposit in the special funding account as of the close of
business on the last day of the immediately preceding due period (or
with respect to the first due period, the closing date); and
(2) the sum of the numerators used to calculate the investor percentages
for allocations with respect to principal receivables, finance charge
receivables or defaulted amounts, as applicable, as of the date as to
which that determination is being made;
provided, however, that with respect to any due period in which an addition
date for an aggregate addition or a removal date occurs, the amount in clause
(1)(a) above shall be the sum of the amounts for each day in that due period
computed as follows and divided by the number of days in that due period:
(A) the aggregate amount of principal receivables as of the close of
business on the last day of the prior due period, for each day in the
period from and including the first day of that due period to but
excluding the related additional cut-off date or removal date; and
(B) the aggregate amount of principal receivables as of the close of
business on the related additional cut-off date or removal date after
adjusting for the aggregate amount of principal receivables added to
or removed on the related additional cut-off date or removal date, as
the case may be, for each day in the period from and including the
related additional cut-off date or removal date to and including the
last day of that due period.
"administration fee" means an annual fee payable to the administrator in an
amount equal to $[.].
"amortization event" has the meaning set forth on page S-[.].
"available investor finance charge collections" means, for any due period,
an amount equal to the sum of:
(1) the investor finance charge collections deposited in the collection
account for that due period;
S-52
(2) an amount equal to the principal funding investment proceeds, if any,
for the related distribution date; and
(3) amounts, if any, to be withdrawn from the reserve account which are
required to be included in available investor finance charge
collections under the Series 2001-[.] indenture supplement for the
related distribution date.
"available investor principal collections" means, for any due period, an
amount equal to the sum of:
(1) the investor percentage of collections of principal receivables
deposited in the collection account for that due period; minus the
amount of subordinated principal collections for that due period;
(2) any shared principal collections from other principal sharing series
in principal sharing group one allocated to your series; and
(3) any amounts treated as available investor principal collections for
the related distribution date.
"base rate" means the weighted average of the Class A note interest rate,
the Class B note interest rate and the Class C note interest rate, weighted
based on the aggregate principal balance of the Class A notes, the Class B
notes and the Class C notes as of the last day of the preceding due period,
plus the servicing fee rate.
"business day" means, any day other than a Saturday, a Sunday or a day on
which banking institutions in New York City, Delaware, or any other state in
which the principal executive offices of the transferors, the owner trustee,
the indenture trustee or other account owner, as the case may be, are located,
are authorized or obligated by law, executive order or governmental decree to
be closed.
"Class A additional interest" means, for any distribution date, will equal
to the product of:
(1) the excess of Class A monthly interest for that distribution date over
the aggregate amount of funds allocated and available to pay Class A
monthly interest for that distribution date;
(2) the Class A note interest rate for the related interest period; and
(3) the actual number of days in that interest period divided by 360.
"Class A note interest rate" means, for any interest period, a rate of [.]%
per annum above LIBOR for the related LIBOR determination date.
"Class A monthly interest" with respect to any distribution date will equal
the product of:
(1) the Class A note interest rate for the related interest period;
(2) the actual number of days in that interest period divided by 360; and
(3) the principal balance of the Class A notes as of the close of
business on the last day of the prior due period or, with respect to
the first distribution date, the principal balance of the Class A
notes as of the closing date.
S-53
"Class B additional interest" means, for any distribution date, will equal
to the product of:
(1) the excess of Class B monthly interest for that distribution date over
the aggregate amount of funds allocated and available to pay Class B
monthly interest for that distribution date;
(2) the Class B note interest rate for the related interest period; and
(3) the actual number of days in that interest period divided by 360.
"Class B note interest rate" means, for any interest period, a rate of [.]%
per annum above LIBOR for the related LIBOR determination date.
"Class B monthly interest" means, for any distribution date, will equal to
the product of:
(1) the Class B note interest rate for the related interest period;
(2) the actual number of days in that interest period divided by 360; and
(3) the principal balance of the Class B notes as of the close of
business on the last day of the prior due period or, with respect to
the first distribution date, the principal balance of the Class B
notes as of the closing date.
"Class C additional interest" means, for any distribution date, will equal
to the product of:
(1) the excess of Class C monthly interest for that distribution date over
the aggregate amount of funds allocated and available to pay Class C
monthly interest for that distribution date;
(2) the Class C note interest rate for the related interest period; and
(3) the actual number of days in that interest period divided by 360.
"Class C note interest rate" means, for any interest period, a rate of [.]%
per annum above LIBOR for the related LIBOR determination date.
"Class C monthly interest" means, for any distribution date, an amount
equal to the product of:
(1) the Class C note interest rate for the related interest period;
(2) the actual number of days in that interest period divided by 360; and
(3) the principal balance of the Class C notes as of the close of
business on the last day of the prior due period or, with respect to
the first distribution date, the principal balance of the Class C
notes as of the closing date.
"controlled accumulation amount" means, for any distribution date with
respect to the controlled accumulation period, $[.]. However, if the
commencement of the controlled accumulation period is postponed as described
under "Description of the Notes--Principal Payments--Postponement of Controlled
Accumulation Period," the controlled accumulation
S-54
amount may be higher than the amount stated above for each distribution date
with respect to the controlled accumulation period and will be determined by
the servicer in accordance with the Series 2001-[.] indenture supplement based
on the principal payment rates for the accounts and on the invested amounts of
other series, other than excluded series, which are scheduled to be in their
revolving periods and then scheduled to create shared principal collections
during the controlled accumulation period.
"controlled deposit amount" means, for any distribution date, the sum of:
(1) the controlled accumulation amount for that distribution date, plus
(2) the deficit controlled accumulation amount, if any.
"deficit controlled accumulation amount" means:
(1) on the first distribution date during the controlled accumulation
period, the excess, if any, of the controlled accumulation amount for
that distribution date over the amount deposited in the principal
funding account on that distribution date; and
(2) on each subsequent distribution date during the controlled
accumulation period, the excess, if any, of the applicable controlled
accumulation amount for that subsequent distribution date plus any
deficit controlled accumulation amount for the prior distribution
date over the amount deposited in the principal funding account on
that subsequent distribution date.
"distribution date" means [.], 2001 and the 15th day of each following
month or, if the 15th day is not a business day, the following business day.
"due period" means the period from and including the first day of a
calendar month to and including the last day of that calendar month, other than
the initial due period, which will commence on and include [.] and end on and
include [.], 2001.
"excess finance charge collections" means reallocated investor finance
charge collections, and other amounts treated like finance charge collections,
in excess of the amount required to make payments or deposits for your series.
"excess spread percentage" has the meaning set forth on page S-[.].
"expected principal payment date" means [.], 20[.].
"fixed investor percentage" means, for any due period, the percentage
equivalent of a fraction:
(1) the numerator of which is the adjusted invested amount as of the close
of business on the last day of the revolving period; and
(2) the denominator of which is the adjusted principal balance.
"floating investor percentage" means, for any due period, the percentage
equivalent of a fraction:
(1) the numerator of which is the adjusted invested amount as of the close
of business on the last day of the preceding due period (or with
respect to the first due period, the initial invested amount); and
S-55
(2) the denominator of which is the adjusted principal balance.
"interest period" means the period beginning on and including a
distribution date and ending on but excluding the next distribution date;
provided that the first interest period will begin on and include the closing
date.
"invested amount" means, for any date of determination, an amount equal to:
(1) the initial principal amount of the Series 2001-[.] notes, minus
(2) the amount of principal previously paid to the Series 2001-[.]
noteholders, minus
(3) the amount of unreimbursed investor charge-offs and subordinated
principal collections.
"investor charge-offs" means, for any due period, the excess of:
(1) the investor default amount for the related due period; over
(2) the amount available for reimbursement of investor default amounts
described under clause (5) under "Description of Series Provisions--
Application of Collections--Payment of Interest, Fees and Other
Items."
"investor default amount" means, for any date of determination, an amount
equal to the product of:
(1) the floating investor percentage for that month; and
(2) the defaulted amount.
"investor finance charge collections" means, for any distribution date, an
amount equal to the product of:
(1) the floating investor percentage for the related due period; and
(2) collections of finance charge receivables deposited in the collection
account for the related due period.
"investor percentage" means, for any due period:
(1) for defaulted amounts and for collections of finance charge
receivables at any time and for collections of principal receivables
during the revolving period, the floating investor percentage; and
(2) for collections of principal receivables during the controlled
accumulation period, and early amortization period, the fixed
investor percentage.
"LIBOR" means, for any LIBOR determination date, the rate for deposits in
United States dollars for a [one-]month period which appears on Telerate Page
3750 as of 11:00 a.m., London time, on that date. If that rate does not appear
on Telerate Page 3750, the rate for that LIBOR determination date will be
determined based on the rates at which deposits in United States dollars are
offered by four major banks selected by the servicer at approximately 11:00
a.m., London time, on that day to prime banks in the London interbank
S-56
market for a [one]-month period. The indenture trustee will request the
principal London office of each of those banks to provide a quotation of its
rate. If at least two quotations are provided, the rate for that LIBOR
determination date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided, the rate for that LIBOR determination date
will be the arithmetic mean of the rates quoted by major banks in New York
City, selected by the servicer, at approximately 11:00 a.m., New York City
time, on that day for loans in United States dollars to leading European banks
for a [one-]month period.
"LIBOR determination date" means, for any interest period, two London
business days before that interest period commences, provided that the LIBOR
determination date for the first interest period will be two London business
days before the closing date.
"London business day" is any business day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
"monthly administration fee" means an amount equal to one-twelfth of the
administration fee.
"monthly excess spread percentage" has the meaning set forth on page S-
[.].
"monthly interest" means, for any distribution date, an amount equal to
the sum of the Class A monthly interest, the Class B monthly interest and the
Class C monthly interest for that distribution date.
"monthly principal" means, for any distribution date, an amount equal to
the least of:
(1) the available investor principal collections on deposit in the
collection account with respect to that distribution date;
(2) for each distribution date with respect to the controlled
accumulation period, the controlled deposit amount for that
distribution date; and
(3) the adjusted invested amount (as adjusted for any investor charge-
offs and subordinated principal collections on that distribution
date).
"monthly servicing fee" means, for any distribution date, an amount equal
to one-twelfth of the product of:
(1) the servicing fee rate;
(2) the floating investor percentage for the related due period; and
(3) the total amount of principal receivables as of the close of business
on the last day of the immediately preceding due period, or with
respect to the first due period, the total amount of principal
receivables as of the closing date, in either case, excluding the
principal portion of participation interests;
provided, however, that with respect to any due period in which an addition
date for an aggregate addition or a removal date occurs, the amount in clause
(3) above shall be the sum of the amounts for each day in that due period
computed as follows and divided by the number of days in that due period:
(A) the aggregate amount of principal receivables, excluding the principal
portion of participation interests, as of the close of business on the
last day of the prior Due
S-57
Period, for each day in the period from and including the first day of
that Due Period to but excluding the related additional cut-off date
or removal date; and
(B) the aggregate amount of principal receivables, excluding the
principal portion of participation interests, as of the close of
business on the related additional cut-off date or removal date after
adjusting for the aggregate amount of principal receivables,
excluding the principal portion of participation interests, added to
or removed on the related additional cut-off date or removal date, as
the case may be, for each day in the period from and including the
related additional cut-off date or removal date to and including the
last day of that due period;
provided further, that with respect to the first distribution date, the monthly
servicing fee will equal $[.].
"monthly subordination amount" means, for any due period, the sum of:
(1)the lower of:
(a) the excess of the amounts needed to pay current and past due Class
A monthly interest as described under "--Application of
Collections--Payment of Interest, Fees and Other Items" over the
reallocated investor finance charge collections and excess finance
charge collections allocated to cover these amounts; and
(b) [.]% of the initial invested amount minus the amount of
unreimbursed investor charge-offs and unreimbursed subordinated
principal collections; plus
(2) the lower of:
(a) the excess of the amounts needed to pay current and past due Class
B monthly interest and the monthly servicing fee, if Conseco Bank
or any of its affiliates is no longer the servicer, and prior
unpaid monthly servicing fees as described under "--Application of
Collections--Payments of Interest, Fees and Other Items" over the
reallocated investor finance charge collections and excess finance
charge collections allocated to cover these amounts; and
(b) [.]% of the initial invested amount minus the amount of
unreimbursed investor charge-offs and unreimbursed subordinated
principal collections.
"partial amortization period" has the meaning set forth on page S-[.].
"principal funding investment proceeds" means investment earnings, net of
investment losses and expenses, on funds on deposit in the principal funding
account.
"principal shortfalls" means any scheduled or permitted principal
distributions to noteholders and deposits to principal funding accounts, if
any, for any series in principal sharing group one which have not been covered
out of the collections of principal receivables allocable to the other series
in principal sharing group one and other amounts for those series.
"quarterly excess spread percentage" has the meaning set forth on page S-
[.].
S-58
"reallocated investor finance charge collections" means the amount of
reallocation group one investor finance charge collections allocated to the
noteholders' interest for your series.
"reallocation group one investor additional amounts" means, for any
distribution date, the sum of:
(1) additional amounts for that distribution date; and
(2) for all other series included in reallocation group one, the
aggregate net amount by which the invested amounts of those series
have been reduced as a result of investor charge-offs, subordination
of principal collections and funding the investor default amounts for
any class or series enhancement interests of those series as of that
distribution date.
"reallocation group one investor default amount" means, for any
distribution date, the aggregate amount of the investor default amounts for
all the series included in reallocation group one for that distribution date.
"reallocation group one investor finance charge collections" means, for
any distribution date, the aggregate amount of the available investor finance
charge collections for all the series included in reallocation group one.
"reallocation group one monthly interest" means, for any distribution
date, the sum of the aggregate amount of monthly interest, including overdue
monthly interest and interest on that overdue monthly interest, if applicable,
for all the series included in reallocation group one for that distribution
date.
"reallocation group one monthly fees" means, for any distribution date,
the sum of:
(1) the monthly servicing fee and monthly administration fee for that
distribution date;
(2) the monthly servicing fee and monthly administration fee past due but
not paid for any prior distribution date; and
(3) fees similar to those described in clauses (1) and (2) above for
reallocation group one plus any additional fees and amounts,
including credit enhancement fees and reserve account funding
requirements for all other series included in reallocation group one.
"record date" means, for any distribution date, the last day of the
calendar month preceding that distribution date.
"recoveries" are the amounts received by the transferors or the servicer
from the purchaser or transferee with respect to the sale or other disposition
of receivables in defaulted accounts.
"required minimum principal balance" means for all outstanding series,
unless otherwise provided in the related indenture supplement for a series
having a paired series, the sum of the series adjusted invested amounts for
each series outstanding on that date plus the required transferor amount on
that date, minus the amounts on deposit in the special funding account.
S-59
"required transferor amount" will be calculated as follows:
required aggregate series
transferor X adjusted invested
percentage amounts of all series
related to pool one
"required transferor percentage" means initially [.]%, but may be reduced
if the transferors provide the servicer and the indenture trustee with written
confirmation that the designation will not result in:
(1) the reduction or withdrawal by any rating agency of its rating of any
outstanding series or class; and
(2) an Adverse Effect.
"required spread account amount" has the meaning set forth on page S-[.].
"reserve account funding date" means the distribution date with respect to
the due period which commences three months prior to the commencement of the
controlled accumulation period, or an earlier date as the servicer may
determine.
"reserve draw amount" has the meaning set forth on page S-[.].
"required reserve account amount" means for any distribution date on or
after the reserve account funding date an amount equal to:
(1) [.]% of the principal balance of the Class A notes; or
(2) any other amount designated by the transferors; except that if the
designation is of a lesser amount, the transferors will provide the
servicer and the indenture trustee with written confirmation that the
designation will not result in the reduction or withdrawal by any
rating agency of its rating of any outstanding series or class and
each transferor will deliver to the indenture trustee a certificate
of an authorized officer of such transferor to the effect that, based
on the facts known to that officer at the time, in the reasonable
belief of such transferor, the designation will not cause an
amortization event or an event that, after the giving of notice or
the lapse of time, would cause an amortization event to occur with
respect to Series 2001-[.].
"Series 2001-[.] final maturity date" means the earlier of:
(1) the payment in full of the aggregate principal balance of the notes;
and
(2) [.], 200[.].
"series adjusted invested amount" means, with respect to any due period:
(1) during the revolving period, the invested amount as of the last day of
the immediately preceding due period; and
(2) during the controlled accumulation period, the invested amount as of
the close of business on the last day of the revolving period less
the amount in the principal funding account on such date of
determination;
S-60
provided, however, that on any date, at the option of the transferors, such
amount may be reduced below the amount specified for the previous due period to
an amount not less than the greater of:
(a) the invested amount as of the last day of the immediately
preceding due period, less the amount of any distribution of
principal made to noteholders of this series since the last day of
the immediately preceding due period; and
(b) an amount that, if used as the numerator of the fixed investor
percentage for the remainder of the controlled accumulation
period, would assure that available investor principal
collections for this series plus the product of the aggregate
amount of the shared principal collections during each due period
multiplied by a fraction the numerator of which is the invested
amount of this series and the denominator of which is the
aggregate invested amount of all series not scheduled to be in
their revolving period during such due period would equal at
least 125% of the applicable controlled deposit amount for such
due period for so long as the invested amount is greater than
zero, assuming for this purpose that:
(A) the payment rate with respect to collections of principal
receivables remains constant at the level of the immediately
preceding due period;
(B) the total amount of principal receivables theretofore
conveyed to and in the trust, and the amount on deposit in
the special funding account, remains constant at the level
existing on the date of such reduction;
(C) no amortization event with respect to any series will
subsequently occur; and
(D) no additional series, other than any series being issued on
the date of such reduction, will be subsequently issued; and
(3) during any early amortization period, the invested amount as of the
last day of the revolving period less the amount in the principal
funding account or, if less, the amount last determined under clause
(2) above during the controlled accumulation period.
"servicing fee rate" means 2% per annum or such lesser percentage as may be
specified by the servicer and which, in the reasonable belief of the servicer,
will not result in an Adverse Effect.
"series portfolio yield" means, for any due period, the annualized
percentage equivalent of a fraction:
(1) the numerator of which is the sum of reallocated investor finance
charge collections and excess finance charge collections, if any,
deposited in the collection account and allocable to the Series 2001-
[.] notes for that due period, calculated on a cash basis after
subtracting the investor default amount for that due period; and
(2) the denominator of which is the aggregate principal balance of the
notes as of the close of business on the last day of the immediately
preceding due period.
S-61
"shared principal collections" means the amount of collections of principal
receivables for any due period allocated to the invested amount remaining after
covering required payments to the noteholders, any similar amount remaining for
any other series in principal sharing group one and, at the option of the
issuer as specified in the indenture, specified net proceeds from the issuance
of a new series.
"spread account percentage" has the meaning set forth on page S-[.].
"subordinated principal collections" means, for any due period, available
investor principal collections used to pay interest on the Class A notes and
the Class B notes or used to pay the monthly servicing fee, if Conseco Bank or
any of its affiliates are not the servicer, in an amount equal to the lesser
of:
(1) the monthly subordination amount for that due period; and
(2) the invested amount after giving effect to any investor charge-offs
for that distribution date.
"transferor amount" means with respect to pool one an amount equal to the
difference between:
(1) the sum of (a) the total amount of principal receivables in pool one
of the trust portfolio on the immediately preceding day and (b) the
special funding account balance; and
(2) the aggregate series adjusted invested amounts of all series of notes
related to pool one then outstanding.
"Telerate Page 3750" means the display page currently so designated on the
Bridge Telerate Capital Markets Report, or any other page as may replace that
page on that service for the purpose of displaying comparable rates or prices.
S-62
Annex I
Other Series Issued And Outstanding
The table below sets forth the principal characteristics of the other
series previously issued by the trust that are currently outstanding, [all of
which are in reallocation group one, excess finance charge sharing group one,
and principal sharing group one]. For more specific information with respect to
any series, any prospective investor should contact , at
, , (telephone ( ) ).
will provide, without charge, to any prospective
purchaser of the notes, a copy of the disclosure documents for any previous
publicly-issued series.
[1. Series 2001-[.]
Initial
Class A
Invested
Amount...... $[.]
Current
Class A
Invested
Amount...... $[.]
Class A note
interest
rate........ [one-month] LIBOR plus [.]% per annum
Initial
Class B
Invested
Amount...... $[.]
Current
Class B
Invested
Amount...... $[.]
Class B note
interest
rate........ [one-month] LIBOR plus [.]% per annum
Initial
Class C
Invested
Amount...... $[.]
Current
Class C
Invested
Amount...... $[.]
Class C note
interest
rate........ [one-month] LIBOR plus [.]% per annum
[controlled
accumulation
amount...... $[.]*]
[Expected
principal
payment
date........ [.] distribution date]
Annual
servicing
fee
percentage.. [.]% per annum
[Enhancement
for the
Class A
notes....... Subordination of Class B and Class C notes]
[Enhancement
for the
Class B
notes....... Subordination of Class C notes]
[Enhancement
for the
Class C
notes....... spread account]
Series 2001-
[.] final
maturity
date........ [.] distribution date
Series
Issuance
Date........ [.], 2001
- --------
* Subject to change if the commencement of the accumulation period or
controlled accumulation period, as applicable, is delayed.]
i
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Conseco Private Label Credit Card Master Note Trust
Issuer
Conseco Bank, Inc.
Transferor and Servicer
Conseco Finance Credit Card Funding Corp.
Transferor
Series 2001-[.]
$[.]
Class A Floating Rate Asset Backed Notes
$[.]
Class B Floating Rate Asset Backed Notes
$[.]
Class C Floating Rate Asset Backed Notes
----------------
PROSPECTUS SUPPLEMENT
----------------
Underwriters of the Class A Notes
Underwriters of the Class B Notes
Underwriters of the Class C Notes
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of any date other than the
dates stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the notes and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the notes will deliver a
prospectus supplement and prospectus until [.], 2001.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be amended. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated January 3, 2001
Prospectus
Conseco Private Label Credit Card Master Note Trust
Issuer
Conseco Bank, Inc.
Transferor and Servicer
Conseco Finance Credit Card Funding Corp.
Transferor
Asset Backed Notes
The Trust --
. may periodically issue asset backed notes in one or more series with one
or more classes; and
. will own --
. receivables in a portfolio of private label credit card accounts;
. payments due on those receivables; and
. other property described in this prospectus and in the accompanying
prospectus supplement.
The Notes --
. offered by this prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized rating
organization;
. will be paid only from the trust assets;
. may have one or more forms of credit enhancement; and
. will be issued as part of a designated series which may include one or
more classes of notes and credit enhancement.
-----------
You should consider carefully the risk factors beginning on page 9 in this
prospectus.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of Conseco Private Label Credit Card Master Note
Trust only and are not obligations of Conseco Finance Credit Card Funding
Corp., Conseco Finance Corp., Conseco Bank, Inc., Green Tree Retail Services
Bank, Inc. or any other person.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved these notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
[.], 2001
Important Notice about Information Presented in this
Prospectus and the Accompanying Prospectus Supplement
We provide information to you about the notes in two separate documents:
(1) this prospectus, which provides general information, some of which may
not apply to your series of notes; and
(2) the accompanying prospectus supplement, which describes the specific
terms of your series of notes, including:
. the terms, including interest rates, for each class;
. the timing of interest and principal payments;
. information about the receivables;
. information about credit enhancement, if any, for each class;
. the ratings for each class being offered; and
. the method for selling the notes.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
in the accompanying prospectus supplement provide the pages on which these
captions are located.
Table of Contents
Page
----
Prospectus Summary........................................................ 1
The Issuer............................................................... 1
Risk Factors............................................................. 1
Indenture Trustee........................................................ 1
Transferors.............................................................. 1
Servicer and Administrator............................................... 1
Originators.............................................................. 2
Merchants and Dealers.................................................... 2
Accounts................................................................. 2
Receivables.............................................................. 3
Trust Assets............................................................. 3
Interest Payments on the Notes........................................... 4
Principal Payments on the Notes.......................................... 4
Revolving Period........................................................ 4
Partial Amortization.................................................... 4
Amortization or Accumulation Periods.................................... 5
Amortization Events..................................................... 5
Early Amortization or Early Accumulation Period......................... 5
Events of Default........................................................ 5
General................................................................. 5
Events of Default Remedies.............................................. 6
Note Ratings............................................................. 6
Credit Enhancement....................................................... 7
Tax Status............................................................... 7
Collections and Allocations.............................................. 7
Groups................................................................... 7
Shared Transferor Principal Collections.................................. 8
Note Ratings............................................................. 8
Risk Factors.............................................................. 9
The Glossary.............................................................. 22
The Issuer................................................................ 22
Use of Proceeds........................................................... 23
The Conseco Private Label Credit Business................................. 23
Background............................................................... 23
Conseco Finance Corp..................................................... 24
Description of Originators and Transferors............................... 24
Conseco Bank, Inc....................................................... 24
Page
----
Green Tree Retail Services Bank, Inc.................................... 24
Conseco Finance Credit Card Funding Corp................................ 24
Description of the Private Label Business................................ 25
Marketing................................................................ 25
Merchants............................................................... 25
Customers............................................................... 26
Servicing................................................................ 26
Description of FiServe................................................... 26
Merchants and Dealers.................................................... 26
Merchant and Dealer Contracts............................................ 27
Cardholder Agreements.................................................... 28
Accounts................................................................. 28
General................................................................. 28
Applications............................................................ 29
Credit Evaluation....................................................... 29
Finance Charges......................................................... 29
Billing................................................................. 30
Minimum Payments........................................................ 31
Application of Payments................................................. 31
Special Payment Plans................................................... 31
Skip-a-Payment Promotions............................................... 32
In-Store Payments....................................................... 32
Collections............................................................. 32
Security Interests...................................................... 32
Charge Offs.............................................................. 33
The Trust Portfolio....................................................... 33
Description of the Notes.................................................. 36
General.................................................................. 36
Book-Entry Registration.................................................. 37
Definitive Notes......................................................... 41
New Issuances............................................................ 42
Funding Period........................................................... 43
Paired Series............................................................ 44
Interest Payments........................................................ 45
Principal Payments....................................................... 45
Credit Enhancement....................................................... 47
General................................................................. 47
Subordination........................................................... 48
-i-
Page
----
Cash Collateral Guaranty or Account..................................... 49
Spread Account.......................................................... 49
Reserve Account......................................................... 49
Letter of Credit........................................................ 49
Surety Bond or Insurance Policy......................................... 50
Amortization Events...................................................... 50
Final Payment of Principal; Termination.................................. 51
Defeasance............................................................... 52
Reports to Noteholders................................................... 53
Investor Percentage, Transferor Percentage and Credit Enhancement
Percentage............................................................. 54
Groups................................................................... 54
General................................................................. 54
Excess Finance Charge Sharing Group..................................... 54
Reallocation Group...................................................... 55
Shared Enhancement Group................................................ 55
Principal Sharing Group................................................. 55
Shared Transferor Principal Collections.................................. 55
Trust Bank Accounts...................................................... 56
Application of Collections............................................... 56
Defaulted Receivables; Investor
Charge-Offs............................................................ 59
Description of the Indenture.............................................. 59
Events of Default; Rights Upon Event of Default.......................... 59
Material Covenants....................................................... 62
Modification of the Indenture............................................ 63
Annual Compliance Statement.............................................. 66
Indenture Trustee's Annual Report........................................ 66
List of Noteholders...................................................... 66
Satisfaction and Discharge of Indenture.................................. 66
Resignation and Removal of the Indenture Trustee......................... 66
Description of the Transfer and Servicing Agreement....................... 67
Page
----
General................................................................. 67
Representations and Warranties of the Transferors....................... 67
Regarding No Conflict.................................................. 67
Regarding Enforceability............................................... 68
Regarding the Accounts and the Receivables............................. 68
Additional Representations and Warranties in the Prospectus
Supplement........................................................... 69
Additional Transferors.................................................. 69
Eligible Accounts....................................................... 69
Eligible Receivables.................................................... 71
Addition of Trust Assets................................................ 72
Removal of Trust Assets................................................. 73
Discount Option......................................................... 74
Servicing Compensation and Payment of Expenses.......................... 75
Matters Regarding the Servicer and the Transferors...................... 75
Servicer Default........................................................ 77
Evidence of Compliance.................................................. 79
Assumption of a Transferor's Obligations................................ 79
Amendments.............................................................. 81
Description of the Receivables Purchase Agreements....................... 82
Sale of Receivables..................................................... 83
From Green Tree Retail Services Bank, Inc. to Conseco Bank, Inc........ 83
From Conseco Bank, Inc. to Conseco Finance Corp........................ 83
From Conseco Finance Corp. to Conseco Finance Credit Card Funding
Corp................................................................. 83
Representations and Warranties.......................................... 83
Amendments.............................................................. 84
Termination............................................................. 85
Note Ratings............................................................. 85
Material Legal Aspects of the Receivables................................ 85
Transfer of Receivables................................................. 85
-ii-
Page
----
Matters Relating to Conservatorship, Receivership and Bankruptcy.......... 87
Consumer Protection Laws.................................................. 89
Material Federal Income Tax Consequences................................... 90
General................................................................... 90
Tax Consequences to Noteholders........................................... 91
State and Local Tax Consequences.......................................... 94
Page
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ERISA Considerations....................................................... 94
Plan of Distribution....................................................... 95
Reports to Noteholders..................................................... 96
Where You Can Find More Information........................................ 96
Glossary................................................................... 98
Global Clearance, Settlement and Tax Documentation Procedures.............. A-1
-iii-
Prospectus Summary
This summary highlights information and does not contain all of the
information that you need to consider in making your investment decision. You
should carefully read this entire document and the accompanying prospectus
supplement before you purchase any notes.
The Issuer
Conseco Private Label Credit Card Master Note Trust, a Delaware business
trust, is the issuer of the notes. The trust's principal place of business is
located at . Its phone number is .
The trust is a master trust and will issue notes in series. Each series of
notes will consist of one or more classes. The classes of a series may be
issued at the same time or at different times. The notes of each series will be
issued from an indenture and a series supplement to the indenture, each between
the trust and the indenture trustee.
Some classes or series may not be offered by this prospectus. They may be
offered, for example, in a private placement.
Risk Factors
Investment in the notes involves risks. You should consider carefully the
risk factors beginning on page [.] in this prospectus and the risk factors
described in the accompanying prospectus supplement.
Indenture Trustee
U.S. Bank Trust National Association is the indenture trustee under the
indenture. Its address is 180 East Fifth Street, 2nd Floor, St. Paul, Minnesota
55101 attention: Corporation Trust. Its phone number is (651) 244-5000.
Transferors
Conseco Bank, Inc. and Conseco Finance Credit Card Funding Corp. will
transfer receivables to the trust.
Other affiliates of Conseco Finance may also become transferors in the
future
Conseco Bank will be the primary transferor. Its address is 2825 East
Cottonwood Parkway, Suite 230, Salt Lake City, Utah 84121. Its phone number is
(801) 733-2205. Conseco Bank is a Utah industrial loan corporation. Its
deposits are insured by the FDIC.
Credit Card Funding Corp. will be a transferor for receivables generated in
less than [.]% of the accounts. Its address is . Its phone
number is . Credit Card Funding Corp. is a newly created special
purpose Minnesota corporation whose stock is held by Conseco Finance.
Servicer and Administrator
Conseco Bank will service the receivables for the trust and will act as the
trust's administrator. Conseco Bank expects to subservice some or all of the
receivables through one or more affiliates.
In limited cases, the servicer may resign or be removed, and either the
1
indenture trustee or a third party may be appointed as the new servicer. The
servicer receives a servicing fee from the trust, and each series is obligated
to pay a portion of that fee.
In addition, Conseco Bank will act as the trust's administrator and will
receive an administration fee from the trust.
Originators
A portion of the accounts are owned by Green Tree Retail Services Bank,
Inc. The receivables in those accounts are originated by Green Tree Bank and
sold to Conseco Bank.
A small portion of the accounts, representing less than % of the initial
accounts are accounts owned by Conseco Finance. These are either commercial or
contractor accounts opened prior to 199 . Conseco Finance originates
receivables in those accounts.
The balance of the accounts are owned by Conseco Bank. Conseco Bank
originates the receivables in those accounts.
Conseco Bank, Green Tree Bank, and Conseco Finance are the originators of
the credit card receivables. In the future other affiliates of Conseco Finance
may originate private label credit card accounts and designate those accounts
to the trust.
Merchants and Dealers
Each of the accounts designated to the trust has been or will be originated
under an agreement with a specific merchant or product sponsor or dealer. These
agreements are collectively referred to as merchant agreements. Under the
merchant agreements, Green Tree Bank, Conseco Bank, or Conseco Finance provide
credit:
. to customers of the merchants to purchase goods and services at the
merchant's stores;
. to customers who purchase from a dealer or distributor specific goods or
services of the sponsoring dealer.
We expect that over time the merchants and dealers will change. New
merchants and dealers will be added and some of the existing merchants and
dealers will discontinue their programs with Conseco.
The merchants and dealers represent a wide variety of industries with the
primary concentration being in the home center and home improvement industries.
Other industries and products for which financing is provided include
motorcycles, sports and recreational vehicles, marine craft, outdoor power
equipment, furniture and soft goods.
None of the merchants nor the dealers has any obligation with respect to
the accounts. The obligation to pay principal and interest on the accounts is
solely that of the customers who open the accounts.
Accounts
Conseco Bank, Green Tree Bank and Conseco Finance each owns a portfolio of
private label credit card accounts. Together the Conseco Bank private label
credit card portfolio, the Green Tree Bank private label credit card portfolio
and the Conseco Finance private label credit card portfolio constitute the
Conseco private label credit card portfolio. Accounts designated to the trust
will be selected from the Conseco private label credit card portfolio.
2
Each account designated to the trust will be an account originated under an
approved merchant or dealer program.
The accounts designated to the trust will constitute the trust portfolio.
Each of the accounts is opened under the terms of a card holder agreement
with an individual as the obligor or, in limited cases, with a business entity
as the obligor. Each account will be owned either by Green Tree Bank, Conseco
Bank, Conseco Finance or another affiliate of Conseco Finance. Each account
will be originated under a specific merchant or dealer program.
The accounts are revolving private label credit card accounts each opened
under a card holder agreement.
A portion of the accounts include provisions for financing major purchases
with level principal payments over a period of approximately [27] months.
Within an account, a portion of the principal balance may be on a revolving
basis and a portion on a fixed monthly principal payment basis.
Approximately % of the accounts are consumer, retail accounts.
Approximately % are contractor accounts and approximately % are
commercial accounts.
From time to time, Conseco Bank or Green Tree Bank may originate revolving
credit card accounts pursuant to MasterCard(R) or VISA(R)* MasterCard and VISA
are federally registered servicemarks
- --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of
MasterCard International, Inc. and VISA U.S.A., Inc., respectively.
of MasterCard International, Inc. and VISA U.S.A., Inc., respectively. programs
that meet the eligibility criteria for inclusion in the trust.
Receivables
The receivables in the trust will be in accounts selected from the Conseco
private label portfolio and designated to the trust.
The receivables will be all amounts shown on the servicer's records as
amounts payable by obligors on those accounts designated to the trust. The
receivables will include amounts payable as principal receivables and as
finance charge receivables.
Finance charge receivables include all periodic rate finance charges, late
fees, overlimit fees, discount option receivables, if any, and [any other fees]
charged to the accounts designated to the trust. Finance charge receivables
also include recoveries with respect to receivables previously charged off.
Principal receivables include all receivables other than the finance charge
receivables or defaulted receivables.
Trust Assets
The receivables transferred to the trust will be the primary trust assets.
Additional assets may be transferred to the trust as described under "The
Transfer and Servicing Agreement--Addition of Trust Assets" in this prospectus.
A transferor may also remove receivables that it transferred to the trust as
described under "Transfer and Servicing Agreement--Removal of Trust Assets" in
this prospectus.
3
The transferors are also permitted to add, from time to time,
participations and related collections to the trust. These participations must
be undivided interests in a pool of assets primarily consisting of receivables
arising under credit card accounts.
For more information about the receivables, see "The Trust Portfolio" in
this prospectus.
All trust assets will initially be in a pool of assets designated as pool
one. All series of notes offered by this prospectus will be backed by the
assets in pool one unless the prospectus supplement for a series specifies a
different pool of assets for that series. In the event that assets are
transferred to the trust and designated as being in a pool of assets other than
pool one, a separate collection account and special funding account will be
created for that pool. Series of notes which are issued to finance assets in a
different pool will be backed solely by those assets and not by assets in pool
one. All references in this prospectus to receivables, accounts and notes shall
refer to pool one only, unless otherwise stated.
Interest Payments on the Notes
Each note entitles the holder to receive payments of interest as described
in the applicable prospectus supplement. If a series of notes consists of more
than one class, each class may differ in, among other things, priority of
payments, payment dates, interest rates, methods for computing interest, and
rights to series enhancement.
Each class of notes may have fixed, floating or any other type of interest
rate. Generally, interest will be paid monthly, quarterly, semi-annually or on
other scheduled dates over the life of the notes. See "Description of the
Notes--Interest Payments" in this prospectus.
Principal Payments on the Notes
Each note entitles the holder to receive payments of principal as described
in the applicable prospectus supplement. If a series of notes consists of more
than one class, each class may differ in, among other things, the amounts
allocated for principal payments, priority of payments, payment dates,
maturity, and rights to series enhancement. See "Description of the Notes--
Principal Payments" in this prospectus.
Revolving Period
Each series of notes will begin with a period during which the trust will
not pay or accumulate principal for payment to the noteholders of that series.
The period when no principal is paid or accumulated is known as the revolving
period. The trust, during the revolving period, will pay available collections
of principal receivables to noteholders of other series in a principal sharing
group as shared principal collections or to the transferors as holders of the
transferor interest, or in limited circumstances described under "Description
of the Notes--Special Funding Account" and "--Application of Collections" will
deposit the available principal in the special funding account.
Partial Amortization
A series of notes may be subject to a partial amortization during the
revolving
4
period. A partial amortization may occur if a merchant terminates its merchant
agreement and purchases receivables then in the trust and the receivables are
not replenished as described in the prospectus supplement.
Amortization or Accumulation Periods
Following the termination of the revolving period, each class of notes will
have one or more of the following periods in which:
. principal is accumulated in specified amounts per month and paid on an
expected principal payment date, known as a controlled accumulation period;
. principal is paid in fixed amounts at scheduled intervals, known as a
controlled amortization period; or
. principal is paid or accumulated in varying amounts each month based on the
amount of principal receivables collected following an amortization event,
known as an early amortization period or early accumulation period,
respectively.
In addition, each class may have other types of accumulation or
amortization periods as specified in the related prospectus supplement.
Amortization Events
An amortization event for any series of notes will include adverse events
described in the prospectus supplement for that series. In addition, the
following will be amortization events for all series:
. bankruptcy, insolvency or similar events relating to the transferors,
including any additional transferor; the bankruptcy or insolvency of Green
Tree Bank or of Conseco Finance may also be an amortization event for all
series;
. the transferors, including any additional transferor, are unable to
transfer receivables to the trust as required under the transfer and
servicing agreement; or
. the trust becomes subject to regulation as an "investment company" under
the Investment Company Act of 1940.
See "Description of the Notes--Amortization Events" in this prospectus.
Early Amortization or Early Accumulation Period
If an amortization event occurs which affects all series or your series,
then an early amortization period or early accumulation period will begin. If
a series or class of notes is in an early amortization or early accumulation
period, the trust will pay available principal to those noteholders on each
distribution date or accumulate available principal by making a deposit into
an account on each distribution date. If the series has more than one class,
each class may have a different priority for payment.
Events of Default
General
The indenture and related indenture supplement governing the terms and
conditions of the notes include a list of adverse events called events of
default.
If an event of default occurs, then, after any applicable cure period, the
indenture trustee or the holders of a
5
majority of the outstanding principal amount of the affected series of notes
may declare all the notes of that series to be immediately due and payable.
Events of default include the following:
. the trust fails to pay interest on any note within 35 days of its due date;
. the trust fails to pay in full principal on any note on its series final
maturity date;
. the trust defaults on any covenant or breaches any agreement under the
indenture and the default or breach continues unremedied for 60 days after
notice is given to the trust by the indenture trustee or to the trust and
the indenture trustee by holders of at least 25% of the outstanding
principal amount of the affected series of notes; or
. the occurrence of those events of bankruptcy, insolvency, reorganization or
similar events relating to the trust described under "The Indenture--Events
of Default".
See "The Indenture--Events of Default; Rights upon Event of Default" in
this prospectus for a description of the events of default and their
consequences to noteholders.
It is not an event of default if the principal of a note is not paid on its
expected principal payment date. It is only an event of default if the
principal amount is not paid on the final maturity date which may be several
months or years after the expected payment date.
Events of Default Remedies
After an event of default and the acceleration of a series of notes, funds
in the collection account and any trust accounts for that series will be
applied to pay those notes to the extent permitted by law. After an event of
default, principal collections and finance charge collections allocated to that
series of notes will be applied to make monthly principal and interest payments
on those notes until the earlier of the date those notes are paid in full or
the series final maturity date of those notes.
See "The Indenture--Events of Default; Rights upon Event of Default" in
this prospectus.
Note Ratings
Any note offered by this prospectus and an accompanying prospectus
supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization.
The ratings of the notes address the likelihood of the timely payment of
interest on and the ultimate payment of principal of the notes. The rating
agencies have not rated the ability to pay principal of the notes in full on
the expected principal payment date or any other date prior to the series final
payment date.
A rating is not a recommendation to buy, sell or hold securities, and may
be revised or withdrawn at any time by the assigning agency. Each rating should
be evaluated independently of any other rating. See "Description of the Notes--
Note Ratings" in this prospectus.
6
Credit Enhancement
Each class of a series may be entitled to credit enhancement. Credit
enhancement for the notes of any class may take the form of one or more of the
following:
. subordination . letter of credit
. collateral . surety bond
interest . spread account
. insurance . reserve account
policy . guaranteed rate agreement
. cash . tax protection agreement
collateral
guaranty or
account
. swap
arrangements
. interest rate
cap agreement
.
overcollateralization
The type, characteristics and amount of any credit enhancement for a series
will be:
. based on several factors, including the characteristics of the receivables
and accounts at the time a series of notes is issued; and
. established based on the requirements of the rating agencies.
See " Description of the Notes--Credit Enhancement" in this prospectus.
Tax Status
Subject to important considerations described under "Federal Income Tax
Consequences" in this prospectus, Dorsey & Whitney LLP, as counsel to the
trust, is of the opinion that, for United States federal income tax purposes
the notes will be treated as indebtedness and the trust will not be an
association or a publicly traded partnership taxable as a corporation and
accordingly will not be subject to federal income tax. In addition, noteholders
will agree, by acquiring notes, to treat the notes as debt of the issuer for
federal, state and local income and franchise tax purposes.
Collections and Allocations
The servicer receives collections on the receivables, deposits those
collections in the collection account and keeps track of them as finance charge
receivables or principal receivables.
The servicer then allocates those collections among each series of notes
outstanding and the transferor interest. The servicer allocates collections of
finance charge receivables and principal receivables, and receivables in
accounts written off as uncollectible to each series based on varying
percentages. The accompanying prospectus supplement describes the allocation
percentages applicable to your series.
The interest in the assets not allocated to any series of notes is the
transferor interest. The principal amount of the transferor interest fluctuates
with the amount of the principal receivables held in the trust and the amount
of notes outstanding.
Groups
The notes of a series may be included in one or more groups of series that
share collections of finance charge and/or principal receivables. The
prospectus supplement will identify whether your series has been included in
one or more of the following groups:
. Excess finance charge sharing group
. Reallocation group
7
. Shared Enhancement Group
. Principal Sharing group
See "Description of the Notes--Groups" in this prospectus.
Shared Transferor Principal Collections
If a series is identified in its prospectus supplement as being entitled to
receive shared transferor principal collections, collections of principal
receivables otherwise payable to the transferors may be applied to cover
principal payments for that series. See "Description of the Notes-- Shared
Transferor Principal Collections" in this prospectus.
Note Ratings
Any note offered by this prospectus and an accompanying prospectus
supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization. A rating is not a
recommendation to buy, sell or hold securities, and may be revised or withdrawn
at any time by the assigning agency. Each rating should be evaluated
independently of any other rating. See "Note Ratings" in this prospectus.
8
Risk Factors
The risk factors disclosed in this section of the prospectus and in the
prospectus supplement describe the principal risk factors of an investment in
the notes. You should consider the following factors and the risk factors
described in the prospectus supplement before you decide whether or not to
purchase the notes.
Fixed payments will require A portion of the accounts include a fixed
new accounts to maintain the principal payment schedule for all or a
trust; failure to maintain portion of the principal receivables in the
required principal balances account. These accounts perform differently
will cause an early from credit card accounts in which all
amortization. principal is on a revolving basis; the fixed
payments may pose the following risks:
. We expect that, for the most part, as the
principal of the accounts which was
incurred for a major purchase, is repaid,
additional large principal amounts will
not be charged to the accounts; therefore,
to replace these receivables, and to
maintain the trust, we will be required to
originate and designate new accounts to
the trust. If we are unable to originate
new principal receivables, an early
amortization event may occur, and your
notes may be paid early and leave you with
a reinvestment risk.
. [Others.]
[Risks related to discounting and promotional programs to be added.]
Relationships with merchants The private label credit card business is
create risk resulting from dependent upon the ability of Conseco to
pressure to provide attractive attract merchants and dealers to participate
credit pricing and promotions in the program and to maintain and retain the
and create risk from merchant and dealer relationships.
termination of agreements. Competition for merchant agreements is
intense and to win and retain desirable
merchant agreements, credit providers must
provide attractive terms and participate in
promotional programs offered by the merchants
and dealers to their customers. This
competition and negotiation with merchants
and dealers may significantly reduce the
amount which the credit provider is able to
realize upon the accounts.
Merchant agreements are generally initially
entered into for a period of three to five
years with provisions for periodic extension.
In addition to the stated
9
termination date in the merchant agreements,
there are a number of circumstances specified
in the merchant agreements which will cause
the termination of the agreement. Some of the
circumstances which may result in a
termination of a merchant agreement are the
failure of either the merchant or the Conseco
entity to pay amounts due to the other party
when required and/or an event of bankruptcy
or insolvency.
Such agreements frequently provide that upon
termination, the merchant has the right to
purchase all outstanding accounts including
receivables originated under the program. If
this were to occur, particularly if the
termination and sale were related to a
merchant with accounts which represented a
significant portion of the trust portfolio,
the ability of Conseco to replace those
accounts cannot be assured. Proceeds received
from the sale of the accounts would be
deposited into an account held by the
indenture trustee. If receivables in new
accounts were not available to replace the
amounts in the sold accounts, this could
result in an early redemption of some or all
of your notes.
In the alternative, if the terminating
merchant did not purchase the existing
accounts, the obligor's charging privileges
would be terminated, but the trust would
continue to own the receivables in those
accounts. However, the termination could
adversely affect the payment patterns on the
remaining accounts.
[Other risks associated with the merchant
relationships to be discussed.]
Some liens may be given Although each transfer of receivables by
priority over your notes which Conseco Bank, Conseco Finance, Green Tree
could cause your receipt of Bank, Credit Card Funding Corp. or another
payments to be delayed or account owner or transferor is treated as a
reduced. sale, a court could conclude that any of such
transfers was not an absolute transfer but a
secured borrowing and that the transferring
party remains as the owner of the
receivables. Even so, the indenture trustee
would still have a first priority perfected
security interest in the receivables;
10
however, the following interests may receive
priority above your interest:
. a tax or governmental lien, or other lien
imposed under state or federal law without
consent, on the property of the person
that owns the receivables arising before
receivables come into existence;
. the fees and expenses of a receiver or
conservator for Conseco Bank, Green Tree
Retail Services, or any other account
owner or transferor which is a bank or a
similarly regulated financial institution;
. the interests of other creditors in
collections commingled and used for the
benefit of the servicer, if insolvency or
bankruptcy proceedings were commenced by
or against the servicer, any subservicer
or Conseco Finance.
In addition, if insolvency or bankruptcy
proceedings were commenced by or against
Conseco Finance, Credit Card Funding Corp. or
any other account owner or transferor that is
not a bank or a similarly regulated financial
institution, the automatic stay provisions of
that law could interfere with the timely
transfer of collections to the indenture
trustee. If any of these events were to
occur, payments to you could be delayed or
reduced. See "Material Legal Aspects of the
Receivables--Transfer of Receivables" and
"Description of the Transfer and Servicing
Agreement--Representations and Warranties of
the Transferors" in this prospectus.
If a conservator or receiver If the FDIC were appointed as conservator or
were appointed for Conseco receiver for Conseco Bank, Green Tree Bank or
Bank, Green Tree Bank or other other account owner or transferor, an early
account owner or transferor, payment of principal on all outstanding
or a transferor or account series could result, and payments to you
owner became a debtor in a could be delayed or reduced. If the FDIC did
bankruptcy case, delays or not respect the security interest granted by
reductions in payment of your Conseco Bank, Green Tree Bank or other
notes could occur. account owner or transferor, in the
receivables, the FDIC could:
. require the indenture trustee to go
through the administrative claims
procedure established by the FDIC in order
to obtain payments on the notes;
11
. request a stay of any actions by the
indenture trustee to enforce the transfer
and servicing agreement against Conseco
Bank or request a stay of any actions to
enforce the receivables purchase agreement
against Green Tree Bank; or
. repudiate the transfer and servicing
agreement and/or the receivables purchase
agreement or other documents transferring
the receivables and limit the claims of
the holders of the notes to their "actual
direct compensatory damages."
If the FDIC were to take any of these
actions, the amount payable to you could be
delayed and could be less than the
outstanding principal and accrued interest on
the notes, thus resulting in losses to you.
Payments to you also could be delayed or
reduced if the transfer of receivables to the
transferors or to the trust were construed as
the grant of a security interest rather than
an absolute assignment or if the assets and
liabilities of the transferors or to the
trust were substantively consolidated with
those of an entity in bankruptcy.
If a conservator or receiver were appointed
for Green Tree Bank or Conseco Bank, or any
account owner or transferor, or if an event
of bankruptcy or insolvency occurred with
respect to any transferor or any account
owner, an early payment of principal on all
outstanding series could result. Under the
terms [of the receivables purchase agreements
and] the transfer and servicing agreement,
new principal receivables would not be
transferred to the trust. However, the
bankruptcy court, the conservator or the
receiver may have the power, regardless of
the terms of the transaction documents, to
delay that procedure, to prevent the early
payment of principal, or to require new
principal receivables to continue to be
transferred.
In addition, in the event a conservator or
receiver were appointed for the servicer, the
conservator or the receiver may have the
power to prevent either the indenture trustee
or the noteholders from appointing a new
servicer.
12
See "Material Legal Aspects of the
Receivables-- Matters Relating to
Conservatorship, Receivership and Bankruptcy"
in this prospectus.
Bankruptcy or insolvency of We intend that the transfer of the
Conseco Finance or other receivables from Conseco Finance to Credit
affiliates of the transferors Card Funding Corp. will constitute an
could cause delays in payment absolute transfer of the receivables and that
of or losses on your notes all previous transfers of the receivables
which are or will be trust assets and which
were passed through Conseco Finance were and
will be absolute transfers for value. We also
intend that Credit Card Funding Corp. and the
trust will be organized and operated in such
a manner that, in the event of the bankruptcy
or insolvency of Conseco Finance or an
affiliate thereof, neither Credit Card
Funding Corp. nor the trust, will be
consolidated in the bankruptcy or insolvency
proceeding. However, if Conseco Finance or an
affiliate were to become a debtor under the
federal bankruptcy code, it is possible that
a creditor or trustee in bankruptcy for
Conseco Finance or the affiliate or Conseco
Finance or the affiliate as debtor-in-
possession, may argue that all or a part of
the assets of Credit Card Funding Corp. and
all or part of the trust assets should be
consolidated in the bankruptcy proceeding or
may otherwise interfere with the rights of
the trust to the receivables. See "The
Conseco Private Label Credit Business" in
this prospectus and information concerning
Conseco Finance.
Limited experience in Conseco Finance, formerly known as Green Tree
underwriting and servicing Financial Corporation, and its affiliates
private label credit card began its private label credit card business
accounts may result in higher in [1996] and has limited historical
than expected delinquencies, experience with underwriting, originating and
defaults or losses on the servicing private label credit card accounts.
accounts which may result in In particular, Conseco has not been engaged
default on your investment. in the private label business during any
periods of significant economic downturn. In
addition, the business has expanded
significantly since its initiation and the
nature of the business has changed and we
expect that it will continue to change. The
historical information concerning the Conseco
private label credit card portfolio presented
in this prospectus and in any prospectus
supplement is limited. Although we have
calculated and
13
presented delinquency and net loss experience
for the private label portfolio since we
began the private label business in [1996],
you must not assume that the information
presented will actually reflect future
experience for the account receivables
transferred into the trust. In addition, you
must not assume that any future delinquency,
loan loss or repossession experience of the
trust for the receivables will be better or
worse than those described. If the
delinquency, default or loss experience of
the receivables transferred into the trust is
worse than expected, you could suffer a loss
on your investment.
In addition our experience with managing and
predicting customer payment patterns and
yield and spread levels is limited and you
must not assume that historical experiences
will reflect future experiences.
Change in the characteristics Our private label credit card business is
of the merchants and accounts changing, expanding and developing. Currently
may adversely affect payment a majority of our accounts are revolving
patterns. accounts opened for the purpose of financing
general purchases at specified merchants and
to receive cash advances. However, a growing
percentage of the accounts are opened to
finance a major purchase or home improvement
and involve a fixed principal payment
schedule. We cannot accurately predict how
our business will develop in the future. As a
result, you should be aware that the
characteristics of our private label credit
card business and the accounts designated to
the trust may change significantly during the
term of your notes.
Additions to trust assets may The transferors expect that they will
decrease the credit quality or periodically add additional accounts to the
change the characteristics of trust and may, at times, be obligated to add
the assets securing the additional accounts. While each additional
repayment of your notes. If account must be an eligible account at the
this occurs, your receipt of time of its designation, additional accounts
payments of principal and may not be of the same credit quality as the
interest may be reduced, initial accounts, may not be originated under
delayed or accelerated. the same merchant or dealer programs or
within the same industries. There are many
reasons which could cause differences in
credit quality and the performance of the
receivables. These reasons include the fact
that the additional accounts may have been
originated by Conseco Bank, Green Tree Bank
or other account owner, as
14
applicable, using credit criteria different
from those which were applied by Conseco
Bank, or Green Tree Bank to the initial
accounts or the accounts may have been
acquired by Conseco Bank, Green Tree Bank or
other account owner, as applicable, from an
institution which may have used different
credit criteria or the accounts may have been
originated under programs with different
merchants or dealers or for different
industries. Consequently, there is no
assurance that future additional accounts
will have the same credit quality or that the
receivables will perform as those currently
designated to the trust. If additional
accounts added to the trust reduce the credit
quality of the trust assets, it will increase
the likelihood that your receipt of payments
will be reduced or not be received on the
scheduled principal payment date.
You may have limited or no Under the indenture, noteholders holding a
ability to control actions specified percentage of the outstanding
under the indenture. This may principal amount of notes of a series or
result in, among other things, class or all the notes may take actions, or
payment of principal being may direct the indenture trustee to take
accelerated when it is in your various actions described under "Description
interest to receive payment of of the Indenture--Events of Default, Rights
principal at the scheduled Upon Events of Default", including
principal payment date, or it accelerating the payment of principal of the
may result in payment of notes. In the case of votes by series or
principal not being votes by holders of all the notes, the most
accelerated when it is in your senior class of notes will generally be
interest to receive early substantially greater than the subordinate
payment of principal. class or classes of notes. The holders of the
most senior class of notes will therefore
generally have the ability to determine
whether and what actions are to be taken. The
holders of the subordinate class or classes
of notes will generally need the concurrence
of the holders of the most senior class of
notes to cause actions to be taken.
Therefore, the actions taken or not taken by
the controlling noteholders may be contrary
to the actions that you determine to be in
your best interest.
Issuance of additional series The trust is expected to issue additional
by the trust may affect the series from time to time. The trust may issue
timing of payments to you. additional series with terms that are
different from your series without your prior
review or consent. It is a condition to the
issuance of each new series that each rating
agency that has rated an outstanding series
confirm in writing
15
that the issuance of the new series will not
result in a reduction or withdrawal of its
rating of any class of any outstanding
series. The rating agency confirmation
primarily will be based on the trust's
ability to pay principal by the series final
maturity date and interest on each
distribution date. The rating agency
confirmation will not consider how the terms
of a new series could affect the timing and
amounts of payments on your series on its
expected principal payment date. Therefore,
the issuance of a new series may cause
payments of principal and interest on your
notes to be reduced, delayed or accelerated.
If an event of default occurs, Your remedies may be limited if an event of
your remedy options will be default occurs. After an event of default and
limited and you may not the acceleration of your series of notes,
receive full payment of collections of principal receivables and
principal and accrued finance charge receivables allocated to those
interest. notes and, if applicable any funds in the
principal funding account for your series,
will be applied to make payments of monthly
interest and principal on those notes until
the earlier of the date those notes are paid
in full and the final maturity date of those
notes. However, no principal collections will
be allocated to a class of notes if its
invested amount is zero, even if the stated
principal balance of the note has not been
paid in full. If your series includes a
principal funding account, funds in that
principal funding account, if any, that are
not reallocated to other classes of that
series will still be available to pay
principal of and interest on classes of notes
with an invested amount of zero. If your
notes are subordinated notes as specified in
the prospectus supplement, you will receive
payment of principal of those notes only if
and to the extent that, after giving effect
to that payment, the amount of subordination,
as specified in the prospectus supplement,
will be maintained for the senior classes of
notes in that series.
If a transferor breaches Conseco Bank, Green Tree Bank, Conseco
representations and warranties Finance and Credit Card Funding Corp. as
relating to the receivables, originators and/or parties transferring the
payments on your notes may be receivables, make representations and
reduced. warranties relating to the validity and
enforceability of the receivables arising
under the accounts in the trust portfolio,
and as to the
16
perfection and priority of the indenture
trustee's interest in the receivables.
However, neither the owner trustee nor the
indenture trustee will make any examination
of the receivables or the related assets to
determine the presence of defects, compliance
with the representations and warranties or
for any other purpose.
If a representation or warranty relating to
the receivables is violated, the related
obligors may have defenses to payment or
offset rights, [or creditors of the other
account owner or the transferors may claim
rights to the trust assets.] If a
representation or warranty is violated, the
transferor or account owner may have an
opportunity to cure the violation. If it is
unable to cure the violation within the
specified time period or if there is no right
to cure the violation, the transferor must
accept reassignment of the receivables
affected by the violation. These
reassignments are the only remedy for
breaches of representations and warranties,
even if your damages exceed your share of the
reassignment price. See "The Transfer and
Servicing Agreement--Representations and
Warranties of the Transferors" in this
prospectus.
Changes to consumer protection Receivables that do not comply with consumer
laws may impede collection protection laws may not be valid or
efforts or reduce collections enforceable against the obligors on those
which may result in a receivables.
reduction in payments on your
notes.
Federal and state consumer protection laws
regulate the creation and enforcement of
consumer loans, including credit card
accounts and receivables. Changes or
additions to those regulations could make it
more difficult for the servicer of the
receivables to collect payments on the
receivables or could reduce the finance
charges and other fees that the originator
can charge on credit card account balances,
resulting in reduced collections.
If an obligor sought protection under federal
or state bankruptcy or debtor relief laws, a
court could reduce or discharge completely
the obligor's obligations to repay amounts
due on its account and, as a result, the
related receivables would be written off as
uncollectible. See "Material Legal Aspects of
the
17
Receivables--Consumer Protection Laws" in
this prospectus.
Competition in the credit card The credit card industry is highly
and consumer loan industry may competitive. As new credit card companies
result in a decline in new enter the market and companies try to expand
receivables and may result in their market share, effective advertising,
a reduction in the yield on target marketing and pricing strategies grow
the accounts. This may result in importance. [Discussion of competition in
in the payment of principal to the private label sector to be added.]
you earlier or later that your Conseco Bank's, Green Tree Bank's, Conseco
scheduled principal payment Finance's or other account owner's ability to
date. compete in this industry environment will
affect its ability to generate new
receivables and might also affect payment
patterns on the receivables. If the rate at
which Green Tree Bank, Conseco Bank or other
account owner generates new receivables
declines significantly, the account owners
might be unable to transfer additional
receivables or designate additional accounts
to the trust and an amortization event could
occur, resulting in payment of principal
sooner than expected. If the rate at which
the account owners generate new receivables
decreases significantly at a time when
noteholders are scheduled to receive
principal, noteholders might receive
principal more slowly than planned.
Also, competition may result in lower rates
charged on accounts and more extensive use of
promotional programs. This could result in a
reduction in amounts available to pay
interest on the notes and could, if yields
decline, result in an early amortization.
The account owner may change As owner of the accounts, Green Tree Bank,
the terms and conditions of Conseco Bank, Conseco Finance, or other
the accounts in a way that account owner retains the right to change
reduces collections. These various account terms including finance
changes may result in reduced charges, other fees and the required monthly
or early payments to you. minimum payment. Those changes may be
voluntary on the part of Green Tree Bank,
Conseco Bank or Conseco Finance or may be
[undertaken at the request of a merchant or
dealer or may be] forced by law or market
conditions. Changes by the account owner in
interest rates and fees charged to its
customers could decrease the effective yield
on the accounts and this could result in an
early payment or reduced payment of principal
of your notes. Changes
18
in the required monthly minimum payment could
result in delays in the payment of your
notes. Changes in account terms could also
cause a reduction in the credit ratings on
your notes.
Payment patterns may not be The receivables transferred to the trust may
consistent over time and be paid at any time. We cannot assure the
variations in these payment creation of additional receivables in the
patterns may result in reduced trust's accounts or that any particular
payment of principal, or pattern of payments will occur. A portion of
receipt of payment of the existing accounts have been opened for
principal earlier or later the primary purpose of financing a single
than expected. purchase such as a motorcycle, spa or home
siding. These accounts have a fixed principal
payment schedule for the major purchase and
as the principal is paid, new receivables are
not generally generated in that account. To
maintain the required amount of receivables
in the trust, it may be necessary to add
accounts. A significant decline in the amount
of new receivables generated could result in
the occurrence of an amortization event for
one or more series and the commencement of
the early amortization period or, if
applicable, the early accumulation period for
each of those series. If an amortization
event occurs, you could receive payment of
principal sooner than expected.
Conseco's ability to compete in the current
industry environment will affect their
ability to generate new receivables and might
also affect payment patterns on the
receivables. In addition, changes in finance
charges can alter the monthly payment rates.
A significant decrease in monthly payment
rates, including the effect of promotional
programs, could slow the return or
accumulation of principal during an
amortization period or accumulation period.
See "Description of the Notes--Principal
Payments" in this prospectus.
Recharacterization of The transferors may designate a percentage of
principal receivables would the receivables that would otherwise be
reduce principal receivables treated as principal receivables to be
and may require the addition treated as finance charge receivables. This
of new receivables. If new designation should decrease the likelihood of
receivables are unavailable an early amortization event occurring as a
when required you may receive result of a reduction of the series portfolio
payment of principal earlier yield for a given period. However, this
than expected. designation will also reduce the aggregate
amount of principal receivables,
19
which may increase the likelihood that the
transferors will be required to add
receivables to the trust. If the transferors
were unable to add receivables and could not
make a sufficient cash deposit into the
special funding account, one or more series
of notes, including your series, could go
into early amortization resulting in
principal being paid before the scheduled
payment date.
The note interest rate and the [Most] accounts have finance charges set at a
receivables interest rate may variable rate based on a designated index,
re-set at different times and such as the prime rate, while others have
will be established using finance charges based upon a fixed rate.
different indexes, resulting Some, under promotional programs, may bear no
in reduced or early payments interest for a specified period of time. A
to you. series of notes may bear interest either at a
fixed rate or at a floating rate based on a
different index. If the interest rate charged
on the accounts declines, collections of
finance charge receivables may be reduced
without a corresponding reduction in the
amounts of interest payable on your notes and
other amounts required to be paid out of
collections of finance charge receivables.
This could result in delayed or reduced
payments to you.
A decrease in the spread, or difference,
between collections of finance charge
receivables and those collections allocated
to make interest payments on your notes could
also increase the risk of early repayment of
your notes.
Subordinated classes bear One or more classes of notes in a series may
losses before senior classes. be subordinated to one or more senior classes
If you own subordinated notes, of notes in the same series. Principal
the priority of allocations allocations to the subordinated class or
among classes of notes may classes generally do not begin until each of
result in payment on your the more senior classes has been paid in
notes being reduced or full. Therefore, if you own subordinate
delayed. notes, your receipt of principal payments may
be delayed or reduced to the extent the
senior noteholders have not received full and
timely payments with respect to their notes.
Additionally, if collections of finance
charge receivables allocated to a series are
insufficient to cover amounts due for that
series' senior notes, the invested amount for
the series might be reduced. This would
reduce the amount of the collections of
finance charge receivables allocated to
20
the series in future periods and could cause
a possible delay or reduction in principal
and interest payments on the subordinated
notes.
Allocations of defaulted The servicer will write off the receivables
receivables could reduce arising in accounts in the trust portfolio if
payments to you. the receivables become uncollectible. Your
series will be allocated a portion of these
defaulted receivables. See "Description of
Series Provisions--Allocation Percentages"
and "The Bank's Credit Card Portfolio--
Collection of Delinquent Accounts" in the
accompanying prospectus supplement. If the
amount of defaulted receivables allocated to
your series of notes exceeds the amount of
funds available to reimburse those amounts,
you may not receive the full amount of
principal and interest due to you. See
"Description of Series Provisions--
Reallocation Group One," "--Application of
Collections" and "--Defaulted Receivables;
Investor Charge-Offs" in the accompanying
prospectus supplement.
There is no public market for The underwriters may assist in resales of the
the notes. As a result you may notes but they are not required to do so. A
be unable to sell your notes secondary market for any notes may not
or the price of the notes may develop. If a secondary market does develop,
suffer. it might not continue or it might not be
sufficiently liquid to allow you to resell
any of your notes.
21
The Glossary
This prospectus uses defined terms. You can find a listing of defined terms
in the Glossary beginning on page [.] in this prospectus.
The Issuer
Conseco Private Label Credit Card Master Note Trust is a business trust
created under the laws of the State of Delaware on , 2000. It is operated
under a trust agreement, dated as of [.], 2001, between Conseco Bank and Credit
Card Funding Corp., as transferors, and Wilmington Trust Company, as owner
trustee.
The activities of the issuer are limited to:
. acquiring, owning and managing the trust assets and the proceeds of
those assets;
. issuing and making payments on the notes; and
. engaging in related activities.
The primary assets of the issuer will be
. the receivables transferred to the issuer by Credit Card Funding
Corp., Conseco Bank and any other transferor;
. any participation interests transferred to it;
. credit enhancement facilities obtained in connection with any of the
notes;
. derivative agreements that the issuer will enter into from time to
time to manage interest rate or currency risk relating to certain
series, classes or tranches of notes; and
. funds on deposit in the trust account; and
. [certain rights under the merchant agreements].
The issuer does not expect to have any other significant assets.
Conseco Bank will be the administrator for the trust under an
administration agreement dated as of [.], 2001, between the administrator and
the issuer. The administrator will provide notices and perform, on behalf of
the issuer, other administrative obligations required by the transfer and
servicing agreement, the indenture and the indenture supplement for each
series. The administrator will be compensated with a monthly fee as specified
in the prospectus supplement. The transferors are responsible for payment of
the administrator's fees, to the extent not paid under the terms of the
transfer and servicing agreement, and will reimburse the administrator for any
of its liabilities and extra out-of-pocket expenses related to its performance
under the administration agreement and any other document relating to the
issuance of the notes.
The issuer's principal offices are in Delaware, in care of Wilmington Trust
Company, as owner trustee, at the following address: . Its phone
number is .
22
The transferors will pay the fees of the owner trustee and will reimburse
it for particular liabilities and expenses.
Use of Proceeds
The proceeds from each sale of notes will be paid to the transferors and
used for their general corporate purposes, which may include the origination or
purchase of additional receivables.
The Conseco Private Label Credit Business
Background
[The Conseco private label credit business began in [1996] when Green Tree
Financial Corp. in connection with Green Tree Bank, a South Dakota banking
corporation, entered into an agreement to provide private label credit cards to
customers of Menard's Inc., a Minnesota-based home improvement center company
with stores throughout the midwest. Since that time Green Tree Financial Corp.,
now known as Conseco Finance, has entered into numerous other Merchant
Agreements and has assigned the Merchant Agreements either to Green Tree Bank
or to Conseco Bank which was previously known as Green Tree Capital Bank, a
Utah industrial loan corporation.]
In 1998, Green Tree Financial Corp. was acquired by Conseco, Inc. In 1999,
Green Tree Financial Corp. changed its name and became Conseco Finance and
Green Tree Capital Bank became Conseco Bank.
Conseco Finance has continued to expand its private label credit business
both through originating new accounts and through the acquisition of accounts
originated by other lenders. Currently accounts are originated and cards issued
by either Green Tree Bank or Conseco Bank. Conseco Bank is a wholly owned
direct subsidiary of Conseco Finance. Green Tree Bank is a wholly owned
subsidiary of Conseco Finance Servicing Corp. Conseco Finance Servicing Corp.
is a wholly owned subsidiary of Conseco Finance.
[Description of the type of accounts originated by Green Tree Bank and the
type of accounts originated by Conseco Bank to be added.] In addition, Conseco
Finance has originated and is the account owner for a small percentage of
accounts which are contractor or commercial accounts originated prior to 199 .
The accompanying prospectus supplement describes the portion of the
accounts which were originated by Green Tree Bank, by Conseco Bank and by
Conseco Finance.
[Conseco Bank has primarily financed some of its private label credit card
operations through the issuance of the certificates representing interests in a
pool of receivables in designated accounts. Those certificates were placed with
private commercial paper conduits. At the time of issuance of the first series
of notes by the trust, the outstanding certificates will be paid and the
interest of the certificateholders will be released. Some or all of the
receivables in the current securitization program will be transferred by
[Conseco Bank] to
23
the trust. Other receivables initially transferred to the trust will come from
those portions of the Conseco private label credit card portfolio not
previously securitized.]
Conseco Finance Corp.
Conseco Finance is a Delaware corporation with its principal office in St.
Paul, Minnesota. Conseco Finance is a wholly owned subsidiary of Conseco,
Inc., a financial services holder company. The principal executive offices of
Conseco Finance are located at 1100 Landmark Towers, 345 St. Peter Street, St.
Paul, Minnesota 55102-1639.
The SEC allows us to incorporate by reference some of the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information that Conseco Finance
incorporates by reference is considered to be part of this prospectus, and
later information that Conseco Finance files with the SEC will automatically
update and supersede this information. The accompanying prospectus supplement
will include additional information about Conseco Finance and the information
which is being incorporated by reference.
Description of Originators and Transferors
Conseco Bank, Inc.
Conseco Bank is a Utah industrial loan corporation which was incorporated
in 1996. From December 9, 1996 until December 4, 1998, the name of the bank
was Green Tree Capital Bank, Inc. The deposits of the bank are insured by the
FDIC.
Conseco Bank has originated and will continue to originate and transfer
receivables to the trust. We expect that Conseco Bank will be the primary
transferor to the trust.
Green Tree Retail Services Bank, Inc.
Green Tree Bank is a South Dakota banking corporation which was
incorporated in 1995. The deposits of the bank are insured by FDIC. Green Tree
Bank has originated and will continue to originate receivables under accounts
created under specific existing Merchant programs.
Receivables originated by Green Tree Bank, except [low quality assets] are
transferred on an ongoing basis to Conseco Bank.
Conseco Finance Credit Card Funding Corp.
Credit Card Funding Corp. is a newly created special purpose Minnesota
corporation.
Credit Card Funding Corp. will transfer to the trust those receivables
which it receives from Conseco Finance. We expect that the receivables
transferred to the trust by Credit Card Funding Corp. will be only:
. in contractor or commercial accounts owned by Conseco Finance and
originated before 199[ ]; and
24
. receivables in a specific dealer program transferred from Conseco Bank
to Conseco Finance.
Description of the Private Label Credit Card Business
The Conseco private label credit card business began in 1996 with one
primary merchant agreement.
The business has grown primarily in the home store and home improvement
industries. Recently Conseco has developed several programs providing financing
for major consumer products such as motorcycles, boats, recreational vehicles
and musical instruments.
The growth has occurred by originating new programs with merchants and by
the acquisition of accounts originated by other financial institutions.
Conseco's private label credit card business is centered in Saint Paul,
Minnesota. The business is serviced through two service centers. The western
service center, located in Rapid City, South Dakota, provides credit risk
management services, customer services, accounting and funding functions and
acts as a back-up collections center. The Tempe service center, located in
Tempe, Arizona is responsible for collection services and quality assurance.
The Tempe service center also provides administrative support to the private
label credit card business.
Conseco Bank is headquartered and its management offices are located in
Salt Lake City, Utah. The activities of Conseco Bank are subject to regulation
by the Utah Department of Financial Institutions.
Marketing
Merchants
We market our private label credit card programs primarily within specific
target industries. These target industries include the home center industry,
the home improvement industry, the outdoor power equipment industry, the
furniture industry, heating, ventilation and air conditioning industries and in
the motorcycle, recreational vehicle, sports vehicle and marine products
industries.
We also market to other industries and in the future may from time to time
change the target industries on which we focus our marketing efforts.
Marketing includes solicitation of new programs and acquisition of
portfolios originated by other private label credit card providers.
We seek merchant relationships which are limited to the top merchants in
each of our target industries. Our sales approach focuses on partnership and
differentiating our program through effective marketing activities. [All
relationships are structured with marketing money jointly contributed by both
Conseco and the merchant.]
Relationships with merchants are managed through experienced account
managers.
Our marketing approach recently also has emphasized developing
relationships with manufacturers of products such as heating and air
conditioning units, motorcycles,
25
recreational vehicles and boats. We seek to have these manufacturers endorse
the Conseco private label credit card program. Under these endorsements,
Conseco then enters into agreements with local dealers who sell the products.
Customers
Marketing to the individual consumer is done primarily through in-store
solicitation. Applications for credit cards are available in the stores of the
individual merchants or dealers. Applicants provide a limited amount of
information which is electronically transmitted to Conseco's service center and
the application is accepted or denied within a matter of a few minutes.
Conseco also engages in telemarketing to encourage card activation and to
provide notice of promotions available by the use of the consumer's private
label credit card.
Servicing
Conseco Bank will be the servicer with respect to all of the receivables in
the trust. Conseco will carry out its servicing functions through subservicing
arrangements. [For those accounts which are owned by Green Tree Bank, Conseco
Bank will provide servicing by a subservicing arrangement with Green Tree Bank.
Conseco Bank will also enter into a subservicing arrangement with Conseco
Finance Servicing Corp.]
[Conseco Finance has developed servicing guidelines which have been adopted
by Conseco Bank and will be used in servicing the trust portfolio.]
Description of FiServe
With respect to the trust portfolio, data processing, billing and
administrative functions associated with the servicing of the receivables are
performed by Fiserv, Inc. under the terms of a contract with [Conseco Finance.]
Fiserv is headquartered in Brookfield, Wisconsin. Fiserv provides
information management technology and related services to banks, broker-
dealers, credit companies, mortgage lenders and savings institutions.
Merchants and Dealers
Each of the private label credit card accounts is originated under a
specific private label credit card merchant or dealer program or is an account
opened under a merchant or dealer program by another lender and acquired by
Conseco. The programs have been established with merchants and dealers which
have passed requirements for selection established by Conseco.
Merchants and dealers that have private label credit card programs with
Conseco entities as of the date of this prospectus include home center
retailers, home improvement retailers, furniture retailers, outdoor power
equipment retailers, heating, ventilation and air conditioning retailers,
sports vehicle retailers and soft goods retailers. As of the date of this
26
prospectus, the Conseco private label credit card portfolio includes accounts
opened under approximately [35] programs. The prospectus supplement will
provide you with a listing of the primary merchants and product sponsors which
are then participating in the Conseco private label programs. We expect to
enter into merchant agreements with other merchants and dealers in the future
and we expect that some of the existing agreements will be terminated. The
industries represented by merchants and dealers in the future may vary
significantly from that described in this prospectus.
Under the dealer programs relating to a specific manufacturer's product,
Conseco may enter into numerous contracts with local dealers to provide
financing for sales of the manufacturer's product. Therefore, while the list of
merchants and sponsoring manufacturers may include approximately [35] programs,
the Conseco private label credit card program also includes contracts with
hundreds of local dealers who sell the products.
Under the merchant agreements, an account originator provides credit to
customers of the merchant or dealer generally through a credit card. The credit
cards issued for a particular merchant may be used to purchase goods and
services at that merchant's stores and, in some cases, may be used to purchase
goods and services at other stores and locations and may be used to obtain cash
advances. Under the dealer programs, an account originator provides credit to
customers for the purpose of financing the purchase of specific goods or
services of the dealer. Each account is a [revolving credit card account];
however, under some programs, all or a portion of the amount owed on an account
is subject to a fixed payment schedule.
The accounts are opened under the terms of a card holder agreement with an
individual as the obligor or, in limited cases, with a business entity as the
obligor.
To be approved for a private label credit card program, a merchant's or
dealer's financial condition is reviewed. [An investigation of the merchant is
made, consisting of analysis of financial statements and comparison of
financial information to standards in the particular merchant's industry. A Dun
& Bradstreet profile which reveals bankruptcy, lawsuits or other adverse
information with respect to a merchant will generally result in denial of such
merchant's application. Better Business Bureau reports and personal credit
reports are also reviewed. If a merchant is approved for a private label
program, the merchant will continue to be evaluated periodically and may also
be reviewed whenever Conseco Bank or Green Tree Bank, as the case may be,
believes the circumstances warrant such review. Such circumstances include
pending litigation, portfolio deterioration, an increase in the number of
customer complaints, suspicion of fraudulent activity, rumors of bankruptcy or
insufficient repeat transactions or add-on sales.]
Merchant and Dealer Contracts
Each merchant or dealer accepted into a program enters into a contract with
Conseco Finance, Conseco Bank or Green Tree Bank. [In most cases,] the merchant
agreement is entered into by Conseco Finance and then assigned to Conseco Bank
or Green Tree Bank. Merchant agreements may vary on a merchant-by-merchant
basis, and generally may be amended from time to time. Merchants and dealers
take revolving credit applications from
27
customers and submit them to Conseco Bank or Green Tree Bank. If the customer
is approved, the account originator then opens an account for the customer. The
account originator issuing the card owns the underlying account and all
receivables generated thereunder from the time of origination.
[Merchant agreements generally provide that an account originator will fund
new purchases on an account only if the account originator has authorized the
new purchases.]
Merchant agreements typically provide that the account originator may
chargeback any receivable it acquired if customer disputes occur concerning
merchandise or the validity of the charge or if there is fraud or violation of
certain terms of such contract.
Merchant agreements generally have terms ranging [from three to five years]
with an ongoing automatic renewal terms of one year after the initial term
until either party elects to terminate the contract. In addition, contracts
generally provide that either party may terminate the contract in the event of
a breach of the agreement, and in some agreements, either party may terminate
the agreement with prior notice of typically 180 days.
Certain of the merchant agreements provide that if the merchant or dealer
terminates the contract during its initial term, the merchant or dealer has the
option to purchase--and in some contracts must purchase--all accounts generated
under its program. We expect that from time to time merchant agreements will be
terminated. In such case, if the accounts and the receivables are purchased by
the terminating merchant, the failure of the account originators to designate
additional accounts to replace those purchased by a merchant may result in an
amortization event.
Since the private label programs were initiated in 1996, only one merchant
has purchased the accounts generated under a merchant program.
Cardholder Agreements
Each credit line relating to the accounts is issued in accordance with a
cardholder agreement and disclosure statement provided to the obligor. Subject
to applicable law and certain contracts with merchants and dealers, the account
originators have the right at any time to modify or terminate any terms,
conditions, services or features provided to obligors pursuant to their
cardholder agreements, including the ability to periodically increase or
decrease the credit limit established for an obligor. Pursuant to the
cardholder agreement, the credit card may be used primarily to purchase
merchandise and services of the merchant specified in the cardholder agreement.
Some cards also allow cash advances. In addition, under some programs, the
account originator may issue convenience checks which, when used, result in a
loan to the cardholder.
Accounts
General
Conseco private label credit card accounts include revolving credit card
accounts. In addition, a portion of the accounts allow for financing major
purchases and the repayment of the principal amount of such loans on the basis
of a fixed monthly payment.
28
Finance charges are imposed upon the principal amount outstanding in the
accounts. Finance charges may be imposed at different rates for different tiers
of principal amounts outstanding in an account and may be imposed at different
rates on the revolving principal balances and upon the fixed monthly payment
principal balances.
Applications
To open an account, each prospective obligor must complete an application,
usually obtained from the merchant or dealer. The application lists employment
information, income and credit experience. The application is submitted
electronically from the merchant to an account originator for processing. All
final credit decisions are made by the account originator in accordance with
its underwriting guidelines.
Credit Evaluation
A specialized credit system is used to determine which applicants should be
granted credit and the limit which should be placed upon the credit.
Information obtained by the merchant or dealer from the applicant is evaluated
through credit scoring.
The credit scoring models used in the underwriting process are custom
models, developed by a third party using Conseco's portfolio history. The
models utilize a clustering methodology that categorizes applicants by
attributes in their credit bureau files and scores them using one of several
models that most closely matches their credit profile. The majority of
applications are automatically decisioned by the credit system, however, those
that trigger certain credit policy rules for bankruptcy, delinquency, or
potential fraud are queued to a credit analyst for judgmental review. Overall,
adherence to the scoring models is approximately 99.5%.
Credit limit assignments vary by merchant program and are driven by income
and credit score. Credit limits for programs in the home improvement industry
are generally higher than those in the soft goods industry as average dollar
amount of purchases in these two categories vary significantly. On a periodic
basis, customers credit limits can be increased or decreased based on their
payment performance with Conseco. Custom bankruptcy and behavior scoring are
used in the credit line increase and decrease process.
The underwriting policies discussed herein are constantly reviewed and may
change over time in accordance with the business judgment of Conseco Bank or
Green Tree Bank, applicable law and guidelines established by governing
regulatory authorities.
Finance Charges
Finance charges are assessed on purchases of merchandise and services and
cash advances.
The manner in which finance charges are imposed, fixed or floating, and the
finance charge rates are determined under the terms of the individual merchant
agreements and rates vary from one program to another.
Most programs and [many] accounts in the Conseco private label portfolio
impose finance charges on a floating basis. The majority of these accounts
impose finance charges
29
which are indexed to the prime rate plus an add-on percentage ranging from
[3.40%] to [19.99%]. Within each program, different finance charge rates apply
to the accounts depending upon numerous factors. For example, in some accounts,
the rate imposed upon principal amounts of from $0.00 to $1499 is prime plus
13.65% and the rate for amounts above $1499 is a fixed rate of 13.90%. Amounts
charged for a cash advance may incur finance charges at a different rate than
amounts charge for goods and services.
Under merchant programs which provide consumer cards and contractor or
commercial cards, different finance charge rates may apply to the consumer
cards and to the contractor cards and the commercial cards.
[Most] merchant programs include promotional programs. These programs may
provide for a period of months [or years] in which principal payments are
delayed and is paid within the specified time are "same as cash." In these
cases, if the payment is made in the time specified, no finance charges are
due. In other programs, interest rates are reduced or suspended for specified
purchases or periods of time.
[Description of how finance charges are computed and applied to be added.]
In addition, it is a common practice for an account originator, in
cooperation with merchants and dealers, to reduce interest rates or alter
payment terms in conjunction with promotions. There can be no assurance that
the finance charges, fees and other charges discussed herein will remain at
current levels in the future.
Billing
The accounts are governed by various cardholder agreements and disclosure
statements and have different billing and payment structures, including various
fixed or variable annual percentage rates and fees, depending on the type of
account, the industry and state law. Each cardholder agreement provides that an
account originator may change the terms and conditions of that agreement at any
time, including but not limited to those terms pertaining to minimum payments,
the rate or amount of finance charges, fees or other charges. [Under most
states' laws, fifteen to thirty days prior written notice must be provided to
an obligor before implementation of any such change to the terms and conditions
of such cardholder's agreement. For all accounts, an obligor may avoid changes
to the terms of its account by providing notice to the account originator
within thirty days of that account originator's notice of such changes that the
obligor elects not to be subject to such changes and by refraining from making
additional purchases with the card. In certain states, an obligor must make an
additional purchase or accept new terms in writing before terms apply to the
customer.]
[Monthly billing statements for accounts are sent to the obligor at the end
of each monthly billing cycle, generally within three business days after the
cycle date assigned to such account by the servicer. Currently, cycle dates
correspond to each calendar day within a month, except for days after the 25th
day of the month. The monthly billing statement reflects all purchases,
administrative charges (including late charges, returned check charges, and
overlimit charges), credit insurance charges and finance charges incurred on
the account during the billing cycle or
30
a prior billing cycle and reported to the servicer, all payments or credits
applicable to the account and the outstanding balance of the account as of the
cycle date.]
Minimum Payments
The minimum monthly principal payment due on the accounts is determined by
the terms of the merchant agreement under which the account was originated. For
some accounts the minimum payment is the greater of $10 or 2.5% of the balance.
For others it is the greater of $15 or from 2.0% to 3.0% of the balance
depending upon the amount of the balance and for other programs, other minimums
are imposed. Contractor and commercial accounts may have substantially higher
minimum monthly payments and, in some cases, require that the entire balance be
paid each month.
In addition to the minimum amounts described above, for a portion of the
accounts, the obligor on the account is permitted to borrow to finance a major
purchase. These purchases are, in most programs, to be repaid in equal monthly
principal payments. The required monthly payments are added to the minimum
payments due as described in the preceding paragraph.
Application of Payments
[Customer payments are applied to their accounts according to the type of
charge and whether they relate to regular or promotional purchases. Payments
are generally allocated first to regular purchases in the following order (to
the extent such fees are permitted under applicable law): (a) insurance
charges, (b) finance charges, (c) late payment fee, overlimit fee, and other
fees and charges, as applicable, and (d) all purchases and cash advances in the
order of the date the purchase or cash advance was funded; and second to
promotional purchases in the same order of priority.]
Special Payment Plans
Different special payment plans are offered to merchants, dealers and
customers, although many merchants and dealers do not participate in all types
of plans.
(a) Delayed Payment--The customer's payment is delayed for a period of one
to 12 months with interest accruing on the account during the deferral period.
(b) Waived Finance Charge--Interest on the customer's account is waived for
a period of one to 24 months but minimum monthly payments are required.
(c) Delayed Payment/Waived Finance Charge--Interest on the customer's
account is waived and no minimum monthly payments are required for a period of
one to 12 months.
(d) Same-as-Cash with Payments--The customer receives a statement showing
interest accruing and the customer is required to make the minimum monthly
payment. If the customer pays off the purchase within a specified period, the
interest is waived. If the customer does not pay the purchase off prior to the
expiration of the promotional period, all accrued interest will be applied to
the customer's account balance.
(e) Reduced Rate--The customer's annual percentage rate ("APR") for a
specific purchase is reduced for an established period of time or until the
promotional balance is paid
31
in full, whichever occurs first. The customer is required to make minimum
monthly payments. The reduced rate and the length of the reduced rate period
will vary based on agreements between the merchant and the account originator.
(f) Same-as-Cash with Delayed Payments--The customer receives a statement
showing interest accruing and no minimum monthly payment due. If the customer
pays off the balance by the end of the promotional period, the interest is
waived. If the customer does not pay the balance before the expiration of the
promotional period, all accrued interest will be applied to the customer's
account balance.
(g) Reduced Rate/Delayed Payment/Waived Finance Charges--The customer's
payment is delayed and interest on the account is waived during the delay
period. When interest begins to accrue, it accrues at a reduced rate for an
established period of time.
(h) Six Month Introductory Rate--The customer's daily periodic rate is
reduced for a purchase for six months from the date of purchase.
Skip-a-Payment Promotions
To be eligible for this promotion, accountholders of active merchants are
screened against credit criteria. Accountholders that meet the criteria are
qualified to be offered the option of skipping the minimum monthly payment for
one month. Interest will continue to accrue on the unpaid balance. This program
is typically offered twice a year.
In-Store Payments
Merchants accept in-store payments on a very limited basis. When an in-
store payment is received, the merchant can either forward the check to Green
Tree Bank or Conseco Bank or receive a credit on settlements received from the
account originator.
Collections
[Obligors make payments to a lockbox at bank--with the exception of
in store payments. Payments received at the lockbox are then transferred to
Conseco Bank, as servicer, and to the extent required under the transaction
documents, are deposited into the collection account held by the indenture
trustee.]
[Collection procedures to be described.]
Security Interests
Under the terms of the cardholder agreement and disclosure agreement
entered into for [most] accounts, in most states, the obligor grants to the
account originator a purchase money security interest in the merchandise
purchased on the account If the merchandise purchased is a motor vehicle, the
obligor grants a security interest and the account originator retains a
security interest in the motor vehicle . The cardholder agreement provides
that, if the obligor does not make a minimum monthly payment, the account
originator may repossess the merchandise.
[Issues related to perfection of the security interest to be added.]
32
[If we repossess merchandise, proceeds will be treated as recoveries and
included as collections of finance charge receivables; however, we cannot
assure that we will be successful in any repossession efforts or that any
amounts will be recovered. You should not rely upon any potential recoveries
from the financed merchandise to be available to pay the notes.]
Charge Offs
Under our current policies, we charge off an account
. when it becomes six months contractually delinquent; or
. 60 days after we are notified of a bankruptcy filing by or against the
obligor.
[Policies on reaging of accounts to be added.]
The charge-off policies and collection practices discussed herein are
constantly reviewed and may change over time in accordance with the business
judgment of Conseco Finance, Conseco Bank or Green Tree Bank and applicable law
and guidelines established by governing regulatory authorities.
The Trust Portfolio
Conseco Bank, Conseco Finance and Green Tree Bank will on the initial
closing date select accounts from their private label portfolios and designate
those accounts to the trust. Receivables then existing in those accounts and
receivables subsequently generated in those accounts will, directly, or through
a series of transfers, be transferred to the trust.
From time to time on an on going basis, the account originators may select
additional accounts from the Conseco private label credit card portfolio and
designate those additional accounts to be added to the trust and the
receivables in those additional accounts to be transferred to the trust.
The trust portfolio will consist of the receivables arising from time to
time in each of the accounts designated to the trust.
In addition to the receivables in the trust portfolio, the trust assets
include, to the extent noted below:
. all monies due or to become due in payment of these receivables;
. all proceeds of these receivables;
. all proceeds of any credit insurance policies relating to these
receivables;
. any recoveries allocable to the trust because of these receivables
[including any amounts received as a result of repossession of
merchandise];
. [any participations and the related collections conveyed to the
trust;]
. all monies on deposit in specified trust accounts or investments made
with these monies, including any earned investment proceeds if the
prospectus supplement for your series of notes so indicates;
. proceeds of any credit enhancement, as described in the prospectus
supplement for your series of notes;
33
. proceeds of any derivative contracts between the trust and a
counterparty, as described in the prospectus supplement for your
series of notes; and
. any other amounts so specified in the prospectus supplement.
Receivables in the trust consist of:
. principal receivables; and
. finance charge receivables.
The trust considers recoveries as collections of finance charge
receivables. [In addition, principal receivables include the principal portion
of participations, as determined under the terms and provisions of the
participation agreements.]
If the transferors exercise the discount option, a portion of monthly
collections of principal receivables will be considered finance charge
collections and principal receivables will be reduced by that amount. See "The
Transfer and Servicing Agreement--Discount Option" for a description of the
manner of and the conditions to exercise of the discount option.
Each of the account originators and the transferors has indicated and, in
connection with each future transfer of receivables to the trust, the account
originators or any other account owner and the transferors, including any
additional transferor, will indicate in its computer files or books and records
that the receivables have been conveyed to the trust. In addition, each of the
account originators and the transferors, including any additional transferor,
has provided or caused to be provided to the owner trustee on the required
delivery date computer files or microfiche lists, containing a true and
complete list showing each account, identified by merchant or dealer program,
by account number and by total outstanding balance on the date of transfer.
None of the account originators or any other account owner or the transferors,
including any additional transferor, will deliver to the owner trustee any
other records or agreements relating to the accounts or the receivables, except
in connection with additions or removals of accounts. Except as stated above,
the records and agreements relating to the accounts and the receivables
maintained by any account originator or any other account owner and the
transferors, including any additional transferor, are not and will not be
segregated from other documents and agreements relating to other credit card
accounts and receivables and are not and will not be stamped or marked to
reflect the transfers described above, but the computer records of each of the
account originators or any other account owner and the transferors, including
any additional transferor, are and will be required to be marked to evidence
these transfers. Each of the account originators and the transferors has filed
in all appropriate jurisdictions Uniform Commercial Code financing statements
with respect to the receivables meeting the requirements of applicable law. See
"Risk Factors--Some liens may be given priority over your notes which could
cause your receipt of payments to be delayed or reduced" and "Material Legal
Aspects of the Receivables" in this prospectus.
All trust assets will initially be in a pool of assets designated as pool
one. All series of notes offered by this prospectus will be backed by the
assets in pool one unless the prospectus supplement for a series specifies a
different pool of assets for that series. In the event that assets are
deposited into the trust and designated as being in a pool of assets other
34
than pool one, a separate collection account and special funding account will
be created for that pool. Series of notes which are issued to finance assets in
a different pool will be backed solely by those assets and not by assets in
pool one. All references in this prospectus to receivables, accounts and notes
shall refer to pool one only, unless otherwise stated.
Initially, a group of accounts was selected on the initial cut-off date and
designated as trust accounts. In the future, additional accounts may be
designated for inclusion in the trust as well as participations in lieu of, or
in addition to, additional accounts. Accounts initially designated as trust
accounts and any future accounts designated for inclusion in the trust must
meet eligibility criteria set forth in the transfer and servicing agreement.
Receivables conveyed to the trust must also meet eligibility criteria set forth
in the transfer and servicing agreement. If receivables conveyed to the trust
are found to have been ineligible when created or designated for inclusion, the
transferor that transferred them must accept retransfer of these receivables.
Each transferor has the right, and may be required to, designate additional
accounts for inclusion in the trust portfolio, as described under "The Transfer
and Servicing Agreement--Addition of Trust Assets" in this prospectus.
Each transferor also has the right to remove accounts from the trust
portfolio, as described under "The Transfer and Servicing Agreement--Removal of
Trust Assets" in this prospectus. If a transferor does so, the trust will
reconvey all receivables in these removed accounts, whether existing or to be
created, to that transferor.
When the trust issues a new series of notes, each transferor will represent
and warrant to the trust that, as of the closing date for the new series, the
accounts designated as trust accounts met the eligibility criteria set forth in
the transfer and servicing agreement at their time of designation. See "The
Transfer and Servicing Agreement--Representations and Warranties of the
Transferor" in this prospectus for more information on eligibility criteria for
accounts and receivables.
From time to time, Conseco Bank or Green Tree Bank may establish
Mastercard(R) or Visa(R) credit card programs. Accounts originated under these
programs and receivables under those accounts may be designated to the trust if
they meet eligibility criteria.
The prospectus supplement relating to each series of notes will provide
information about the trust portfolio as of the date specified. This
information will include:
. the amount of principal receivables;
. the amount of finance charge receivables;
. the range and average of principal balances of the accounts;
. the range and average of credit limits of the accounts;
. the range and average of ages of the accounts;
. the geographic distribution of the accounts;
35
. the principal merchants and dealers;
. the concentration of principal receivables by industry; and
. delinquency statistics relating to the accounts.
Description of the Notes
The notes will be issued in series. Each series will represent an
obligation of the trust. Each series of notes will be issued from the
indenture, as supplemented by an indenture supplement, in each case entered
into by the trust and the indenture trustee. The following summaries describe
the material provisions common to each series of notes. The accompanying
prospectus supplement gives you additional information specific to the notes of
your series.
General
The notes will be secured by and paid from the assets of the trust. Each
series will be allocated collections of principal receivables and finance
charge receivables based on the investor percentage. The investor percentage
will be based on the invested amount for a series. References to a series in
this prospectus include any subseries of a series.
Each series of notes may consist of one or more classes, one or more of
which may be senior notes and/or one or more of which may be subordinated
notes. Each class of a series will evidence the right to receive a specified
portion of each distribution of principal or interest or both. Each class of a
series may differ from other classes in some aspects, including:
. note rating;
. availability and amount of enhancement;
. priority of entitled payments;
. amounts allocated to interest and principal payments;
. interest rate; and
. maturity date.
Payments and deposits of interest and principal will be made on payment
dates to noteholders in whose names the notes were registered on the record
dates specified in the accompanying prospectus supplement. Interest will be
distributed to noteholders in the amounts, for the periods and on the dates
specified in the accompanying prospectus supplement.
The transferors initially will own the transferor interest. The holder of
the transferor interest, subject to limitations, will have the right to the
transferor percentage of all payments from the receivables in the trust. The
transferor interest may be transferred, in whole or in part, subject to the
limitations and conditions set forth in the trust agreement and the transfer
and servicing agreement, and, at the discretion of the transferors, the
transferor interest may
36
be held either in an uncertificated form or in the form of a transferor
certificate. See "The Transfer and Servicing Agreement--Matters Regarding the
Servicer and the Transferor" in this prospectus.
During the revolving period, the invested amount of a series will remain
constant except under limited circumstances. See "--Defaulted Receivables;
Investor Charge-Offs" in this prospectus. The amount of principal receivables
in the trust, however, will vary each day as new principal receivables are
created and others are paid. The amount of the transferor interest will
fluctuate each day, therefore, to reflect the changes in the amount of the
principal receivables in the trust. When a series is amortizing, the invested
amount of that series will decline as customer payments of principal
receivables are collected and distributed, or accumulated for distribution, to
the noteholders. As a result, the transferor interest will generally increase
to reflect reductions in the invested amount for that series and will also
change to reflect the variations in the amount of principal receivables in the
trust. The transferor interest may also be reduced as the result of new
issuances. See "--New Issuances" in this prospectus.
If the servicer adjusts the amount of any principal receivable because of
transactions occurring in respect of a rebate or refund to an obligor, or
because that principal receivable was created in respect of merchandise which
was refused or returned by an obligor, then the transferor interest will be
reduced by the amount of the adjustment. In addition, the transferor interest
will be reduced as a result of transactions in respect of any principal
receivable which was discovered as having been created through a fraudulent or
counterfeit charge.
Book-Entry Registration
Generally, notes offered through the prospectus and the accompanying
prospectus supplement:
. will be represented by notes registered in the name of a DTC nominee;
. will be available for purchase in minimum denominations of $1,000 and
multiples of $1,000 in excess of that amount; and
. will be available for purchase in book-entry form only.
The accompanying prospectus supplement will specify if your notes have
different characteristics from those listed above.
DTC has informed the transferors that their nominee will be Cede & Co.
Accordingly, Cede & Co. is expected to be the holder of record of each series
of notes. As an owner of beneficial interests in the notes, you will generally
not be entitled to a definitive note representing your interest in the issued
notes because you will own notes through a book-entry record maintained by DTC.
References in this prospectus and the accompanying prospectus supplement to
distributions, reports, notices and statements to noteholders refer to DTC or
Cede & Co., as registered holder of the notes, for distribution to you in
accordance with DTC procedures. All references in this prospectus and the
accompanying prospectus
37
supplement to actions by noteholders shall refer to actions taken by DTC upon
instructions from DTC participants.
The accompanying prospectus supplement may state that application will be
made to list your series or class of notes on the Luxembourg Stock Exchange or
another exchange.
Following is a description of the form your notes will take. We also
describe how your notes may be transferred and how payments will be made to
you.
The information in this section concerning DTC and DTC's book-entry system
has been provided by DTC. The transferors have not independently verified the
accuracy of this information.
You may hold your notes through DTC in the U.S., Clearstream Luxembourg or
Euroclear in Europe or in any other manner described in the accompanying
prospectus supplement. You may hold your notes directly with one of these
systems if you are a participant in the system, or indirectly through
organizations which are participants.
Cede & Co., as nominee for DTC, will hold the global notes. Clearstream
Luxembourg and Euroclear will hold omnibus positions on behalf of the
Clearstream customers and the Euroclear participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries which in turn will hold those positions
in customers' securities accounts in the depositaries' names on the books of
DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, who may
include the underwriters of any series, banks, trust companies and clearing
corporations and may include other organizations. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies, as indirect participants, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream customers and Euroclear participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
customers or Euroclear participants, on the other, will be effected through DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary; however, those cross-market transactions
will require delivery of instructions to the relevant European
38
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines, European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream customers and Euroclear participants may not deliver
instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Clearstream
Luxembourg or Euroclear as a result of a transaction with a participant will be
made during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and those credits or any transactions in
those securities settled during the subsequent securities settlement processing
will be reported to the relevant Clearstream customer or Euroclear participant
on that business day. Cash received in Clearstream Luxembourg or Euroclear as a
result of sales of securities by or through a Clearstream customer or a
Euroclear participant to a DTC participant will be received with value on the
DTC settlement date but will be available in the relevant Clearstream or
Euroclear cash account only as of the business day following settlement in DTC.
Note owners that are not participants or indirect participants but desire
to purchase, sell or otherwise transfer ownership of, or other interest in,
notes may do so only through participants and indirect participants. In
addition, note owners will receive all distributions of principal of and
interest on the notes from the indenture trustee through the participants who
in turn will receive them from DTC. Under a book-entry format, note owners may
experience some delay in their receipt of payments, since those payments will
be forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC
will forward those payments to its participants, which thereafter will forward
them to indirect participants or note owners. It is anticipated that the only
"noteholder" will be Cede & Co., as nominee of DTC. Note owners will not be
recognized by the indenture trustee as noteholders, as that term is used in the
indenture, and note owners will only be permitted to exercise the rights of
noteholders indirectly through the participants who in turn will exercise the
rights of noteholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among participants
on whose behalf it acts with respect to the notes and is required to receive
and transmit distributions of principal and interest on the notes. Participants
and indirect participants with which note owners have accounts with respect to
the notes similarly are required to make book-entry transfers and receive and
transmit those payments on behalf of their respective note owners. Accordingly,
although note owners will not possess notes, note owners will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and banks, the ability of a note owner to
pledge notes to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of those notes, may be limited due to the
lack of a physical certificate for those notes.
39
DTC has advised the transferors that it will take any action permitted to
be taken by a noteholder under the indenture only at the direction of one or
more participants to whose account with DTC the notes are credited.
Additionally, DTC has advised the transferors that it will take those actions
with respect to specified percentages of the invested amount only at the
direction of and on behalf of participants whose holdings include interests
that satisfy those specified percentages. DTC may take conflicting actions with
respect to other interests to the extent that those actions are taken on behalf
of participants whose holdings include those interests.
Clearstream Banking, societe anonyme, was incorporated in 1970 as "Cedel
S.A.," a company with limited liability under Luxembourg law, a societe
anonyme. Clearstream Luxembourg holds securities for its customers and
facilitates the clearance and settlement of securities transactions between
Clearstream customers through electronic book-entry changes in accounts of
Clearstream customers, thereby eliminating the need for physical movement of
certificates. Transactions may be settled by Clearstream Luxembourg in any of
36 currencies, including United States Dollars. Clearstream Luxembourg provides
to its customers, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Clearstream Luxembourg also deals with domestic
securities markets in over 30 countries through established depository and
custodial relationships. Clearstream Luxembourg is registered as a bank in
Luxembourg. Clearstream Luxembourg is subject to regulation by the Commission
de Surveillance du Secteur Financier, which supervises Luxembourg banks.
Clearstream's customers are world-wide financial institutions including
underwriters, securities brokers, and dealers, banks, trust companies and
clearing corporations. Clearstream U.S. customers are limited to securities
brokers and dealers, and banks. Currently, Clearstream Luxembourg has
approximately 2,000 customers located in over 80 countries, including all major
European countries, Canada, and the United States. Indirect access to
Clearstream Luxembourg is available to other institutions that clear through or
maintain a custodial relationship with an account holder of Clearstream
Luxembourg.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of notes and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 27 currencies, including United States dollars.
The Euroclear System includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office as the Euroclear operator, under
contract with Euro-clear Clearance System, S.C., a Belgian cooperative
corporation. All operations are conducted by the Euroclear operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator, not the cooperative. The cooperative
establishes policy for the Euroclear System on behalf of Euroclear
participants. Euroclear participants include banks, including central banks,
securities brokers and dealers and other
40
professional financial intermediaries and may include the underwriters of any
series of notes. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
The Euroclear operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. It is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law. These rules and laws govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear System,
and receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under these rules and laws only on behalf of
Euroclear participants and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to notes held through Clearstream Luxembourg or
Euroclear will be credited to the cash accounts of Clearstream customers or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Distributions with
respect to notes held through Clearstream Luxembourg or Euroclear will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences" in this prospectus.
Clearstream Luxembourg or the Euroclear operator, as the case may be, will take
any other action permitted to be taken by a noteholder under the indenture on
behalf of a Clearstream customer or Euroclear participant only in accordance
with its relevant rules and procedures and subject to its depositary's ability
to effect those actions on its behalf through DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Clearstream Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform those procedures and those
procedures may be discontinued at any time.
Definitive Notes
The notes of each series will be issued as definitive notes to note owners
or their nominees, rather than to DTC or its nominee, only if:
. the administrator advises the indenture trustee for that series in
writing that DTC is no longer willing or able to discharge properly
its responsibilities as depository with respect to a given class of
notes, and the administrator is unable to locate a qualified
successor;
. the administrator, at its option, advises the indenture trustee in
writing that it elects to terminate the book-entry system through DTC;
or
41
. after the occurrence of a servicer default or an event of default,
note owners of a class representing more than 50% of the outstanding
principal amount of that class of notes advise the indenture trustee
and DTC through participants in writing that the continuation of a
book-entry system through DTC, or a successor thereto, is no longer in
the best interest of the note owners of that class of notes.
If any of these events occur, DTC must notify all participants of the
availability through DTC of definitive notes. Upon surrender by DTC of the
definitive instrument representing the notes and instructions for re-
registration, the indenture trustee will issue the notes as definitive notes,
and thereafter the indenture trustee will recognize the registered holders of
those definitive notes as noteholders under the indenture.
Distribution of principal and interest on the notes will be made by the
indenture trustee directly to holders of definitive notes in accordance with
the procedures set forth in this prospectus and in the indenture. Interest
payments and any principal payments on each payment date will be made to
holders in whose names the definitive notes were registered at the close of
business on the related record date. Distributions will be made by check mailed
to the address of the noteholders as it appears on the register maintained by
the indenture trustee. The final payment on any note, whether definitive notes
or the notes registered in the name of Cede & Co. representing the notes,
however, will be made only upon presentation and surrender of that note at the
office or agency specified in the notice of final distribution to noteholders.
The indenture trustee will provide this notice to registered noteholders not
later than the fifth day of the month of the final distributions.
Definitive notes will be transferable and exchangeable at the offices of
the transfer agent and registrar, which will initially be the indenture
trustee. No service charge will be imposed for any registration of transfer or
exchange, but the transfer agent and registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
with the transfer or exchange. The transfer agent and registrar will not be
required to register the transfer or exchange of definitive notes for a period
of fifteen days preceding the due date for any payment on those definitive
notes.
New Issuances
The indenture provides that, under any one or more indenture supplements,
the transferors may cause the owner trustee, on behalf of the trust, to issue
one or more new series of notes and may define all principal terms of those
series. Each series issued may have different terms and enhancements than any
other series. Upon the issuance of an additional series of notes, the
transferors, the servicer, the indenture trustee or the trust are not required
and do not intend to obtain the consent of any noteholder of any other series
previously issued by the trust. However, as a condition of a new issuance, the
indenture trustee must receive written confirmation that the new issuance will
not result in the reduction or withdrawal by any rating agency of its rating of
any outstanding series or class. The trust may offer any series under a
prospectus or other disclosure document in offerings under this prospectus or
in transactions either registered under the Securities Act, or exempt
42
from registration under the Securities Act directly, through one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise.
Unless otherwise specified in the accompanying prospectus supplement, a new
issuance may only occur upon the satisfaction of conditions provided in the
indenture. The transferors may cause the owner trustee, on behalf of the trust,
to issue new series of notes by notifying the owner trustee, the indenture
trustee, the servicer and each rating agency at least five days in advance of
the date upon which the new issuance is to occur. The notice will state the
date upon which the new issuance is to occur.
The owner trustee will execute, and the indenture trustee will
authenticate, the notes of any series only upon delivery to them of the
following items, or satisfaction of the following conditions, among others:
(1) an indenture supplement specifying the principal terms of the new
series;
(2) a tax opinion;
(3) if required by the related indenture supplement, the form of credit
enhancement and an appropriate credit enhancement agreement with
respect to that credit enhancement executed by the transferors and
the issuer of the credit enhancement;
(4) written confirmation from each rating agency that the new issuance
will not result in a reduction or withdrawal of its rating of any
outstanding series or class;
(5) a certificate of an authorized officer of each transferor to the
effect that it reasonably believes the new issuance will not have an
Adverse Effect; and
(6) after giving effect to the new issuance, the total amount of
principal receivables plus the principal amount of any participation
interests previously transferred to the trust exceeds the required
minimum principal balance.
To the extent set forth in the prospectus supplement, additional notes of
the same series may be issued subject to the conditions set forth in the
applicable indenture supplement.
[Funding Period
For any series of notes, the total amount of principal receivables in the
trust available to that series may be less than the total principal amount of
the notes of that series. If this occurs, the initial invested amount for that
series of notes will be less than the principal amount of that series of notes.
In this case, the related prospectus supplement will set forth the terms of the
funding period.
During the funding period, the portion of the series amount not invested in
receivables will be maintained in a pre-funding account. On the closing date
for that series of notes, this amount may be up to 100% of the principal
balance of that series of notes. The invested amount for that series will
increase as new receivables are transferred to the trust or as the invested
amounts of other outstanding series are reduced. The invested amount may
decrease due to charge-offs allocated to the series.
43
During the funding period, funds on deposit in the pre-funding account will
be paid to the transferors as the invested amount increases. If the invested
amount for that series is not increased so that it equals the principal balance
of the notes of that series by the end of the funding period, any amount
remaining in the pre-funding account will be repaid to noteholders. This type
of event may also cause repayment of other amounts to noteholders, as set forth
in the related prospectus supplement.
If so specified in the related prospectus supplement, funds on deposit in
the pre-funding account will be invested by the indenture trustee in eligible
investments or will be subject to a guaranteed rate or investment agreement or
other similar arrangement. On each distribution date during the funding period,
earnings on funds in the pre-funding account during the related monthly period
will be withdrawn from the pre-funding account and deposited, together with any
applicable payment under a guaranteed rate or investment agreement or other
similar arrangement, into the collection account as finance charge collections
to make interest payments on the notes of the related series in the manner
specified in the related prospectus supplement.
The prospectus supplement for a series with a funding period will set
forth:
. the series' initial invested amount;
. the series' full invested amount, which is the initial principal
balance of the series of notes;
. the date on which the series' invested amount is expected to equal the
full invested amount;
. the date by which the funding period will end; provided that the
funding period will not exceed one year; and
. what other events, if any, will occur if the end of the funding period
is reached before the full invested amount is funded.]
Paired Series
The prospectus supplement for a series of notes will specify whether that
series may be paired with a previously or later issued series so that a
decrease in the invested amount of the previously issued series results in a
corresponding increase in the invested amount of the later issued series. In
general, a series may be issued as a paired series so the trust can fund the
amount by which the previously issued series has amortized and will amortize in
the future.
If an amortization event occurs for the previously issued series or its
paired series when the previously issued series is amortizing, the investor
percentage for the allocation of collections of principal receivables for the
previously issued series may be reset to a lower percentage as described in the
prospectus supplement for that series and the period over which it will
amortize may be lengthened as a result. The extent to which the period over
which it amortizes is lengthened will depend on many factors, only one of which
is the
44
reduction of its investor percentage. For a discussion of these factors, see
"Risk Factors-- Issuance of additional series by the trust may affect the
timing of payments to you" in this prospectus and "Description of Series
Provisions--Principal Payments--Controlled Accumulation Period" and "--Early
Amortization Period" in the accompanying prospectus supplement.
Interest Payments
For each series of notes and each related class, interest will accrue from
the relevant closing date on the applicable principal balance at the applicable
interest rate. The interest rate on any note may be a fixed, floating or any
other type of rate as specified in the accompanying prospectus supplement.
Interest on the notes, other than zero coupon notes, will generally be paid, or
deposited for later payment, to noteholders on the distribution dates.
Interest payments or deposits on any distribution date will be funded from:
. collections of finance charge receivables allocated to the invested
amount during the preceding due period or periods;
. investment earnings, if any, on any funds held in trust accounts;
. any credit enhancement, to the extent described in the accompanying
prospectus supplement;
. any derivative counterparty, to the extent described in the
accompanying prospectus supplement; and
. other amounts specified in the prospectus supplement.
If interest payments will be made less frequently than monthly, an interest
funding account may be established to accumulate the required interest amount.
If a series has more than one class of notes, that series may have more than
one interest funding account.
Your class of notes will pay interest on the dates and at the interest rate
specified in the accompanying prospectus supplement. If your notes bear
interest at a floating or variable rate, the accompanying prospectus supplement
will describe how that rate is calculated.
Principal Payments
Generally, each series will begin with a revolving period during which no
principal payments will be made to the noteholders of that series, except that,
if described in the prospectus supplement for your series, a partial
amortization may occur following a termination of a merchant agreement and a
failure to replenish the receivables in the trust. Following the termination of
its revolving period, each series of notes is expected to begin to accumulate
principal or begin to distribute principal to noteholders. The accompanying
prospectus supplement describes the conditions under which an accumulation or
amortization period will begin for your class of notes.
45
Principal payments for any series or the related class will be funded from
collections of principal receivables and other trust assets received during the
related due period or periods as specified in the accompanying prospectus
supplement and allocated to that series or class. Principal payments may also
be funded from proceeds from the issuance of notes in the same principal
sharing group, subject to the consent of the noteholders of a series or class
representing a majority of the outstanding principal amount of the notes of
that series or class.
Principal will accumulate in a principal funding account if your series
features a controlled accumulation period or an early accumulation period and
one of these accumulation periods begins. As described in the accompanying
prospectus supplement, during a controlled accumulation period, on each
distribution date an amount of principal, up to the amount specified, will be
set aside in a principal funding account. If an amortization event occurs and
your series features an early accumulation period after that amortization
event, the full amount of principal available to your series will be deposited
in the principal funding account, up to the amount specified in the related
prospectus supplement. This accumulated principal is expected to be paid to
those noteholders on the date specified in the prospectus supplement for that
class or series, or earlier if an amortization period begins before your
expected principal payment date. Note that although your series may feature an
accumulation period, your class of notes might not make use of it.
Funds on deposit in any principal funding account for a series may be
subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement specified in the accompanying prospectus supplement intended
to assure a minimum rate of return on the investment of those funds. In order
to enhance the likelihood of the payment in full of the principal amount of a
series or a related class of notes at the end of an accumulation period, that
series or class of notes may be subject to a principal guaranty or other
similar arrangement specified in the accompanying prospectus supplement.
If your series features a controlled amortization period and this
amortization period begins, principal will be paid to you in increments, up to
the amount specified in the accompanying prospectus supplement. Your class of
notes might also begin to pay principal to you if the accompanying prospectus
supplement specifies that your class will begin early amortization and an
amortization event occurs.
If the series described in the accompanying prospectus supplement features
multiple classes, different classes of your series may have differing
priorities for the accumulation or payment of principal. This means that
noteholders of other classes could begin to receive payments of principal
before you do. The accompanying prospectus supplement will specify the manner,
timing and priority of principal payments to noteholders of each class.
We cannot assure you that principal will be available when expected, either
to accumulate or to pay to you. The expected principal payment date for your
class of notes is based upon assumptions about payment rates on the
receivables, as detailed in the accompanying prospectus supplement. We cannot
assure you that these payment rate assumptions will be correct. Payment rates
depend on collections of receivables. Collections
46
can vary seasonally and are also affected by general economic conditions and
the payment habits of individual obligors. The accompanying prospectus
supplement will provide historical payment rates, total charge-offs and other
information relating to the bank portfolio. We cannot assure you that future
events will be consistent with this historical performance. The life of your
notes might be longer than expected if principal is collected more slowly.
Alternatively, the occurrence of any amortization event may substantially
shorten the average life of your notes.
Credit Enhancement
General
For any series, credit enhancement may be provided by one or more of the
related classes or one or more other series. Credit enhancement may be in the
form of the subordination of one or more classes of the notes of that series or
one or more other series, a letter of credit, the establishment of a cash
collateral guaranty or account, a surety bond, an insurance policy, a spread
account, a reserve account, the use of cross support features or another method
of credit enhancement described in the accompanying prospectus supplement, or
any combination of these. If so specified in the accompanying prospectus
supplement, any form of credit enhancement may be structured so as to be drawn
upon by more than one class or series to the extent described in that
accompanying prospectus supplement.
Unless otherwise specified in the accompanying prospectus supplement for a
series, the credit enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
notes and interest thereon. If losses occur which exceed the amount covered by
the credit enhancement or which are not covered by the credit enhancement,
noteholders will bear their allocable share of deficiencies.
If credit enhancement is provided with respect to a series, the
accompanying prospectus supplement will include a description of:
. the amount payable under that credit enhancement;
. any conditions to payment not described here;
. the conditions, if any, under which the amount payable under that
credit enhancement may be reduced and under which that credit
enhancement may be terminated or replaced; and
. any material provision of any agreement relating to that credit
enhancement.
Additionally, the accompanying prospectus supplement may set forth
information with respect to any credit enhancement provider, including:
. a brief description of its principal business activities;
. its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business;
47
. if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business; and
. its total assets, and its stockholders' or policy holders' surplus, if
applicable, and other appropriate financial information as of the date
specified in the prospectus supplement.
If so specified in the accompanying prospectus supplement, credit
enhancement with respect to a series may be available to pay principal of the
notes of that series following the occurrence of specified amortization events
with respect to that series. In this event, the credit enhancement provider
will have an interest, called a collateral invested amount, in specified cash
flows in respect of the receivables to the extent described in that prospectus
supplement.
Subordination
If so specified in the accompanying prospectus supplement, a series or one
or more classes of any particular series will be subordinated as described in
the accompanying prospectus supplement to the extent necessary to fund
payments with respect to other series or to the senior notes within that
series. The rights of the holders of these subordinated notes to receive
distributions of principal and/or interest on any distribution date for that
series will be subordinate in right and priority to the rights of the holders
of other senior series or senior notes within that series, but only to the
extent set forth in the accompanying prospectus supplement. If so specified in
the accompanying prospectus supplement, subordination may apply only in the
event of specified types of losses not covered by another credit enhancement.
The accompanying prospectus supplement will also set forth information
concerning:
. the amount of subordination of a series or a class or classes of
subordinated notes within a series;
. the circumstances in which that subordination will be applicable;
. the manner, if any, in which the amount of subordination will decrease
over time; and
. the conditions under which amounts available from payments that would
otherwise be made to holders of those subordinated notes will be
distributed to holders of other senior series or senior notes of that
series.
If collections of receivables otherwise distributable to holders of a
subordinated class of a series will be used as support for another series or
another class in that series, the accompanying prospectus supplement will
specify the manner and conditions for applying that cross-support feature.
48
Cash Collateral Guaranty or Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by a guaranty,
referred to as the cash collateral guaranty, secured by the deposit of cash or
permitted investments in an account, referred to as the cash collateral
account, reserved for the beneficiaries of the cash collateral guaranty or by a
cash collateral account alone. The amount available under the cash collateral
guaranty or the cash collateral account will be the lesser of amounts on
deposit in the cash collateral account and an amount specified in the
accompanying prospectus supplement. The accompanying prospectus supplement will
set forth the circumstances under which payments are made to beneficiaries of
the cash collateral guaranty from the cash collateral account or from the cash
collateral account directly.
Spread Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by the periodic
deposit of available excess cash flow from the trust assets into an account,
referred to as the spread account, intended to assist with subsequent
distribution of interest and principal on the notes of that class or series in
the manner specified in the accompanying prospectus supplement.
Reserve Account
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes or any related enhancement will be
provided by the establishment of an account, referred to as the reserve
account. The reserve account may be funded, to the extent provided in the
accompanying prospectus supplement, by an initial cash deposit, the retention
of specified periodic distributions of principal or interest or both otherwise
payable to one or more classes of notes, including the subordinated notes, or
the provision of a letter of credit, guarantee, insurance policy or other form
of credit or any combination of these arrangements. The reserve account will be
established to assist with the subsequent distribution of principal or interest
on the notes of that series or the related class or any other amount owing on
any related enhancement in the manner provided in the accompanying prospectus
supplement.
Letter of Credit
If so specified in the accompanying prospectus supplement, support for a
series or one or more of the related classes will be provided by one or more
letters of credit. A letter of credit may provide limited protection against
specified losses in addition to or in lieu of other credit enhancement. The
issuer of the letter of credit, referred to as the L/C bank, will be obligated
to honor demands with respect to that letter of credit, to the extent of the
amount available thereunder, to provide funds under the circumstances and
subject to any conditions as are specified in the accompanying prospectus
supplement.
The maximum liability of an L/C bank under its letter of credit will
generally be an amount equal to a percentage specified in the accompanying
prospectus supplement of the
49
initial invested amount of a series or a class of that series. The maximum
amount available at any time to be paid under a letter of credit will be set
forth in the accompanying prospectus supplement.
Surety Bond or Insurance Policy
If so specified in the accompanying prospectus supplement, insurance with
respect to a series or one or more of the related classes will be provided by
one or more insurance companies. The insurance policy will guarantee, with
respect to one or more classes of the related series, distributions of interest
or principal in the manner and amount specified in the accompanying prospectus
supplement.
If so specified in the accompanying prospectus supplement, a surety bond
will be purchased for the benefit of the holders of any series or class of that
series to assure distributions of interest or principal with respect to that
series or class of notes in the manner and amount specified in the accompanying
prospectus supplement.
Amortization Events
Unless otherwise specified in the accompanying prospectus supplement, as
described above, the revolving period will continue through the date specified
in the accompanying prospectus supplement unless an amortization event occurs
prior to that date.
An amortization event may be either a trust amortization event which is
described in the indenture and affects all series or a series amortization
event which is described in one or more series supplements to the indenture and
affects only specific series. If a specific event is described as an
amortization event in all series supplements, then the occurrence of that
series amortization event will affect all series.
The events which constitute a trust amortization event are listed in the
glossary to this prospectus in the definition of trust amortization event. Each
of the events which will constitute a series amortization event for your series
will be described in the accompanying prospectus supplement.
On the date on which an amortization event is deemed to have occurred, the
early amortization period or, if so specified in the accompanying prospectus
supplement, the early accumulation period will commence. If, because of the
occurrence of an amortization event, the early amortization period begins
earlier than the scheduled commencement of an amortization period or prior to
an expected principal payment date, noteholders will begin receiving
distributions of principal earlier than they otherwise would have, which may
shorten the average life of the notes.
In addition to the consequences of an amortization event discussed above,
unless otherwise specified in the accompanying prospectus supplement, if
bankruptcy, insolvency or similar proceedings under the Bankruptcy Code or
similar laws occur with respect to a transferor [or account owner], on the day
of that event the affected transferor [or account owner] will immediately cease
to transfer principal receivables to the trust [or in the case of
50
an account owner which is not a Transferor, will cease transferring receivables
under its receivables purchase agreement] and the affected party will promptly
give notice to the indenture trustee and the owner trustee of this event. Any
principal receivables transferred to the trust prior to the event, as well as
collections on those principal receivables and finance charge receivables
accrued at any time with respect to those principal receivables, will continue
to be part of the trust assets and will be applied as specified below in "--
Application of Collections" and in the accompanying prospectus supplement.
If the only amortization event to occur is either the insolvency of a
transferor [or an account owner] or the commencement of a bankruptcy case by or
against a transferor [or an account owner], the bankruptcy court may have the
power to require the continued transfer of principal receivables to the trust.
See "Risk Factors--If a conservator or receiver were appointed for Conseco
Bank, Green Tree Bank or other account owner or a transferor or account owner
became a debtor in a bankruptcy case, delays or reductions in payment of your
notes could occur" in this prospectus.
Final Payment of Principal; Termination
For each series, the transferors have the option to cause the issuer to
prepay the notes at any time after the remaining outstanding principal amount
of that series, excluding any portion of a class of notes held by a transferor
or an affiliate, is 10% or less of the initial principal amount of that series
if conditions set forth in the related indenture supplement are met. The
prepayment price will equal:
(1) the outstanding principal amount of the notes of that series, plus
(2) any accrued and unpaid interest through the day preceding the
distribution date on which the payment occurs or, if the payment
occurs on any other date, through the day preceding the distribution
date immediately following the payment date.
Any amounts on deposit in the principal funding account for that series
will be applied toward the prepayment price on behalf of the issuer.
For any series of notes, the related prospectus supplement may specify
different conditions to the exercise of the prepayment option and a different
method for determining the prepayment price; provided, that:
. the prepayment price of a series of notes will never be less than the
outstanding principal amount of the notes of that series and accrued
and unpaid interest through the payment date; and
. the issuer may only exercise its prepayment option if noteholders will
receive an amount equal to the outstanding principal amount of their
notes together with accrued and unpaid interest thereon through the
payment date.
The notes of each series will be retired on the day following the date on
which the final payment of principal is scheduled to be made to the
noteholders, whether as a result of optional prepayment or otherwise. Each
prospectus supplement will specify the latest date by
51
which principal and interest for the series of notes can be paid, known as the
series final maturity date. However, the notes may be subject to prior
[termination] as provided above. For any series the failure to pay principal of
the related notes on the series final maturity date will be an event of default
and the indenture trustee or holders of a specified percentage of the notes of
that series will have the rights described under "The Indenture--Events of
Default; Rights upon Event of Default" in this prospectus.
Unless the servicer and the holder or holders of the transferor interest
instruct the indenture trustee otherwise, the trust will terminate on the trust
termination date. Upon the termination of the trust and the surrender of the
transferor certificates, the indenture trustee shall convey to the holders of
the transferor certificates all right, title and interest of the trust in and
to the receivables and other funds of the trust. Upon termination of the trust,
the trust or noteholders as sellers of the trust receivables back to the
holders of the transferor certificate will not retain any direct or indirect
liability to the holders of the transferor certificate with respect to those
receivables.
Defeasance
If so specified in the prospectus supplement relating to a series, the
transferors may terminate their substantive obligations in respect of that
series or the trust by depositing with the indenture trustee, from amounts
representing, or acquired with, collections of receivables, money or eligible
investments sufficient to make all remaining scheduled interest and principal
payments on that series or all outstanding series of notes of the trust, as the
case may be, on the dates scheduled for those payments and to pay all amounts
owing to any credit enhancement provider with respect to that series or all
outstanding series, as the case may be, if that action would not result in an
amortization event for any series. Prior to their first exercise of their right
to substitute money or eligible investments for receivables, the transferors,
will deliver to the indenture trustee:
. a statement from a firm of nationally recognized independent public
accountants, who may also render other services to the transferors, to
the effect that the deposit is sufficient to make all the payments
specified above;
. a certificate from an officer of each transferor stating that the
transferor reasonably believes that the deposit and termination of
obligations will not, based on the facts known to that officer at the
time of the certification, then cause an event of default or an
amortization event with respect to any series;
. written confirmation from each rating agency that the deposit and
termination of obligations will not result in a reduction or
withdrawal of its rating of any outstanding series or class; and
. an opinion of counsel to the effect that:
. for federal income tax purposes, the deposit and termination of
obligations will not cause the trust, or any portion of the trust,
to be deemed to be an association, or publicly traded partnership,
taxable as a corporation; and
. the deposit and termination of obligations will not result in the
trust being required to register as an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
52
Reports to Noteholders
Noteholders of each series will receive reports with information on their
series and the trust. The paying agent will forward to each noteholder of
record a report, prepared by the servicer, for its series on the distribution
dates for that series. The report will set forth information as specified in
the related prospectus supplement. If a series has multiple classes,
information will be provided for each class, as specified in the related
prospectus supplement.
Periodic information to noteholders generally will include:
. the total amount distributed;
. the amount of principal and interest for distribution;
. if the series or a class of the series bears interest at a floating or
variable rate, information relating to that rate;
. collections of principal receivables and finance charge receivables
allocated to the series;
. the aggregate investor default amount allocated to the series;
. investor charge-offs for the series and any reimbursements of previous
investor charge-offs;
. the monthly servicing fee for that series;
. the aggregate amount of principal receivables, the outstanding
principal amount of the notes and the outstanding principal amount of
the notes as a percentage of the aggregate amount of the principal
receivables in the trust portfolio;
. the invested amount and the adjusted invested amount for that series;
. the amount available under any enhancement and credit enhancement, if
any, for the series or each class of the series;
. the base rate and the series portfolio yield, each as defined in the
accompanying prospectus supplement, for the series;
. the aggregate outstanding balance of accounts broken out by
delinquency status; and
. the pool factor.
In addition, with respect to a series that incorporates a funding period,
as described under "Description of the Notes--Funding Period" periodic
information to noteholders will include:
. the series' initial invested amount, the series' full invested amount,
and the series' current invested amount; and
. the amount on deposit in the pre-funding account.
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By January 31 of each calendar year, the paying agent will also provide to
each person who at any time during the preceding calendar year was a noteholder
of record a statement, prepared by the servicer, containing the type of
information presented in the periodic reports, aggregated for that calendar
year or the portion of that calendar year that the notes were outstanding,
together with other information that is customarily provided to holders of
debt, to assist noteholders in preparing their United States tax returns.
In addition, noteholders will receive reports with information regarding
the indenture trustee. See "The Indenture--Indenture Trustee's Annual Report"
in this prospectus.
Investor Percentage, Transferor Percentage and Credit Enhancement Percentage
The servicer will allocate all collections of finance charge receivables,
all collections of principal receivables and all defaulted amounts among:
(1) each series issued and outstanding;
(2) the transferors' interest; and
(3) if the related prospectus supplement so states, to any credit
enhancement providers.
All allocations of these amounts will be made through the respective investor
percentages for each series, the transferor percentage and, where applicable,
the credit enhancement percentage. The related prospectus supplements will set
forth how the investor percentages are calculated.
Groups
General
The notes of a series may be included in one or more groups of series that
share specified collections of finance charge receivables and/or principal
receivables. The prospectus supplement will identify whether your series has
been included in one or more of the following groups.
Excess Finance Charge Sharing Group
If a series is identified in the prospectus supplement for that series as
included in an excess finance charge sharing group, collections of finance
charge receivables in the trust portfolio allocated to the series in excess of
the amount needed to make deposits or payments may be shared with other series
identified in the prospectus supplements for those other series as included in
the same group. If one series requires more collections of finance charge
receivables than allocated through its investor percentage, it will have access
to all of these shared excess finance charge collections in other series in its
group. If two or more series require more collections of finance charge
receivables, excess finance charge collections in the group will be shared
among the series in the manner and priority set forth in the related prospectus
supplements.
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Reallocation Group
If a series is identified in the prospectus supplement for that series as
included in a reallocation group, collections of finance charge receivables
which would otherwise be allocated to each series in the reallocation group
will instead be combined and will be available for specified required payments
to all series in that group. Any issuance of a new series in a reallocation
group may reduce or increase the amount of collections of finance charge
receivables allocated to any other series of notes in that group. See "Risk
Factors--Issuance of additional series by the trust may affect the timing of
payments to you." The prospectus supplement with respect to a series offered
hereby will specify whether that series will be included in a reallocation
group or another type of group and whether any previously issued series have
been included in that group. Any series offered hereby may, if so specified in
the related prospectus supplement, be included in a reallocation group. Other
series issued in the future may also be included in that reallocation group.
Shared Enhancement Group
If a series is identified in the prospectus supplement for that series as
included in a shared enhancement group, that series may share collections of
finance charge receivables and other amounts and share in the same credit
enhancement for each series in that group. Any issuance of a new series in a
shared enhancement group may reduce or increase the amount of collections of
finance charge receivables allocated to any other series of notes in that
group. See "Risk Factors--Issuance of additional series by the trust may affect
the timing of payments to you." Sharing may take the form, among others, of
classes of notes of one or more series in a particular shared enhancement group
issued from time to time which are subordinate to other classes issued at the
same or a different time in different series in that group. In addition, if
specified in its prospectus supplement a series may consist of one or more
classes of notes issued in one or more subseries. All subseries of that series
would share collections of finance charge receivables and other amounts and
share in the same credit enhancement for that series.
Principal Sharing Group
If a series is identified in the prospectus supplement for that series as
included in a principal sharing group, to the extent that principal allocated
to that series is in excess of the amount needed for deposit or distribution
for that series, this excess amount will be available to make principal
payments or deposits required by other series, if any, in the same principal
sharing group. If collections of principal receivables in the trust portfolio
allocated to a series are shared with another series, the invested amount for
the series from which collections were shared will not be reduced.
Shared Transferor Principal Collections
If a series is identified in its prospectus supplement as being entitled to
receive shared transferor principal collections, collections of principal
receivables in the trust portfolio otherwise payable to the holders of the
transferor interest may be available to make principal
55
payments or deposits required by noteholders of one or more series. These
shared transferor principal collections will be limited to those series
identified in the prospectus supplements as being entitled to receive shared
transferor principal collections. If two or more series require more
collections of principal receivables, transferor principal collections will be
shared among the series in the manner and priority set forth in the related
prospectus supplements.
Trust Bank Accounts
The servicer will establish and maintain in the name of the indenture
trustee, for the benefit of noteholders of all series, a collection account,
which shall be a qualified account. The servicer will also establish and
maintain with a securities intermediary in the name of the indenture trustee, a
special funding account, which also is required to be a qualified account.
Funds in the collection account and the special funding account will be assets
of the trust and will be invested, at the direction of the servicer, in
eligible investments.
The paying agent will have the revocable power to withdraw funds from the
collection account for the purpose of making payments to the noteholders of any
series under the related indenture supplement.
Application of Collections
Except in the circumstance described in this section, the servicer must
deposit into the collection account, no later than two business days after
processing, all payments made on receivables in the trust portfolio. The
servicer must also allocate these deposits between accounts and to various
parties. However, the servicer will be permitted to make these deposits on a
monthly or other periodic basis rather than a daily basis if one of the
following is true:
(1) Conseco Bank remains the servicer under the transfer and servicing
agreement and maintains a commercial paper rating of not less than A-
1 by Standard & Poor's and P-1 by Moody's;
(2)(a) Conseco Bank remains the servicer under the transfer and servicing
agreement;
(b) no amortization event, reinvestment event or event of default has
occurred;
(c) Conseco Finance maintains a commercial paper rating of not less
than A-1 by Standard & Poor's and P-1 by Moody's;
(d) Conseco Bank remains a wholly-owned subsidiary of Conseco Finance
directly or indirectly; and
(e) in the event of a material change in the financial relationship
between them:
(1) Conseco Bank notifies each rating agency; and
(2) written confirmation is received from each rating agency that
the material change will not result in a reduction or
withdrawal of its rating of any outstanding series or class;
or
56
(3) any other arrangements are made and written confirmation is received
from each rating agency that the arrangements will not result in a
reduction or withdrawal of its rating of any outstanding series or
class.
The servicer must make daily or periodic deposits to the collection account
only to the extent that the funds are needed for deposit into other trust
accounts or distribution to noteholders or other parties. If the collection
account balance ever exceeds this amount for deposit or distribution, the
servicer will be able to withdraw the excess. Subject to [the immediately
preceding sentence,] the servicer may retain its servicing fee with respect to
any series and will not be required to deposit it in the collection account.
Each time a collection account deposit is made, the servicer will withdraw
from, or retain in, the collection account, as applicable, the following
amounts and apply them as indicated:
(1) the transferor percentage of collections of finance charge
receivables in the trust portfolio will be paid or held for payment
to the owner trustee for distribution to the holders of the
transferor certificates in accordance with the trust agreement,
(2) collections of principal receivables in the trust portfolio allocable
to the holders of the transferor certificates will be:
(a) paid to the owner trustee for distribution to the holders of the
transferor certificates in accordance with the trust agreement
only if the transferor interest exceeds zero and those
collections are not required to be used as shared transferor
principal collections;
(b) deposited in the special funding account; or
(c) available to make principal payments or deposits required by
noteholders of one or more series if those collections are
required to be treated as shared transferor principal
collections;
(3) for each series, the relevant investor percentage of collections of
finance charge receivables in the trust portfolio will be retained in
the collection account for allocation and payment as set forth in the
related prospectus supplement;
(4) if the series is in its revolving period, the applicable investor
percentage of collections of principal receivables in the trust
portfolio allocated to the series will be:
(a) paid to the owner trustee for distribution to the holders of the
transferor certificates in accordance with the trust agreement
only if the transferor interest is greater than the required
transferor amount and those collections are not required to be
used as shared principal collections;
(b) deposited in the special funding account; or
(c) available to make principal payments or deposits required by
noteholders of one or more series if those collections are
required to be treated as shared principal collections;
57
(5) if the series is in its controlled accumulation period, controlled
amortization period or early accumulation period, as applicable, the
applicable investor percentage of collections of principal
receivables in the trust portfolio allocated to the series up to the
amount, if any, specified in the accompanying prospectus supplement
will be retained in the collection account or deposited in a
principal funding account, as applicable, for allocation and payment
to noteholders as described in the accompanying prospectus
supplement; provided that if collections of principal receivables
exceed the principal payments which may be allocated or distributed
to noteholders, the excess will be paid to other noteholders or to
the owner trustee for distribution to the holders of the transferor
certificates in accordance with the trust agreement, subject to the
limitations described in clause (4)(a) above; and
(6) if the series is in its early amortization period, the applicable
investor percentage of collections of principal receivables in the
trust portfolio will be retained in the collection account for
application and payment as provided in the accompanying prospectus
supplement.
In the case of a series of notes having more than one class, the amounts in
the collection account will be allocated and applied to each class in the
manner and order of priority described in the accompanying prospectus
supplement.
Any amounts collected in respect of principal receivables and not paid to
the owner trustee for distribution to the holders of the transferor
certificates in accordance with the trust agreement because the transferor
interest is less than the required transferor amount as described in paragraph
(4) above, together with any adjustment payments, will be paid to and held in
the special funding account and paid to the owner trustee for distribution to
the holders of the transferor certificates in accordance with the trust
agreement if, and only to the extent that, the transferor interest is greater
than the required transferor amount. If an amortization period or accumulation
period has commenced, the amounts described in the previous sentence will be
held for distribution to the noteholders on the dates specified in the
accompanying prospectus supplement or accumulated for distribution on the
expected principal payment date, as applicable, and distributed to the
noteholders of each class or held for and distributed to the noteholders of
other series of notes issued by the trust in the manner and order of priority
specified in the accompanying prospectus supplement.
If the servicer determines, based upon the yield of special funding account
investments during the previous due period, that by decreasing the amount on
deposit in the special funding account, any outstanding series which permits
the partial amortization of the principal balance of its notes may be prevented
from experiencing an amortization event based upon insufficiency of yield, the
servicer will on the next distribution date instruct the indenture trustee to
apply funds on deposit in the special funding account as partial amortization
sfa amounts to that series, and if more than one series, to each on a pro rata
basis according to each invested amount, in an amount such that the special
funding account is reduced to an amount which, based on the then current
investment yield, would not cause a yield insufficiency amortization event for
any series then outstanding.
58
Defaulted Receivables; Investor Charge-Offs
Unless otherwise specified in the accompanying prospectus supplement, for
each series of notes, on the determination date, the servicer will calculate
the aggregate investor default amount for the preceding due period, which will
be equal to the aggregate amount of the investor percentage of defaulted
amounts. If so provided in the accompanying prospectus supplement, an amount
equal to the investor default amount for any due period may be paid from
collections of finance charge receivables allocable to that series and other
amounts specified in the accompanying prospectus supplement, including from
credit enhancement, and applied to pay principal to noteholders or, subject to
limitations, the holder of the transferor interest, as appropriate.
With respect to each series of notes, the invested amount of that series
will be reduced by investor charge-offs. Investor charge-offs will be
reimbursed on any distribution date to the extent amounts on deposit in the
collection account and otherwise available exceed the interest, the investor
default amount and any other fees specified in the accompanying prospectus
supplement which are payable on that date. This reimbursement of investor
charge-offs will result in an increase in the invested amount with respect to
that series.
Description of the Indenture
The following summarizes the material terms of the indenture.
Events of Default; Rights Upon Event of Default
With respect to the notes of any series, "events of default" under the
indenture will be any of the following:
(1) the trust fails to pay principal for that series on or before the
series final maturity date;
(2) the trust fails to pay interest on the notes when it becomes due and
payable and the default continues for a period of 35 days;
(3) bankruptcy, insolvency, conservatorship, receivership, liquidation or
similar events relating to the trust;
(4) the trust fails to observe or perform covenants or agreements made in
the indenture and the failure continues, or is not cured, for 60 days
after notice to the trust by the indenture trustee or to the trust
and the indenture trustee by noteholders representing 25% or more of
the outstanding principal amount of the affected series; or
(5) any other events of default described in the accompanying prospectus
supplement.
Failure to pay the full principal amount of a note on its expected
principal payment date will not constitute an event of default.
An event of default with respect to one series of notes will not
necessarily be an event of default with respect to any other series of notes.
59
If an event of default, other than with respect to clause (3) above, should
occur and be continuing with respect to the notes, the indenture trustee or
noteholders holding more than 50% of the outstanding principal amount of the
notes of the affected series may declare all the notes of that series to be
immediately due and payable. This declaration may, under limited circumstances,
be rescinded by noteholders holding more than 50% of the outstanding principal
amount of the notes of that series. If an event of bankruptcy, insolvency,
conservatorship, receivership, liquidation, or similar events relating to the
trust should occur and be continuing, the indenture trustee will declare all of
the notes immediately due and payable. Upon such declaration, the revolving
period, or other period of principal payment or accumulation, other than an
early amortization period, with respect to the affected series will terminate
and an early amortization period will commence.
Generally, in the case of any event of default, the indenture trustee will
be under no obligation to exercise any of the rights or powers under the
indenture if requested or directed by any of the holders of the notes of the
affected series if the indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with that request. Subject to those provisions
for indemnification and limitations contained in the indenture, noteholders
holding more than 50% of the outstanding principal amount of the notes of the
affected series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the indenture trustee,
and noteholders holding more than 50% of the outstanding principal amount of
the notes of the affected series may, in limited cases, waive any default with
respect to the notes, except a default in the payment of principal or interest
or a default relating to a covenant or provision of the indenture that cannot
be modified without the waiver or consent of all noteholders of the affected
series.
After acceleration of a series of notes, principal collections and finance
charge collections allocated to those notes will be applied to make monthly
principal and interest payments on the notes until the earlier of the date the
notes are paid in full or the final maturity date of the notes. Funds in the
collection account and other trust accounts for an accelerated series of notes
will be applied immediately to pay principal of and interest on those notes.
Upon acceleration of the maturity of a series of notes following an event
of default, the indenture trustee will have a lien on the collateral for those
notes for its unpaid fees and expenses that ranks senior to the lien of those
notes on the collateral.
In general, the indenture trustee will enforce the rights and remedies of
the holders of the accelerated series of notes. However, noteholders will have
the right to institute any proceeding with respect to the indenture if the
following conditions are met:
(1) the noteholders of at least 25% of the outstanding principal amount
of the affected series make a written request to the indenture
trustee to institute a proceeding in its own name as indenture
trustee;
(2) the noteholders give the indenture trustee written notice of a
continuing event of default;
60
(3) the noteholders offer reasonable indemnification to the indenture
trustee against the costs, expenses and liabilities of instituting a
proceeding;
(4) the indenture trustee has not instituted a proceeding within 60 days
after receipt of the notice, request and offer of indemnification;
and
(5) the indenture trustee has not received, during the 60-day period
described in clause (4) above, from noteholders holding more than 50%
of the outstanding principal amount of the notes of that series a
direction inconsistent with the request;
provided, however, you may at any time, institute a proceeding to enforce your
right to receive all amounts of principal and interest due and owing to you
under your note.
If any series of notes has been accelerated following an event of default,
and the indenture trustee has not received any valid directions from the
noteholders regarding the time, method and place of conducting any proceeding
for any remedy available to the indenture trustee, the indenture trustee may
elect to continue to hold the portions of the trust assets that secure those
notes and apply distributions on the trust assets to make payments on those
notes to the extent funds are available.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, in case any event of default occurs and is continuing with
respect to the notes, the indenture trustee:
. may institute proceedings in its own name for the collection of all
amounts then payable on the notes of the affected series; or
. may take any other appropriate action to protect and enforce the
rights and remedies of the indenture trustee and the noteholders of
the affected series.
. may, at its own election or at the direction of noteholders holding
more than 50% of the outstanding principal amount of the accelerated
series of notes, excluding any portion of a class of notes held by a
transferor or an affiliate, foreclose on the portion of the
receivables which secure that accelerated series of notes by causing
the trust to sell principal receivables in an amount generally equal
to the invested amount of the accelerated series notes plus the
related finance charge receivables to a third party, who would not
cause the trust to be taxable as a publicly traded partnership for
federal income tax purposes, but only if it determines that the
proceeds of the sale of principal receivables will be sufficient to
pay principal of and interest on the accelerated series of notes in
full; and
. must, at the direction of noteholders holding more than 66-2/3% of the
outstanding principal amount of each class of notes of the accelerated
series, excluding any portion of a class of notes held by a transferor
or an affiliate, foreclose on the portion of the receivables which
secure that accelerated series of notes by causing the trust to sell
principal receivables in an amount generally equal to the invested
amount of the accelerated notes plus the related finance charge
receivables to a third party, who would not cause the trust to be
taxable as a publicly traded
61
partnership for federal income tax purposes, regardless of the
sufficiency of the proceeds recovered from the sale of principal
receivables.
Following the foreclosure and sale of the collateral, or portion of the
collateral, for the notes of a series and the application of the proceeds of
that sale to that series and the application of the amounts then held in the
collection account, the special funding account and any series accounts for
that series and any amounts available under the series enhancement for that
series, that series will no longer be entitled to any allocation of
collections or other property constituting the collateral for the notes of
that series under the indenture and the notes of that series will no longer be
outstanding.
None of the transferors, the administrator, the owner trustee, the
indenture trustee, the servicer, Green Tree Bank, Conseco Finance or the
trust, in its individual capacity, nor any holder of an ownership interest in
the trust, nor any of their respective owners, beneficiaries, agents,
officers, directors, managers, employees, successors or assigns shall, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the notes or for the agreements of
the trust contained in the indenture. The notes will represent obligations
solely of the trust, and the notes will not be insured or guaranteed by the
transferors, the servicer, the administrator, the owner trustee, the indenture
trustee, Green Tree Bank, Conseco Finance or any other person or entity.
Material Covenants
The indenture provides that the trust may not consolidate with, merge into
or sell its business to, another entity, unless:
. the entity formed by or surviving the consolidation or merger, or that
acquires the Issuer's business, is organized under the laws of the
United States, any state of the United States or the District of
Columbia;
. the entity is not subject to regulation as an "investment company"
under the Investment Company Act of 1940, as amended;
. the entity expressly assumes, by supplemental indenture, the trust's
obligation to make due and punctual payments upon the notes and the
performance of every covenant of the trust under the indenture;
. no amortization event or event of default shall have occurred and be
continuing immediately after the merger, consolidation or sale;
. written confirmation is received from each rating agency that the
transaction will not result in a reduction or withdrawal of its rating
of any outstanding series or class;
. the trust has received an opinion of counsel to the effect that the
consolidation, merger or sale would have no material adverse federal
income tax consequence to any noteholder;
. any action as is necessary to maintain the lien and security interest
created by the indenture shall have been taken; and
62
. the trust has delivered to the indenture trustee an opinion of counsel
and officer's certificate each stating that the consolidation, merger
or sale satisfies all requirements under the indenture and that the
supplemental indenture is duly authorized, executed and delivered and
is valid, binding and enforceable.
The trust will not, among other things:
. except as expressly permitted by the indenture, the transfer and
servicing agreement or related documents, sell, transfer, exchange or
otherwise dispose of any of the assets of the trust;
. claim any credit on or make any deduction from payments in respect of
the principal of and interest on the notes, other than amounts
withheld under the Code or applicable state law, or assert any claim
against any present or former noteholders because of the payment of
taxes levied or assessed upon the trust;
. voluntarily dissolve or liquidate in whole or in part; or
. permit (1) the validity or effectiveness of the indenture to be
impaired, or permit the lien under the indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
person to be released from any covenants or obligations with respect
to the notes under the indenture except as may be expressly permitted
by the indenture, (2) any lien, charge, excise, claim, security
interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of the trust or any part
of the trust, except as may be created by the terms of the indenture;
or (3) the lien of the indenture not to constitute a valid first
priority perfected security interest in the assets of the trust that
secure the notes.
The trust may not engage in any activity other than as specified under "The
Issuer" in this prospectus. The trust will not incur, assume or guarantee any
indebtedness other than indebtedness incurred under the notes and the
indenture.
Modification of the Indenture
The trust and the indenture trustee may, without the consent of any
noteholders, enter into one or more supplemental indentures, upon receiving
written confirmation from each rating agency that the action will not result in
a reduction or withdrawal of its rating of any outstanding series or class, for
any of the following purposes:
. to correct or enhance the description of any property subject to the
lien of the indenture, or to take any action that will enhance the
indenture trustee's lien under the indenture, or to add to the
property pledged to secure the notes;
. to reflect the agreement of another person to assume the role of the
trust;
. to add to the covenants of the trust, for the benefit of the
noteholders, or to surrender any right or power of the trust;
. to transfer or pledge any property to the indenture trustee;
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. to appoint a successor to the indenture trustee with respect to the
notes and to add to or change any of the provisions of the indenture
to allow more than one indenture trustee to act under the indenture;
. to modify, eliminate or add to the provisions of the indenture as
necessary to qualify the indenture under the Trust Indenture Act of
1939, as amended, or any similar federal statute later enacted;
. to permit the issuance of one or more new series of notes in
accordance with the indenture; or
. to terminate any interest rate swap agreement or other credit
enhancement in accordance with the related indenture supplement.
The trust and the indenture trustee may also, without the consent of any
noteholders and without prior notice to each rating agency, enter into one or
more supplemental indentures in order to:
. cure any ambiguity, to correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent
with any other provision in the indenture or in any supplemental
indenture;
. make any other provisions with respect to matters or questions arising
under the indenture or in any supplemental indenture; and
. qualify for sale treatment under generally accepted accounting
principles;
in each case, upon receipt of a certificate of an authorized officer of each
transferor to the effect that, in the transferor's reasonable belief, the
action will not have an Adverse Effect.
The trust and the indenture trustee may also, without the consent of any
noteholders, enter into one or more supplemental indentures to add provisions
to, change in any manner or eliminate any provision of the indenture, or to
change the rights of the noteholders under the indenture, upon:
. receipt of written confirmation from each rating agency that the
action will not result in a reduction or withdrawal of its rating of
any outstanding series or class;
. receipt of a certificate of an authorized officer of each transferor
to the effect that, in the transferor's reasonable belief, the action
will not have an Adverse Effect; and
. receipt of a tax opinion.
The trust and the indenture trustee may also, without the consent of the
noteholders of any series or the series enhancers for any series, enter into
one or more supplemental indentures to add, modify or eliminate any provisions
necessary or advisable in order to enable the trust or any portion of the trust
to qualify as, and to permit an election to be made for the trust to be treated
as, a "financial asset securitization investment trust" under the Internal
Revenue Code of 1986, as amended and to avoid the imposition of state or local
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income or franchise taxes on the trust's property or its income. The following
conditions apply for the amendments described in this paragraph:
. delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of each transferor to the effect
that the requirements under the indenture applicable to the proposed
amendments have been met;
. receipt of written confirmation from each rating agency that the
action will not result in a reduction or withdrawal of its rating of
any outstanding series or class; and
. the amendment must not affect the rights, duties or obligations of the
indenture trustee or the owner trustee under the indenture.
The trust and the indenture trustee will not, without prior notice to each
rating agency and without the consent of each noteholder affected, enter into
any supplemental indenture to:
. change the date of payment of any installment of principal of or
interest on any note or reduce the principal amount of a note, the
note interest rate or the redemption price of the note or change any
place of payment where, or the currency in which, any note is payable;
. impair the right to institute suit for the enforcement of specified
payment provisions of the indenture;
. reduce the percentage which constitutes a majority of the outstanding
principal amount of the notes of any series, whose consent is required
for execution of any supplemental indenture or for any waiver of
compliance with specified provisions of the indenture or of some
defaults under the indenture and their consequences provided in the
indenture;
. reduce the percentage of the outstanding principal amount of the notes
required to direct the indenture trustee to sell or liquidate the
trust assets if the proceeds of the sale would be insufficient to pay
the principal amount and interest due on those notes;
. decrease the percentage of the outstanding principal amount of the
notes required to amend the sections of the indenture that specify the
percentage of the aggregate principal amount of the notes of a series
necessary to amend the indenture or other related agreements;
. modify any provisions of the indenture regarding the voting of notes
held by the trust, any other party obligated on the notes, or Green
Tree Bank, Conseco Finance, any other account owner or any of their
affiliates; or
. permit the creation of any lien superior or equal to the lien of the
indenture with respect to any of the collateral for any notes or,
except as otherwise permitted or contemplated in the indenture,
terminate the lien of the indenture on the collateral or deprive any
noteholder of the security provided by the lien of the indenture.
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The trust and the indenture trustee may otherwise, with prior notice to
each rating agency and with the consent of noteholders holding more than 50% of
the outstanding principal amount of the notes of each series adversely
affected, enter into one or more supplemental indentures to add provisions to,
change in any manner or eliminate any provision of the indenture, or to change
the rights of the noteholders under the indenture.
Annual Compliance Statement
The trust will be required to present to the indenture trustee each year a
written statement as to the performance of its obligations under the indenture.
Indenture Trustee's Annual Report
The indenture trustee will be required to mail to the noteholders each year
a brief report relating to its eligibility and qualification to continue as
indenture trustee under the indenture, the property and funds physically held
by the indenture trustee and any action it took that materially affects the
notes and that has not been previously reported.
List of Noteholders
Upon the issuance of definitive notes, three or more holders of the notes
who have each owned a note for at least six months may obtain access to the
list of noteholders the indenture trustee maintains for the purpose of
communicating with other noteholders. The indenture trustee may elect not to
allow the requesting noteholders access to the list of noteholders if it agrees
to mail the requested communication or proxy, on behalf and at the expense of
the requesting noteholders, to all noteholders of record.
Satisfaction and Discharge of Indenture
An indenture will be discharged with respect to the notes upon the delivery
to the indenture trustee for cancellation of all the notes or, with specific
limitations, upon deposit with the indenture trustee of funds sufficient for
the payment in full of all the notes.
Resignation and Removal of the Indenture Trustee
The indenture trustee may resign at any time, in which event the
administrator will appoint a successor indenture trustee for your series. The
administrator may also remove the indenture trustee if it ceases to be eligible
to continue as an indenture trustee under the indenture or if the indenture
trustee becomes insolvent. The administrator will then be obligated to appoint
a successor indenture trustee for your series. If an event of default occurs
under the indenture and the accompanying prospectus supplement provides that a
given class of notes of your series is subordinated to one or more other
classes of notes of your series, under the Trust Indenture Act of 1939, as
amended, the indenture trustee may be deemed to have a conflict of interest and
be required to resign as indenture trustee for one or more of those classes of
notes. In that case, a successor indenture trustee will be appointed for one or
more of those classes of notes and may provide for rights of senior noteholders
to
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consent to or direct actions by the indenture trustee which are different from
those of subordinated noteholders. Any resignation or removal of the indenture
trustee and appointment of a successor indenture trustee for any series of
notes will not become effective until the successor indenture trustee accepts
its appointment for your series.
Description of the Transfer and Servicing Agreement
General
On the initial closing date, Conseco Bank and Credit Card Funding Corp.
will transfer the existing receivables in a designated portfolio of accounts to
the issuer under the transfer and servicing agreement. In the transfer and
servicing agreement, Conseco Bank will agree to service the receivables for the
trust. The following summarizes the material terms of the transfer and
servicing agreement. A form of this agreement is filed as an exhibit to the
registration statement of which this prospectus is a part.
Representations and Warranties of the Transferors
When the trust issues a new series of notes, each transferor will for
itself make several representations and warranties to the trust in the transfer
and servicing agreement including the following:
Regarding No Conflict
. the execution and delivery by the transferor the transfer and
servicing agreement and each other document relating to the issuance
to which it is a party will not conflict with any law or any other
agreement to which the transferor is a party; and
. all required governmental approvals in connection with the execution
and delivery by the transferor of the transfer and servicing agreement
and each other document relating to the issuance have been obtained
and remain in force and effect.
If a representation or warranty made by a transferor is later found to be
materially incorrect when made, and:
. continues to be materially incorrect for 60 days after notice to the
affected transferor by the indenture trustee, or to the transferor and
the indenture trustee by any noteholder; and
. as a result, the interests of the noteholders are materially and
adversely affected, and continue to be materially and adversely
affected during the 60-day period,
then the indenture trustee or noteholders holding more than 50% of the
outstanding principal amount of the notes of the affected series may give
notice to the transferors and the servicer, and to the indenture trustee if
given by the noteholders, declaring that an amortization event has occurred.
Declaring an amortization event will automatically begin early amortization or,
if specified in the accompanying prospectus supplement, early accumulation of
principal.
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Regarding Enforceability
Each transferor will make other representations and warranties to the trust
in the transfer and servicing agreement including the following:
. as of the closing date, the transferor is duly incorporated and in
good standing and has the authority to consummate the issuance;
. the transfer and servicing agreement and each other document relating
to the issuance to which it is a party constitutes a legal, valid and
binding obligation enforceable against the transferor; and
. the trust has all right, title and interest in the receivables in the
trust portfolio or has a first priority perfected security interest in
these receivables.
In the event:
. any representation or warranty described immediately above is breached
by one or more transferor; and
. as a result, the interests of noteholders in the receivables in the
trust portfolio are materially and adversely affected;
then any of the owner trustee, the indenture trustee or noteholders
representing 50% or more of the outstanding principal amount of all of the
trust's outstanding series may give notice to the transferors and the servicer,
and to the owner trustee and indenture trustee if given by the noteholders,
directing each transferor which is in breach to accept reassignment of the
portion of the trust portfolio which was transferred by that transferor and to
pay into the trust's collection account a cash deposit equal to the sum of the
amounts specified with respect to each outstanding series in the related
indenture supplement. However, no reassignment will be required if:
. within 60 days, or up to 120 days if specified in the notice, the
transferor cures the breach and any material adverse effect caused by
the breach; or
. on any day within the applicable 60-day to 120-day period the relevant
representation and warranty is then true and correct in all material
respects and the transferor delivers to the owner trustee a
certificate of an authorized officer describing the nature of the
breach and the manner in which the relevant representation and
warranty became true and correct.
Reassignment of the required portion of the trust portfolio and the
transferor's obligation to make the cash deposit in the trust's collection
account are the only remedies to any breach of the representations and
warranties described above.
Regarding the Accounts and the Receivables
The transferors make representations and warranties in the transfer and
servicing agreement concerning the accounts and the receivables in the trust
portfolio. Only eligible accounts can be designated as accounts for the trust
portfolio. We can give you no assurance that eligible accounts will remain
eligible once added to the trust.
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The transferors also represent that each receivable in the trust portfolio
is an eligible receivable when created. If a receivable in the trust portfolio
is found to be ineligible when created, and, as a result, the interests of
noteholders in any receivable in the trust portfolio are materially and
adversely affected, the transferor that transferred such receivable must accept
reassignment of the principal amount of this ineligible receivable. However,
such transferor will have 60 days, or up to 120 days if agreed to by the
indenture trustee and the servicer, from the earlier to occur of discovery of
the breach by such transferor or receipt by the transferor of written notice of
the breach given by the owner trustee, the indenture trustee or the servicer,
to cure the ineligibility before reassignment is required.
A transferor will accept reassignment of an ineligible receivable by
directing the servicer to deduct the principal amount of the ineligible
receivable from the transferor interest. If this would reduce the transferor
interest below the required transferor amount, the transferor will make a cash
deposit in the trust's special funding account in the amount by which the
transferor interest would have been reduced below the required transferor
amount. Any deduction or deposit is considered a repayment in full of the
ineligible receivable. The obligation of the transferring transferor to accept
reassignment of any ineligible receivable is the only remedy for any breach of
a representation concerning eligibility of receivables.
Additional Representations and Warranties in the Prospectus Supplement
The accompanying prospectus supplement may specify additional
representations and warranties made by the transferors when your notes are
issued. The indenture trustee is not required to make periodic examinations of
receivables in the trust portfolio or any records relating to them. However,
the servicer will deliver to the indenture trustee once each year an opinion of
counsel affirming, among other things, that no further action is necessary to
maintain the trust's perfected security interest in the receivables.
Additional Transferors
A transferor may, from time to time, designate one or more of its
affiliates as additional transferors under the transfer and servicing
agreement. In connection with this designation, the then existing transferors
will exchange the transferors' certificate for a newly issued transferors'
certificate modified to reflect any additional transferor's interest in the
transferor interest. The transfer and servicing agreement may be amended to
permit the designation of these additional transferors and the exchange of the
transferor certificate without noteholder consent upon:
. delivery to the owner trustee and the indenture trustee of a tax
opinion regarding the exchange; and
. receipt of written confirmation from each rating agency that the
exchange will not result in a reduction or withdrawal of its rating of
any outstanding series or class.
Eligible Accounts
An "eligible account" means, as of the initial cut-off date, or with
respect to additional accounts, as of their date of designation for inclusion
in the trust, each private
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label revolving credit card account owned by Conseco Bank, Green Tree Bank,
Conseco Finance or other account owner:
. which is in existence and maintained by Conseco Bank, Conseco Finance,
Green Tree Bank, Conseco Finance or other account owner, as
applicable;
. which is payable in United States dollars;
. the obligor of which has provided, as his or her most recent billing
address, an address located in the United States or its territories,
possessions or military bases; provided, however, that as of any date
of determination, up to % of the accounts (calculated by number of
accounts) may have account obligors who have provided as their billing
addresses, addresses located outside of such jurisdictions;
. except as described in the following paragraph, has an obligor who has
not been identified by the servicer in its computer files as currently
being involved in a bankruptcy proceeding;
. which has not been classified as an account with respect to which the
related card, if any, has been lost or stolen or the related account
number has been stolen;
. which has not been sold or pledged to any other party except for any
sale to another account owner that has either entered into a
receivables purchase agreement or is an additional transferor;
. which, with respect to the initial accounts, is an account in
existence and maintained by Conseco Bank, Green Tree Bank or Conseco
Finance as of the initial cut-off date or as of its date of
designation for inclusion in the trust with respect to additional
accounts;
. except as described in the following paragraph, does not have any
receivables that are defaulted receivables; and
. which does not have any receivables that have been identified by the
servicer or the relevant obligor as having been incurred as a result
of fraudulent use of any related credit card, if any, or related
account number.
Eligible accounts may include accounts, the receivables of which have been
charged off, or with respect to which the servicer believes the related obligor
is bankrupt, in each case as of the initial cut-off date, with respect to the
initial accounts, and as of the related additional cut-off date, with respect
to additional accounts; provided, that (a) the balance of all receivables
included in these accounts is reflected on the books and records of the
appropriate transferor (and is treated for purposes of the transfer and
servicing agreement) as "zero" and (b) charging privileges with respect to all
these accounts have been canceled in accordance with the relevant credit
guidelines.
Under the transfer and servicing agreement, the definition of eligible
account may be changed by amendment to the agreement without the consent of the
noteholders if the transferor delivers to the owner trustee and the indenture
trustee a certificate of an authorized officer to the effect that, in the
reasonable belief of the transferor, the amendment will not as of the date of
the amendment adversely affect in any material respect the interest of the
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noteholders, and the amendment will not result in a withdrawal or reduction of
the rating of any outstanding series under the trust.
Eligible Receivables
With respect to each series of notes, an "eligible receivable" means each
receivable:
. which has arisen in an eligible account;
. which was created in compliance, in all material respects, with all
requirements of law applicable to the institution that owned the
receivable at the time of its creation, and under the terms of a
credit agreement which complies in all material respects with all
requirements of law applicable to Conseco Bank, Green Tree Bank or
Conseco Finance or other account owner, as applicable;
. with respect to which all material consents, licenses or
authorizations of, or registrations with, any governmental authority
required to be obtained or given in connection with the creation of
the receivable or the execution, delivery and performance by Conseco
Bank, Green Tree Bank or Conseco Finance or other account owner or
transferor, as applicable, of the related credit agreement have been
duly obtained or given and are in full force and effect;
. as to which, at the time of its transfer to the trust, a transferor or
the trust has good title, free and clear of all liens and security
interests arising under or through the transferor, other than some tax
liens for taxes not then due or which a transferor is contesting;
. which has been the subject of either a valid transfer and assignment
from a transferor to the trust of all of the transferor's right, title
and interest in the receivable, including any proceeds of the
receivable, or the grant of a first priority perfected security
interest in the receivable, and in the proceeds of the receivable,
effective until the termination of the trust;
. which is the legal, valid and binding payment obligation of the
obligor under the receivable, legally enforceable against that obligor
in accordance with its terms, subject to some bankruptcy-related
exceptions;
. which, at the time of transfer to the trust, has not been waived or
modified except as permitted under the customary policies and
procedures, as amended from time to time, of Conseco Bank, Green Tree
Bank, Conseco Finance or other account owner or transferor, as
applicable, and then only if the waiver or modification is reflected
in the servicer's computer file of revolving credit accounts;
. which, at the time of transfer to the trust, is not subject to any
right of rescission, setoff, counterclaim or any other defense,
including defenses arising out of violations of usury laws, of the
obligor, other than defenses arising out of bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights in
general;
. which, at the time of transfer to the trust, Conseco Bank, Green Tree
Bank, Conseco Finance or other account owner or transferor, as
applicable, has satisfied all of its obligations required to be
satisfied by that time;
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. which, at the time of transfer to the trust, none of the transferors,
Conseco Bank, Green Tree Bank, Conseco Finance or any other account
owner or transferor, as applicable, has taken any action, or omitted
to take any action, that would impair the rights of the trust or the
noteholders; and
. which constitutes [an "account" or "general intangible" or "chattel
paper"] under Article 9 of the UCC as then in effect in the States of
South Dakota, Utah and Minnesota with respect to those accounts
originated by Green Tree Bank and in the state of Utah with respect to
those accounts originated by Conseco Bank or any other state where the
filing of a financing statement is required to perfect the trust's
interest in the receivables and the proceeds of those receivables.
Addition of Trust Assets
As described above under "The Trust Portfolio," each transferor will have
the right to designate, from time to time, additional accounts to be included
as accounts for the trust. The additional accounts will consist of either
[aggregate addition accounts] or new accounts. In addition, the transferor will
be required to designate additional accounts under the circumstances and in the
amounts specified in the accompanying prospectus supplement. Each transferor
will convey to the trust its interest in all receivables of those additional
accounts, whether the receivables are then existing or subsequently created.
Each additional account will be selectively or randomly chosen from
eligible accounts in Conseco Bank's or Green Tree Bank's or other account
owner's portfolio of private label credit accounts. However, these additional
accounts may not be of the same credit quality as the initial accounts, may not
be established under the same merchant or dealer programs as the initial
accounts and may not related to the same industries as the initial accounts.
Additional accounts may have been originated by Conseco Bank, Green Tree Bank
or other account owner, as applicable, using credit criteria different from
those which were applied by Conseco Bank, Conseco Finance or Green Tree Bank to
the initial accounts or may have been acquired by Conseco Bank, Conseco
Finance, Green Tree Bank or other account owner, as applicable, from an
institution which may have had different credit criteria.
[The transferor is also permitted to add, from time to time, participations
and related collections to the trust. These participations must be undivided
interests in a pool of assets primarily consisting of receivables arising under
credit accounts. Participations may be issued under separate agreements that
are similar to the agreements governing the issuance of the notes and that
entitle the holder of the participation to receive percentages of collections
generated by the pool of assets supporting the participation. Participations
may have their own credit enhancement, amortization events, servicing
obligations and servicer defaults, all of which are likely to be enforceable by
a separate trustee under these participation agreements and may be different
from those specified in this prospectus. The rights and remedies of the trust
as the holder of a participation, and, therefore, the noteholders, will be
subject to all the terms and provisions of those participation agreements.]
Any participation interests to be included as trust assets or any eligible
accounts, other than new accounts, designated to be included as accounts after
the initial selection date, are collectively referred to as an aggregate
addition.
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When a transferor or transferors transfer receivables in additional
accounts or participations, they must satisfy several conditions, including, as
applicable:
. with respect to any aggregate addition, notice to the owner trustee,
the indenture trustee, the servicer and each rating agency;
. delivery and acceptance by the owner trustee of a written assignment
of receivables in the additional accounts or participations to the
trust;
. delivery on the required delivery date to the owner trustee of a
computer file or microfiche list with an accurate list of all
additional accounts;
. delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer to the effect that:
(1) as of the addition date, each additional account is an eligible
account;
(2) the transferors have deposited into the collection account any
collections relating to additional accounts or participation
interests;
(3) in circumstances where the transferors are not required to
designate additional accounts to be included as accounts for the
trust, or to add participations to the trust, each rating agency
then rating any series of notes outstanding under the trust shall
have previously consented to the designation of the aggregate
addition;
(4) as of the addition date, none of Conseco Bank, Green Tree Bank,
Conseco Finance or any other account owner or the transferors is
insolvent and the transfer of the receivables was not made in
contemplation of insolvency;
(5) in each transferor's reasonable belief, adding the receivables in
aggregate addition accounts or participations will not have an
Adverse Effect;
. delivery on the required delivery date of opinions of counsel with
respect to the transfer of the receivables in the additional accounts
or the participations to the trust; and
. in circumstances where a transferor, in its discretion, designates
aggregate addition accounts to be included as accounts for the trust
or adds participations to the trust, written confirmation from each
rating agency that the aggregate addition will not result in the
reduction or withdrawal of its rating of any outstanding series or
class.
Removal of Trust Assets
Each transferor has the right to designate zero balance accounts, specific
terminated merchant or co-branding participant accounts and randomly chosen
removed accounts and to remove participations from the trust and to require the
indenture trustee to transfer all receivables in the removed accounts and to
transfer the removed participations back to the transferor, whether the
receivables already exist or arise after the designation. As long as the
removal of accounts satisfies the conditions listed below, the removed accounts
may, individually or in the aggregate, be of higher credit quality than the
accounts that remain in
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the trust. The removal of accounts from the trust will reduce the transferor
interest. A transferor's rights to removal are subject to satisfaction of
several conditions, including:
. written notice to the owner trustee, the indenture trustee, the
servicer, each rating agency and each series enhancer;
. delivery to the owner trustee for execution a written reassignment of
receivables in the removed accounts and removed participations to the
transferor or its designee;
. delivery on the required delivery date to the owner trustee of a
computer file or microfiche list with an accurate list of all removed
accounts;
. written confirmation from each rating agency that the removal will not
result in the reduction or withdrawal of its rating of any outstanding
series or class;
. delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer to the effect that, in the
transferor's reasonable belief:
. the removal will not have an Adverse Effect; and
. the accounts to be removed were not chosen through a selection
process believed to be materially adverse to the interests of the
noteholders; and
. any other conditions specified in the accompanying prospectus
supplement.
The conditions described above relating to rating agency confirmation and
the delivery of an officer's certificate will not apply if the removed accounts
are zero balance accounts [or the transferor is purchasing receivables in
accounts designated for re-purchase by a merchant or co-branding participant
upon termination of its agreement with Conseco Bank or other account owner, as
applicable.
In addition, any receivable that becomes a defaulted receivable will be
automatically removed from the trust and will be transferred to the transferor
that transferred such receivable to the trust without any further action or
consideration by the indenture trustee, provided that recoveries with respect
to those accounts will be applied as collections of finance charge receivables.
Discount Option
The transferors have the option to reclassify a percentage, called the
discount percentage, of principal receivables in the trust portfolio as finance
charge receivables. This option is referred to as the discount option. The
transferors may use the discount option to compensate for a decline in the
portfolio yield, but only if there would be sufficient principal receivables to
allow for that discounting. Exercise of the discount option would result in a
larger amount of collections of finance charge receivables and a smaller amount
of collections of principal receivables. By doing so, the transferors would
reduce the likelihood that an amortization event would occur as a result of a
decreased portfolio yield and, at the same time, would increase the likelihood
that the transferors will have to add principal receivables to the trust.
Collections of discount option receivables will be considered collections
of finance charge receivables in the trust portfolio and allocated with all
other collections of finance charge receivables in the trust portfolio.
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The transferors may increase, reduce or withdraw the discount percentage,
at any time and from time to time, on and after the discount option date. To
increase, reduce or withdraw the discount option, the transferors must satisfy
the conditions in the transfer and servicing agreement. Those conditions
include receipt of certificates of an authorized officer of each transferor to
the effect that, in the transferor's reasonable belief, the action will not
have an Adverse Effect and receipt of written confirmation from each rating
agency that use of the discount option will not result in a reduction or
withdrawal of its rating of any outstanding series or class; provided, however,
the discount percentage will be reduced or withdrawn on the date on which the
indenture trustee receives a certificate of an authorized officer of each
transferor to the effect that, in such transferor's reasonable belief, the
continued discounting of principal receivables would have an adverse regulatory
implication for the transferor.
Servicing Compensation and Payment of Expenses
For each series of notes, the servicer will be responsible for servicing
and administering the receivables in accordance with the servicer's policies
and procedures for servicing revolving credit receivables comparable to the
receivables.
The servicer receives a fee for its servicing activities and reimbursement
of expenses incurred in administering the trust. This servicing fee accrues for
each outstanding series in the amounts and is calculated on the balances set
forth in the related prospectus supplement. Each series' servicing fee is
payable each period from collections of finance charge receivables allocated to
the series. Neither the trust nor the noteholders are responsible for any
servicing fee allocable to the transferor interest.
Matters Regarding the Servicer and the Transferors
The servicer may not resign from its obligations and duties under the
transfer and servicing agreement, except:
. upon a determination that performance of its duties is no longer
permissible under applicable law and there is no reasonable action
which the servicer could take to make the performance of its duties
permissible under applicable law; or
. upon assumption of its obligations and duties by one of its affiliates
or by appointment of any other eligible successor if written
confirmation is received from each rating agency that the appointment
will not result in a reduction or withdrawal of its rating of any
outstanding series or class.
If within 120 days of the determination that the servicer is no longer
permitted to act as servicer and the indenture trustee is unable to appoint a
successor, the indenture trustee will act as servicer. If the indenture trustee
is unable to act as servicer, it will petition an appropriate court to appoint
an eligible successor.
The servicer may not resign until the indenture trustee or another
successor has assumed the servicer's obligations and duties. Conseco Bank is
permitted to assign part or
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all of its obligations and duties as servicer to one of its affiliates if it
guarantees its affiliates performance. Conseco Bank is also permitted to and
expects to service the receivables originated by Green Tree Bank through a
subservicing arrangement with Green Tree Bank and may, at its option, enter
into other subservicing arrangements with other affiliates of Conseco Bank.
The servicer will indemnify the trust, the owner trustee and the indenture
trustee for any losses suffered as a result of its actions or omissions as
servicer or the administration by the owner trustee of the trust, except in
each case, for losses resulting from the negligence or willful misconduct of
the owner trustee or the indenture trustee, as applicable.
Neither the servicer nor any of its directors, officers, employees or
agents will be under any other liability to the trust, the owner trustee, the
indenture trustee, the noteholders, any series enhancer or any other person for
any action taken, or for refraining from taking any action, in good faith under
the transfer and servicing agreement. However, none of them will be protected
against any liability resulting from willful wrongdoing, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of obligations and duties under the transfer and servicing agreement. In
addition, the transfer and servicing agreement provides that the servicer is
not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the transfer
and servicing agreement and which in its opinion may expose it to any expense
or liability.
Each transferor will be severally, but not jointly, liable for all of its
obligations, covenants, representations and warranties under the transfer and
servicing agreement. No transferor nor any of its directors, managers,
officers, employees, incorporators or agents will be liable to the trust, the
owner trustee, the indenture trustee, the noteholders, any series enhancer or
any other person for any action taken, or for refraining from taking any
action, in good faith under the transfer and servicing agreement. However, none
of them will be protected against any liability resulting from willful
wrongdoing, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of obligations and duties under the transfer
and servicing agreement.
The trust agreement provides that a transferor may transfer all or a
portion of its interest in the transferors' certificate by causing a
supplemental certificate to be issued to the transferee. The supplemental
certificate will represent that portion of the transferor's interest being
transferred. The terms of the supplemental certificate must be defined in a
supplement to the trust agreement. Before a supplemental certificate is issued,
the following must occur:
. notice of the exchange to the owner trustee, the indenture trustee,
the servicer and each rating agency;
. delivery to the owner trustee and the indenture trustee of an executed
supplement to the trust agreement;
. written confirmation from each rating agency that the exchange will
not result in a reduction or withdrawal of its rating of any
outstanding series or class;
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. delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of such transferor to the effect
that it reasonably believes the exchange will not have an Adverse
Effect;
. delivery to the owner trustee and the indenture trustee of a tax
opinion regarding the exchange; and
. the total amount of principal receivables in the trust portfolio[,
plus the principal amount of any participations transferred to the
trust] must exceed the required minimum principal balance on the date
of the exchange.
No supplemental certificate may be transferred or exchanged unless a tax
opinion is delivered to the owner trustee and the indenture trustee regarding
the exchange.
Each transferor or the servicer may consolidate with, merge into, or sell
its business to, another entity, in accordance with the transfer and servicing
agreement and the surviving entity will be the successor to such transferor or
servicer, as the case may be, on the following conditions:
. execution of an agreement relating to the succession that supplements
the transfer and servicing agreement;
. in the case of a succession relating to a transferor, delivery to the
owner trustee and the indenture trustee of a certificate of an
authorized officer of such transferor and an opinion of counsel, each
addressing compliance with the applicable provisions of the transfer
and servicing agreement and the validity and enforceability of the
supplemental agreement, and written confirmation from each rating
agency that the succession will not result in a reduction or
withdrawal of its rating of any outstanding series or class; and
. in the case of a succession relating to the servicer, delivery to the
owner trustee and the indenture trustee of a certificate of an
authorized officer of the servicer and an opinion of counsel, each
addressing compliance with the applicable provisions of the transfer
and servicing agreement, notification of the succession to each rating
agency, and that the successor is eligible to act as servicer.
Servicer Default
The transfer and servicing agreement specifies the duties and obligations
of the servicer. A failure by the servicer to perform its duties or fulfill its
obligations can result in a servicer default.
A "servicer default" includes each of the following:
(1) failure by the servicer to make any payment, transfer or deposit, or
to give instructions or to give notice to the indenture trustee to do
so, on the required date under the transfer and servicing agreement,
the indenture or any indenture supplement or within the applicable
grace period not exceeding five business days;
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(2) failure on the part of the servicer to observe or perform in any
material respect any of its other covenants or agreements if the
failure:
(a) has an Adverse Effect; and
(b) continues unremedied for a period of 60 days after written notice
to the servicer by the owner trustee or the indenture trustee, or
the servicer, the owner trustee and the indenture trustee by
noteholders of 10% or more of the outstanding principal amount of
all of the trust's outstanding series or, where the servicer's
failure does not relate to all series, 10% or more of the
outstanding principal amount of all series affected; or the
assignment or the delegation by the servicer of its duties,
except as specifically permitted under the transfer and servicing
agreement;
(3) any representation, warranty or certification made by the servicer in
the transfer and servicing agreement, or in any certificate delivered
as required by the transfer and servicing agreement, proves to have
been incorrect when made if it:
(a) has an Adverse Effect; and
(b) continues to be incorrect and to materially adversely affect
those noteholders for a period of 60 days after written notice to
the servicer by the owner trustee or the indenture trustee, or
the servicer, the owner trustee and the indenture trustee by
noteholders of 10% or more of the outstanding principal amount of
all of the trust's outstanding series or, where the servicer's
inaccuracy does not relate to all series, 10% or more of the
outstanding principal amount of all series affected;
(4) specific bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the servicer; or
(5) any other event specified in the accompanying prospectus supplement.
A delay in or failure of performance referred to in clause (1) above for a
period of 10 business days after the applicable grace period, or referred to
under clause (2) or (3) for a period of 60 business days after the applicable
grace period, will not constitute a servicer default if the delay or failure
could not be prevented by the exercise of reasonable diligence by the servicer
and the delay or failure was caused by an act of God or other similar
occurrence. Upon the occurrence of any of these events, the servicer shall not
be relieved from using all commercially reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the transfer and
servicing agreement and the servicer must provide the indenture trustee, the
owner trustee, each transferor and any series enhancer with an officer's
certificate giving prompt notice of its failure or delay, together with a
description of its efforts to perform its obligations.
If a servicer default occurs, for as long as it has not been remedied, the
indenture trustee or noteholders representing a majority of the outstanding
principal amount of all of the trust's outstanding series may give a notice to
the servicer and the owner trustee, and to the indenture trustee if given by
the noteholders, terminating all of the rights and obligations
78
of the servicer under the transfer and servicing agreement and the indenture
trustee may appoint a new servicer. The indenture trustee will as promptly as
possible appoint an eligible successor to the servicer. If no successor has
been appointed or has accepted the appointment by the time the servicer ceases
to act as servicer, the indenture trustee will automatically become the
successor. If the indenture trustee is unable to obtain bids from eligible
servicers and the servicer delivers a certificate of an authorized officer to
the effect that it cannot in good faith cure the servicer default which gave
rise to a transfer of servicing, and if the indenture trustee is legally unable
to act as successor, then the indenture trustee will give the transferors a
right of first refusal to purchase the trust assets on the distribution date in
the next calendar month at a price equal to the sum of the amounts specified
for each series outstanding in the related indenture supplement.
The rights and obligations of the transferors will be unaffected by any
change in servicer.
In the event of the bankruptcy of the servicer, the bankruptcy court may
have the power to prevent either the indenture trustee or the noteholders from
appointing a successor servicer.
Evidence of Compliance
The transfer and servicing agreement provides that on or before March 31 of
each calendar year, commencing March 31, 2001, the servicer will have a firm of
independent certified public accountants furnish a report showing that, for the
prior calendar year:
. the accounting firm has reviewed management's assertion that the
system of internal control over servicing of securitized credit card
receivables met the criteria for effective internal control and that,
in the accounting firm's opinion, management's assertion is fairly
stated in all material respects, and
. the accounting firm has compared amounts set forth in the periodic
reports prepared by the servicer for the prior calendar year with the
servicer's computer reports and that, in the accounting firm's
opinion, the amounts are in agreement, except for any discrepancies
disclosed.
The transfer and servicing agreement also provides that by March 31 of each
calendar year, commencing March 31, 2001, the servicer will deliver to the
owner trustee, the indenture trustee and each rating agency a certificate of an
authorized officer to the effect that the servicer has fully performed its
obligations under the transfer and servicing agreement during the preceding
year, or, if there has been a default in the performance of any of its
obligations, specifying the nature and status of default.
Assumption of a Transferor's Obligations
A transferor may, from time to time, consider a transfer of all or a
portion of its right, title and interest in and to the receivables and/or its
interest in the transferor certificate, collectively referred to as the
assigned assets, together with all servicing functions, if any,
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and other obligations under the transfer and servicing agreement or relating to
the transactions contemplated thereby, collectively referred to as, the assumed
obligations, to another entity, called the assuming entity, which may be an
entity that is not affiliated with the transferor. In the transfer and
servicing agreement, each transferor is permitted to assign, convey and
transfer assigned assets and assumed obligations to the assuming entity without
the consent or approval of the holders of any outstanding notes if the
following conditions, among others, are satisfied:
(1) the assuming entity, the transferor and the owner trustee shall have
entered into and delivered to the owner trustee and the indenture
trustee a supplement to the transfer and servicing agreement or an
assumption agreement providing for the assuming entity to assume the
assumed obligations, including the obligation under the transfer and
servicing agreement to transfer the transferor's interest in the
receivables arising under the accounts and the receivables arising
under any additional accounts to the trust;
(2) all UCC filings required to perfect the interest of the indenture
trustee in the receivables arising under those accounts shall have
been duly made and copies of all UCC filings shall have been
delivered by each transferor to the indenture trustee;
(3) if the assuming entity shall be eligible to be a debtor in a case
under the bankruptcy code, that transferor shall have delivered to
the rating agencies, with a copy to the servicer and the indenture
trustee, notice of the transfer and assumption, and that each rating
agency that has rated an outstanding series of notes confirm in
writing that the transfer will not result in a reduction or
withdrawal of its rating of any class of any outstanding series of
notes or, if the assuming entity shall not be eligible to be a debtor
under the bankruptcy code, that transferor shall have delivered to
the rating agencies notice of the transfer and assumption;
(4) the owner trustee and the indenture trustee shall have received an
opinion of counsel to the effect that
(a) the transfer of the receivables by the assuming entity shall
constitute either a sale of, or the granting of a security
interest in, the receivables by the assuming entity to the trust,
(b) the condition specified in clause (2) shall have been satisfied,
and
(c) if the assuming entity shall be subject to the FDIA, the interest
of the trust in the receivables should not be subject to
avoidance by the FDIC if the FDIC were to become the receiver or
conservator of the assuming entity; and
(5) the indenture trustee shall have received a tax opinion. The
transferor, the assuming entity and the owner trustee may enter into
amendments to permit the transfer and assumption described above
without the consent of the holders of any outstanding notes. After
any permitted transfer and assumption, the assuming entity will be
considered to be a "transferor" for all purposes hereof, and that
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transferor will have no further liability or obligation under the
transfer and servicing agreement other than those liabilities that
arose prior to that transfer.
Amendments
The transfer and servicing agreement may be amended by the transferors, the
servicer and the owner trustee, without the consent of the indenture trustee or
the noteholders of any series, on the following conditions:
. the transferors deliver to the owner trustee and the indenture trustee
a certificate of an authorized officer stating that, in the
transferors' reasonable belief, the amendment will not have an Adverse
Effect; and
. written confirmation from each rating agency that the amendment will
not result in a reduction or withdrawal of its rating of any
outstanding series or class.
The transfer and servicing agreement may also be amended by the servicer,
the transferors and the owner trustee, without the consent of any noteholders
and without prior notice to each rating agency, in order to cure any ambiguity,
to correct or supplement any provision in the transfer and servicing agreement
or in any amendment to the transfer and servicing agreement that may be
inconsistent with any other provision in the transfer and servicing agreement
or in any amendment to the transfer and servicing agreement or to make any
other provisions with respect to matters or questions arising under the
transfer and servicing agreement or in any amendment to the transfer and
servicing agreement upon receipt of a certificate of an authorized officer of
Conseco Bank and Credit Card Funding Corp. to the effect that, in Conseco
Bank's and Credit Card Funding Corp.'s reasonable belief, the action will not
have an Adverse Effect.
The transfer and servicing agreement may also be amended by the servicer
and the owner trustee at the direction of Conseco Bank and Credit Card Funding
Corp., without the consent of the indenture trustee, the noteholders of any
series or the series enhancers for any series to add, modify or eliminate any
provisions necessary or advisable in order to enable the trust or any portion
of the trust to
(1) qualify as, and to permit an election to be made for the trust to be
treated as, a "financial asset securitization investment trust" under
the Internal Revenue Code of 1986, as amended and
(2) avoid the imposition of state or local income or franchise taxes on
the trust's property or its income. The following conditions apply
for the amendments described in this paragraph:
. delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of Conseco Bank and Credit
Card Funding Corp. to the effect that the requirements under the
transfer and servicing agreement applicable to the proposed
amendments have been met;
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. receipt of written confirmation from each rating agency that the
amendment will not result in a reduction or withdrawal of its
rating of any outstanding series or class; and
. the amendment must not affect the rights, duties or obligations of
the indenture trustee or the owner trustee under the transfer and
servicing agreement.
The amendments which Conseco Bank and Credit Card Funding Corp. may make
without the consent of the noteholders of any series or the series enhancers
for any series in accordance with the preceding paragraph may include, without
limitation, the addition of a sale of receivables in the trust portfolio.
The transfer and servicing agreement may also be amended by the
transferors, the servicer and the owner trustee with the consent of noteholders
representing at least 66 2/3% of the outstanding principal amount of the notes
of all series adversely affected by the amendment. Even with consent, no
amendment may occur if it:
(1) reduces the amount of, or delays the timing of:
(a) any distributions to be made to noteholders of any series;
however, changes in amortization events that decrease the
likelihood of the occurrence of those events will not be
considered delays in the timing of distributions for purposes of
this clause;
(b) deposits of amounts to be distributed; or
(c) the amount available under any series enhancement, without the
consent of each affected noteholder;
(2) changes the manner of calculating the interests of any noteholder,
without the consent of each affected noteholder;
(3) reduces the percentage of the outstanding principal amount of the
notes required to consent to any amendment, without the consent of
each affected noteholder; or
(4) adversely affects the rating of any series or class by each rating
agency, without the consent of noteholders representing at least 66
2/3% of the outstanding principal amount of the notes of each
affected series or class.
Description of the Receivables Purchase Agreements
Prior to the initial closing date, Green Tree Bank will transfer
receivables to Conseco Bank under a receivables purchase agreement. On the
initial closing date, Conseco Bank will transfer receivables to Conseco Finance
under a separate receivables purchase agreement. Conseco Finance will in turn
transfer those receivables to Credit Card Funding Corp. pursuant to a separate
receivables purchase agreement. Each receivables purchase agreement permits the
addition of receivables sellers. The following summarizes the material terms of
each of the receivables purchase agreement. Forms of these agreements are filed
as exhibits to the registration statement of which this prospectus is a part.
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Sale of Receivables
From Green Tree Retail Services Bank, Inc. to Conseco Bank, Inc.
Under a receivables purchase agreement between Green Tree Bank and Conseco
Bank, Green Tree Bank has sold to Conseco Bank all of its right, title and
interest in and to all of the receivables existing in those initial accounts
which are owned by Green Tree Bank and in the future may sell receivables
arising in additional accounts together with recoveries allocable to those
receivables and other property.
From Conseco Bank, Inc. to Conseco Finance Corp.
Under an existing agreement between Conseco Bank and Conseco Finance,
Conseco Bank sells, on an ongoing basis, to Conseco Finance all of its right,
title and interest in and to the receivables existing in designated accounts
existing under a specific merchant program.
From Conseco Finance Corp. to Conseco Finance Credit Card Funding Corp.
Under a receivables purchase agreement from Conseco Finance to Credit Card
Funding Corp., Conseco Finance will on the initial closing date sell to the
purchaser all of its right, title and interest in and to all of the receivables
existing in the initial accounts as of the cut-off date and all receivables
arising in those accounts and the receivables in additional accounts as of
their date of designation for inclusion in the trust and recoveries allocable
to those receivables and other property.
In connection with the sale of receivables to a purchaser, the receivables
seller will indicate in its computer files that those receivables have been
sold to the purchaser by the receivables seller and that those receivables will
be sold or transferred by the transferor to the trust. The records and
agreements relating to the accounts and receivables for the trust portfolio may
not be segregated by the transferor from other documents and agreements
relating to other credit accounts and receivables. The receivables seller, the
purchaser and each transferor, as applicable, will file UCC financing
statements meeting the requirements of applicable law in each of the
jurisdictions necessary to perfect the ownership or security interest of the
transferor in those receivables. See "Risk Factors--Some liens may be given
priority over your notes which could cause receipt of payments to be delayed or
reduced" and "Material Legal Aspects of the Receivables" in this prospectus.
Representations and Warranties
[In each receivables purchase agreement, each receivables seller represents
and warrants to the effect that, among other things, as of the date of that
receivables purchase agreement and, with respect to any receivables in any
designated additional accounts, as of the date of designation of those
additional accounts, it is duly organized and in good standing and has the
authority to consummate the transactions contemplated by that receivables
purchase agreement. In each receivables purchase agreement, each receivables
seller additionally represents and warrants that as of the initial cut-off date
and, with respect to any receivables
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in any designated additional accounts, as of each date of designation of those
additional accounts, each receivable transferred thereunder is an eligible
receivable. In the event of a breach of any representation and warranty set
forth in the receivables purchase agreement which results in the requirement
that the transferor accept retransfer of an ineligible receivable under the
transfer and servicing agreement, then each receivables seller will repurchase
that ineligible receivable from the transferor on the date of the retransfer.
The purchase price for the ineligible receivables will be the principal amount
of those receivables plus applicable finance charge receivables.]
Each receivables seller also represents and warrants in the applicable
receivables purchase agreement that, among other things, as of the date of such
receivables purchase agreement and, with respect to any receivables in any
designated additional accounts, as of each date of designation of those
additional accounts, the receivables purchase agreement constitutes a valid and
binding obligation of the receivables seller, and the receivables purchase
agreement constitutes a valid sale of all right, title and interest of the
transferor in and to the receivables existing in the accounts as of the initial
cut-off date and, with respect to any receivables in any designated additional
accounts, as of each date of designation of those additional accounts to the
trust portfolio and in the proceeds of the trust portfolio. If the breach of
any of the representations or warranties described in this paragraph results in
the obligation of Conseco Bank and Credit Card Funding Corp. under the transfer
and servicing agreement to accept retransfer of the receivables, the
receivables seller will repurchase the receivables retransferred to the
receivables seller for an amount of cash at least equal to the amount of cash
the receivables seller is required to deposit under the transfer and servicing
agreement in connection with the retransfer.
Amendments
Each receivables purchase agreement may be amended by the purchaser and the
receivables seller without the consent of the noteholders
(1) to cure any ambiguity,
(2) to correct or supplement any provisions therein which may be
inconsistent with any other provisions therein or in any conveyance
paper,
(3) to add any other provisions with respect to matters or questions
arising thereunder or any conveyance papers which shall not be
inconsistent with the provisions of the receivables purchase
agreement or any conveyance papers.
No amendment, however, may have an Adverse Effect in any material respect
on the interests of the Indenture Trustee or the Noteholders, unless the
Indenture Trustee shall consent thereto, and no amendment may change, modify,
delete or add any other obligation of the transferors unless written
confirmation is received from each rating agency that the amendment will not
result in a reduction or withdrawal of its rating of any outstanding series or
class.
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Termination
Each receivables purchase agreement will terminate immediately after the
trust terminates. In addition, if a receiver or conservator is appointed for a
receivables seller or other bankruptcy, liquidation, insolvency or similar
events occur, such receivables seller will immediately cease to sell
receivables to the purchaser and promptly give notice of that event to the
purchaser and the indenture trustee, unless the bankruptcy court, receiver or
conservator instructs otherwise.
Note Ratings
Any rating of the notes by a rating agency will indicate:
. its view on the likelihood that noteholders will receive required
interest and principal payments; and
. its evaluation of the receivables and the availability of any credit
enhancement for the notes.
Among the things a rating will not indicate are:
. the likelihood that interest or principal payments will be paid on a
scheduled date;
. the likelihood that an amortization event will occur;
. the likelihood that a U.S. withholding tax will be imposed on non-U.S.
noteholders;
. the marketability of the notes;
. the market price of the notes; or
. whether the notes are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
The transferors will request a rating of the notes offered by this
prospectus and the accompanying prospectus supplement from at least one rating
agency. Rating agencies other than those requested could assign a rating to the
notes and, if so, that a rating could be lower than any rating assigned by a
rating agency chosen by the transferor.
Material Legal Aspects of the Receivables
Transfer of Receivables
Each receivables seller in the receivables purchase agreement will
represent and warrant that its transfer of receivables constitutes a valid sale
and assignment of all of its right, title and interest in and to the
receivables. In the transfer and servicing agreement, each transferor will
represent and warrant that its transfer of receivables constitutes a valid sale
and assignment of all of its right, title and interest in and to the
receivables, except for its interest
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as the holder of the transferor certificate, or creates in favor of the trust a
valid first-priority perfected security interest in the receivables seller's
rights in the receivables in existence at the time that the trust is formed or
at the time that receivables in accounts are transferred, as the case may be,
and a valid first-priority perfected security interest in the receivables
seller's rights in the receivables arising in accounts already designated for
the trust on and after their creation, in each case until termination of the
trust. For a discussion of the trust's rights arising from these
representations and warranties not being satisfied, see "The Transfer and
Servicing Agreement--Representations and Warranties of the Transferor" in this
prospectus.
Each of the transferors in the transfer and servicing agreement and the
other account owners or receivables sellers in the receivables purchase
agreements will represent that the receivables are ["accounts" or "general
intangibles" or "chattel paper" for purposes of the UCC.] Both the sale of
accounts and the transfer of accounts as security for an obligation are subject
to the provisions of Article 9 of the UCC. In addition, a transfer of general
intangibles as security for an obligation is subject to the provisions of
Article 9 of the UCC. Therefore, the receivables sellers will file appropriate
UCC financing statements to perfect the respective transferee's security
interest in the receivables. Article 9 of the UCC, however, does not apply to
the sale of general intangibles. As a consequence, some other action under
applicable state law may be required in order to perfect that sale against the
interests of third parties.
There are limited circumstances in which prior or subsequent transferees of
receivables coming into existence after a series closing date could have an
interest in those receivables with priority over the trust's interest. Under
the receivables purchase agreements, each account owner or receivables seller
will represent and warrant that it has transferred the receivables to the
transferor free and clear of the lien of any third party, other than the
indenture trustee. In addition, each account owner or receivables seller will
covenant that it will not sell, pledge, assign, transfer or grant any lien on
any receivable, or any interest in any receivables, other than to the
transferor. Similarly, under the transfer and servicing agreement, each
transferor will represent and warrant that it has transferred the receivables
to the trust free and clear of the lien of any third party, other than the
indenture trustee, and the transferor will covenant that it will not sell,
pledge, assign, transfer, or grant any lien on any receivable, or any interest
in any receivable, other than to the trust. Nevertheless, a tax, governmental
or other nonconsensual lien on property of a transferor or a transferor arising
prior to the time a receivable comes into existence may have priority over the
interest of the trust in that receivable. Furthermore, if the FDIC were
appointed as a receiver or conservator of a transferor, some administrative
expenses of the receiver or conservator may have priority over the interest of
the trust in the receivables.
Payments made on the accounts will be collected by the servicer and may be
commingled and used for the benefit of the servicer prior to the deposit into
the collection account and, in the event of the insolvency or bankruptcy of the
servicer or, in limited circumstances, the lapse of specified time periods, the
trust may not have a first-priority perfected security interest in those
commingled cash collections. If the trust does not have a first priority
perfected security interest in commingled cash collections, the amount payable
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to you could be lower than the outstanding principal and accrued interest on
the notes, thus resulting in losses to you.
Matters Relating to Conservatorship, Receivership and Bankruptcy
Conseco Bank is chartered as a Utah industrial loan corporation and Green
Tree Bank is chartered as a South Dakota banking corporation. The deposits of
both banks are insured by the FDIC. Conseco Bank is regulated by the Utah
Department of Financial Institutions and Green Tree is regulated by the South
Dakota Department of Commerce and Regulation. Both the Utah Department of
Financial Institutions and the South Dakota Department of Commerce and
Regulation are authorized to appoint the FDIC as conservator or receiver for
the relevant bank if specified events occur relating to that bank's financial
condition or the propriety of its actions. In addition, the FDIC could appoint
itself as conservator or receiver for a bank.
To the extent that
(1) a bank is the account owner and the receivables purchase agreement
complies with the regulatory requirements of the FDIA,
(2) the security interest granted under a receivables purchase agreement
or the transfer and servicing agreement was perfected before the FDIC
is appointed as conservator or receiver for a bank, and
(3) the security interest was not taken in contemplation of a bank's
insolvency or with the intent to hinder, delay or defraud a bank or
its creditors, the FDIA provides that the security interest should be
respected. In addition, opinions and policy statements issued by the
FDIC suggest that, because of the manner in which these transactions
are structured, the FDIC would respect the security interest granted
by a bank in the receivables.
Nevertheless, if the FDIC were to assert a contrary position, or were to
require the indenture trustee to go through the administrative claims procedure
established by the FDIC in order to obtain payments on the notes, or were to
request a stay of any actions by the indenture trustee to enforce the
receivables purchase agreement or the notes against a bank, delays in payments
on outstanding series of notes and possible reductions in the amount of those
payments could occur.
[In addition, the FDIC as conservator or receiver for a bank could
repudiate a receivables purchase agreement or the transfer and servicing
agreement. The FDIA would limit the damages for any repudiation to the trust's
"actual direct compensatory damages" determined as of the date that the FDIC
were appointed as conservator or receiver for a bank. The FDIC, moreover, could
delay its decision whether to repudiate the receivables purchase agreement for
a reasonable period following its appointment as conservator or receiver for a
bank. Therefore, if the FDIC as conservator or receiver for a bank were to
repudiate the receivables purchase agreement or the transfer and servicing
agreement, the amount payable to you could be lower than the outstanding
principal and accrued interest on the notes, thus resulting in losses to you.]
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In addition, regardless of the terms of the indenture, the FDIC as
conservator or receiver for Conseco Bank may have the power to prevent the
commencement of an early amortization period, to prevent or limit the early
liquidation of the receivables and termination of the trust, or to require the
continued transfer of new principal receivables. Regardless of the instructions
of those authorized to direct the indenture trustee's action, moreover, the
FDIC as conservator or receiver for Conseco Bank may have the power to require
the early liquidation of the receivables, to require the early termination of
the trust and the retirement of the notes, or to prohibit or limit the
continued transfer of new principal receivables.
In the event of the bankruptcy of the servicer, the bankruptcy court may
have the power to prevent either the indenture trustee or the noteholders from
appointing a successor servicer. In addition, if the servicer becomes a debtor
in a bankruptcy case, the servicer's rights under the transfer and servicing
agreement, including the right to service the receivables, would be property of
the estate of the servicer and, under the Bankruptcy Code, subject to the
servicer's right to assume or reject the transfer and servicing agreement. See
"The Transfer and Servicing Agreement--Servicer Default" in this prospectus.
Credit Card Funding Corp. has been structured such that the filing of a
voluntary or involuntary petition for relief by or against Conseco Finance or
any other affiliate under the Bankruptcy Code and the substantive consolidation
of the assets and liabilities of the transferor with those of Conseco Finance
or another affiliate unlikely. The transferor is a separate, limited purpose
corporation, and its articles of incorporation contain limitations on the
nature of its business and restrictions on its ability to commence a voluntary
case or proceeding under the Bankruptcy Code or similar laws without the prior
unanimous consent of all of its directors and including the independent
directors.
The indenture trustee will covenant in the indenture that it will not at
any time institute against Credit Card Funding Corp. any bankruptcy, insolvency
or similar proceedings under the Bankruptcy Code or similar laws. In addition,
if any account owner or transferor is an entity subject to the Bankruptcy Code,
the transfer of the receivables and collections thereon will be structured as a
sale for purposes of the Bankruptcy Code. Nevertheless, if Credit Card Funding
Corp. were to become a debtor in a bankruptcy case and if a bankruptcy trustee
or creditor of Credit Card Funding Corp. or Credit Card Funding Corp. as
debtor-in-possession were to take the position that the transfer of the
receivables by Credit Card Funding Corp. to the trust should be characterized
as a pledge of those receivables, or if the assets and liabilities of Credit
Card Funding Corp. were substantively consolidated with those of Conseco
Finance or those of another entity in bankruptcy, then delays in payments on
the notes and possible reductions in the amount of those payments could result.
If bankruptcy, insolvency or similar proceedings under the Bankruptcy Code
or similar laws occur with respect to Credit Card Funding Corp. or any account
owner or transferor, the transferors will promptly notify the indenture trustee
and an amortization event will occur with respect to each series. Under the
transfer and servicing agreement, newly created receivables will not be
transferred to the trust on and after any event described in the preceding
sentence. Any principal receivables transferred to the trust prior to the
event, as
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well as collections on those principal receivables and finance charge
receivables accrued at any time with respect to those principal receivables,
will continue to be part of the trust assets and will be applied as specified
above in "Description of the Notes--Application of Collections" and in the
accompanying prospectus supplement.
The bankruptcy court, however, may have the power to delay any procedure or
to require the continued transfer of principal receivables to the trust. See
"Risk Factors--If a conservator or receiver were appointed for Conseco Bank,
Green Tree Bank or other account owner or transferor, or a transferor or
account owner became a debtor in a bankruptcy case, delays or reductions in
payment of your notes could occur" in this prospectus.
Consumer Protection Laws
The relationship of the consumer and the provider of consumer credit is
extensively regulated by federal and state consumer protection laws. With
respect to credit accounts issued by Conseco Bank or Green Tree Bank, the most
significant federal laws include the Federal Truth-in-Lending, Equal Credit
Opportunity, Fair Credit Reporting and Fair Debt Collection Practices Acts.
These statutes impose various disclosure requirements either before or when an
account is opened, or both, and at the end of monthly billing cycles, and, in
addition, limit account holder liability for unauthorized use, prohibit
particular discriminatory practices in extending credit, and regulate practices
followed in collections. In addition, account holders are entitled under these
laws to have payments and credits applied to the revolving credit account
promptly and to request prompt resolution of billing errors. Congress and the
states may enact new laws and amendments to existing laws to regulate further
the consumer revolving credit industry.
The trust may be liable for violations of consumer protection laws that
apply to the receivables, either as assignee from a transferor with respect to
obligations arising before transfer of the receivables to the trust or as the
party directly responsible for obligations arising after the transfer.
In addition, an account holder may be entitled to assert those violations
by way of set-off against the obligation to pay the amount of receivables
owing.
All receivables that were not created in compliance in all material
respects with the requirements of applicable consumer protection laws, if
noncompliance has an Adverse Effect, will be reassigned to the applicable
transferor. The servicer has also agreed in the transfer and servicing
agreement to indemnify the trust, among other things, for any liability arising
from violations described in the preceding sentence. For a discussion of the
trust's rights if the receivables were not created in compliance in all
material respects with applicable laws, see "The Transfer and Servicing
Agreement--Representations and Warranties of the Transferor" in this
prospectus.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the noteholders if those laws result in any receivables
being charged-off as
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uncollectible. See "Description of the Notes--Defaulted Receivables; Investor
Charge-Offs" in this prospectus.
Material Federal Income Tax Consequences
General
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of the notes.
Additional federal income tax considerations relevant to a particular series
may be set forth in the accompanying prospectus supplement.
The following summary has been prepared and reviewed by Dorsey & Whitney
LLP as counsel to the issuer. The summary is based on the Internal Revenue Code
of 1986, as amended as of the date hereof, and existing final, temporary and
proposed Treasury regulations, revenue rulings and judicial decisions, all of
which are subject to prospective and retroactive changes. The summary is
addressed only to original purchasers of the notes, deals only with notes held
as capital assets within the meaning of Section 1221 of the Code and, except as
specifically set forth below, does not address tax consequences of holding
notes that may be relevant to investors in light of their own investment
circumstances or their special tax situations, such as particular financial
institutions, tax-exempt organizations, life insurance companies, dealers in
securities, non-U.S. persons, or investors holding the notes as part of a
conversion transaction, as part of a hedge or hedging transaction, or as a
position in a straddle for tax purposes. Further, this discussion does not
address alternative minimum tax consequences or any tax consequences to holders
of interests in a noteholder.
Counsel to the issuer is of the opinion that the following summary of
federal income tax consequences is correct in all material respects. An opinion
of counsel, however, is not binding on the IRS or the courts, and no ruling on
any of the issues discussed below will be sought from the IRS. Further, such
opinion, as well as the opinions set forth below, are subject to finalization
of documents including those which are exhibits to the registration statement
of which this prospectus forms a part in a form which is satisfactory to
counsel and which is not inconsistent with the descriptions in the body of this
prospectus and the related prospectus supplement. Moreover, there are no
authorities on similar transactions involving interests issued by an entity
with terms similar to those of the notes described in this prospectus.
Accordingly, it is suggested that persons considering the purchase of notes
should consult their own tax advisors with regard to the United States federal
income tax consequences of an investment in the notes and the application of
United States federal income tax laws, as well as the laws of any state, local
or foreign taxing jurisdictions, to their particular situations.
For each series of notes, counsel will deliver its opinion that the trust
will not be an association or publicly traded partnership taxable as a
corporation for federal income tax purposes. As a result, in the opinion of
counsel, the trust itself will not be subject to federal income tax. This
opinion will be based on the assumption that the terms of the indenture,
supplemental indenture and related documents will be complied with, and on
counsel's
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conclusion that the nature of the income of the trust will exempt it from the
rule that some publicly traded partnerships are taxable as corporation. There
are no cases or IRS rulings on transactions involving a trust issuing both debt
and equity interests with terms similar to those of the notes and the
transferor interests. As a result, the IRS may disagree with all or a part of
this discussion.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables,
possible reduced by its interest expense on the notes. Any corporate income tax
could materially reduce cash available to make payments on the notes.
Tax Consequences to Noteholders
Treatment of the Notes as Indebtedness. The owner trustee, on behalf of the
trust, will agree, and the noteholders will agree by their purchase of notes,
to treat the notes as debt for federal income tax purposes. Counsel will
deliver its opinion that the notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
notes is correct.
Interest Income on the Notes. Interest on the notes will be taxable as
ordinary interest income when received by noteholders utilizing the cash-basis
method of accounting and when accrued by noteholders utilizing the accrual
method of accounting. Under the applicable regulations, the notes would be
considered issued with original issue discount if the stated redemption price
at maturity of a note, generally equal to its principal amount as of the date
of issuance plus all interest other than qualified stated interest payable
prior to or at maturity exceeds the original issue price, in this case, the
initial offering price at which a substantial amount of the notes are sold to
the public. Any OID would be considered de minimis under the OID regulations if
it does not exceed 1/4% of the stated redemption price at maturity of a note
multiplied by the number of full years until its maturity date. It is
anticipated that the notes will not be considered issued with more than de
minimis OID. Under the OID regulations, an owner of a note issued with a de
minimis amount of OID must include the OID in income, on a pro rata basis,
according to such owner's method of tax accounting.
While it is not anticipated that the notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to be
issued with OID. This deemed OID could arise, for example, if interest payments
on the notes are not deemed to be qualified stated interest because the notes
do not provide for default remedies ordinarily available to holders of debt
instruments or do not contain terms and conditions that make the likelihood of
late payment or nonpayment a remote contingency. Based upon existing authority,
the trust will treat interest payments on the notes as qualified stated
interest under the OID regulations. If the notes are issued or are deemed to be
issued with OID, all or a portion of the taxable income to be recognized with
respect to the notes would be includible in the income of noteholders as OID.
Any amount treated as OID would not, however, be includible again when the
amount is actually received. If the yield on a class of notes were
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not materially different from its coupon, this treatment would have no
significant effect on noteholders using the accrual method of accounting.
However, cash method noteholders may be required to report income for the notes
in advance of the receipt of cash attributable to that income.
A noteholder must include OID in income as interest over the term of the
notes under a constant yield method. In general, OID must be included in income
in advance of the receipt of cash representing that income. Each noteholder is
encouraged to consult its own tax advisor regarding the impact of the OID rules
if the notes are issued with OID.
Market Discount. The notes, whether or not issued with original issue
discount, will be subject to the market discount rules of Section 1276 of the
Internal Revenue Code. In general, these rules provide that if a noteholder
purchases the note at a market discount, for example, a discount from its
original issue price plus any accrued original issue discount that exceeds a de
minimis amount specified in the Internal Revenue Code, and thereafter
recognizes gain upon a disposition, the lesser of the gain or the accrued
market discount will be taxed as ordinary interest income. Market discount also
will be recognized and taxable as ordinary interest income as payments of
principal are received on the notes to the extent that the amount of the
payments does not exceed the accrued market discount. Generally, the accrued
market discount will be the total market discount on the note multiplied by a
fraction, the numerator of which is the number of days the noteholder held the
note and the denominator of which is the number of days after the date the
noteholder acquired the note until and including its maturity date. The
noteholder may elect, however, to determine accrued market discount under the
constant-yield method, which election shall not be revoked without the consent
of the IRS.
Limitations imposed by the Internal Revenue Code which are intended to
match deductions with the taxation of income may defer deductions for interest
on indebtedness incurred or continued, or short-sale expenses incurred, to
purchase or carry a note with accrued market discount. A noteholder may elect
to include market discount in gross income as it accrues and, if the noteholder
makes such an election, is exempt from this rule. The adjusted basis of a note
subject to the election will be increased to reflect market discount included
in gross income, thereby reducing any gain or increasing any loss on a sale or
taxable disposition. Any election to include market discount in gross income as
it accrues shall apply to all debt instruments held by the noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the IRS.
Amortizable Bond Premium. In general, if a noteholder purchases a note at a
premium (i.e., an amount in excess of the amount payable upon the maturity
thereof), the noteholder will be considered to have purchased the note with
amortizable bond premium equal to the amount of the excess. The noteholder may
elect to deduct the amortizable bond premium as it accrues under a constant-
yield method over the remaining term of the note. The noteholder's tax basis in
the note will be reduced by the amount of the amortizable bond premium
deducted. Amortizable bond premium for a note will be treated as an offset to
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interest income on that note, and a noteholder's deduction for amortizable bond
premium that a note will be limited in each year to the amount of interest
income derived for that note for that year. Any election to deduct amortizable
bond premium shall apply to all debt instruments (other than instruments the
interest on which is excludible from gross income) held by the noteholder at
the beginning of the first taxable year to which the election applies or
thereafter acquired and is irrevocable without the consent of the IRS. Bond
premium on a note held by a noteholder who does not elect to deduct the premium
will decrease the gain or increase the loss otherwise recognized on the
disposition of the note.
Disposition of Notes. If a noteholder sells a note, the noteholder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the noteholder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder generally will equal
the noteholder's cost for the note, increased by any market discount, OID and
gain previously included by that noteholder in income for the note and
decreased by principal payments previously received by that noteholder and the
amount of bond premium previously amortized for the note. Any gain or loss will
be capital gain or loss if the note was held as a capital asset, except for
gain representing accrued interest and accrued market discount not previously
included in income, and will be short-term or long-term capital gain or loss
depending upon whether the note was held for more or less than one year.
Capital losses generally may be used only to offset capital gains.
Foreign Holders. Generally, interest paid to a noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
note in connection with a United States trade or business will be treated as
portfolio interest and will be exempt from the 30% withholding tax. The
noteholder will be entitled to receive interest payments on the notes free of
United States federal income tax provided that the noteholder, prior to any
payment and periodically thereafter, provides a statement (Form W-8) offering
sufficient assurances of and certifying under penalty of perjury that the
noteholder is not a United States person. Such statement shall also provide the
name and place of permanent residence of the noteholder, the noteholder's
Taxpayer Identification Number (if required), and any other information as may
be required by such Form or applicable treasury regulations.
Tax Administration and Reporting. The indenture trustee will furnish to
each noteholder with each distribution a statement showing the amount of the
distribution allocable to principal and to interest. Reports will be made
annually to the IRS and to holders of record that are not excepted from the
reporting requirements regarding the information as may be required for the
interest and original issue discount, with respect to the notes.
Backup Withholding. Treasury regulations effective January 1, 2001 may
modify some of the rules discussed above with respect to withholding, backup
withholding and information reporting requirements with regard to payments made
after December 31, 2000. The new regulations attempt to unify certification
requirements and modify reliance standards, and may, as a result, require a
taxpayer to provide alternative statements and/or assurances. In particular,
beginning on January 1, 2001, statements made by non-United States persons will
be required to be submitted on new forms that comply with such new
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regulations. Under a special transition rule, prior to the January 1, 2001
effective date, the indenture trustee or other person who would otherwise be
required to withhold tax may request certification of non-United States person
status on forms complying with the new regulations. Because the current and
pending regulations are fact specific and complex, noteholders are urged to
consult their own tax advisors regarding withholding, backup withholding and
information reporting rules applicable to payments received by them for a note.
On October 6, 1997, the treasury department issued new regulations which
make some modifications to the withholding, backup withholding and information
reporting rules described above. The new regulations attempt to unify
certification requirements and modify reliance standards, and will generally be
effective for payments made after December 31, 1999, subject to some transition
rules. You are urged to consult your own tax advisors regarding the new
regulations.
Possible Alternative Treatment of the Notes. If, contrary to the opinion of
counsel, the IRS successfully asserted that the notes did not represent debt
for federal income tax purposes, the notes might be treated as equity interests
in the trust. If so treated, the trust would be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
some qualifying income tests. Nonetheless, treatment of the notes as equity
interests in that type of partnership could have adverse tax consequences to
some holders. For example, income to foreign holders generally would be subject
to federal tax and federal tax return filing and withholding requirements,
income to some tax-exempt entities would be unrelated business taxable income,
and individual holders might be subject to some limitations on their ability to
deduct their share of trust expenses.
The United States federal income tax discussion set forth above is included
for general information only, may not be applicable depending upon a holder's
particular tax situation, and does not purport to address the issues described
with the degree of specificity that would be provided by a taxpayer's own tax
advisor. Prospective purchasers should consult their own tax advisors with
respect to the tax consequences to them of the purchase, ownership and
disposition of the notes and the possible effects of changes in federal tax
laws.
State and Local Tax Consequences
The discussion above does not address the taxation of the trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. Each investor should consult its own
tax adviser regarding state and local tax consequences.
ERISA Considerations
Subject to the considerations described under this heading, and in the
accompanying prospectus supplement, the notes may be purchased by, on behalf
of, or with "plan assets"
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of any employee benefit or other plan that is subject to ERISA, or Section 4975
of the Internal Revenue Code of 1986, as amended (each, a "Plan"). Any Plan
fiduciary that proposes to cause a Plan to acquire any of the notes should
consult with its counsel with respect to the potential consequences under ERISA
and the Code of the Plan's acquisition and ownership of such Certificates. See
"ERISA Considerations" in the accompanying prospectus supplement.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans from
engaging in specified transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest") with respect to the Plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and Section 4975 of the Code for such persons, unless a
statutory, regulatory or administrative exemption is available.
Some employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and most church plans (as defined in Section 3(33) of
ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of such plans may be invested in the notes without
regard to the ERISA considerations described herein, subject to the provisions
or other applicable federal and state law. However, any such plan that is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
is subject to the prohibited transaction rules set forth in Section 503 of the
Code.
Fiduciaries or other persons contemplating purchasing the notes on behalf
or with "plan assets" of any Plan should consult their own counsel regarding
whether the trust assets represented by the notes would be considered "plan
assets," the consequences that would apply if the trust's assets were
considered "plan assets," and the availability of exemptive relief from the
prohibited transaction rules.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion
of the Plan's assets in the notes. Accordingly, among other factors, Plan
fiduciaries and other Plan investors should consider whether the investment
(1) satisfies the diversification requirement of ERISA or other
applicable law,
(2) is in accordance with the Plan's governing instruments, and
(3) is prudent in light of the "Risk Factors" and other factors discussed
in the accompanying prospectus supplement.
Plan of Distribution
Subject to the terms and conditions set forth in an underwriting agreement
to be entered into with respect to each series of notes, the transferors will
cause the notes to be sold by the trust to each of the underwriters named in
that underwriting agreement and in the accompanying prospectus supplement, and
each of those underwriters will severally agree to
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purchase from the trust, the principal amount of notes set forth in that
underwriting agreement and in the accompanying prospectus supplement, subject
to proportional adjustment on the terms and conditions set forth in the related
underwriting agreement in the event of an increase or decrease in the aggregate
amount of notes offered by this prospectus and by the accompanying prospectus
supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth in that underwriting agreement,
to purchase all the notes offered by this prospectus and by the accompanying
prospectus supplement if any of those notes are purchased. In the event of a
default by any underwriter, each underwriting agreement will provide that, in
particular circumstances, purchase commitments of the nondefaulting
underwriters may be increased or the underwriting agreement may be terminated.
Each prospectus supplement will set forth the price at which each series of
notes or class being offered initially will be offered to the public and any
concessions that may be offered to dealers participating in the offering of
those notes. After the initial public offering, the public offering price and
such concessions may be changed.
Each underwriting agreement will provide that the transferors will
indemnify the related underwriters against some liabilities, including
liabilities under the Securities Act of 1933, as amended.
The place and time of delivery for any series of notes in respect of which
this prospectus is delivered will be set forth in the accompanying prospectus
supplement.
Reports to Noteholders
The servicer will prepare monthly and annual reports that will contain
information about the trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive notes are issued, the reports will be
sent to Cede & Co. which is the nominee of The Depository Trust Company and the
registered holder of the notes. No financial reports will be sent to you. See
"Description of the Notes--Book-Entry Registration," "--Reports to Noteholders"
and "The Transfer and Servicing Agreement--Evidence of Compliance" in this
prospectus.
Where You Can Find More Information
We filed a registration statement relating to the notes with the SEC. This
prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer, on behalf of the trust will file with the SEC all required
annual, monthly and special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information the
servicer files on behalf of the Trust at the SEC's public reference room in
Washington, D.C. You can
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request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. The SEC filings
relating to the Trust are also available to the public on the SEC Internet site
(http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information filed with the
SEC on behalf of the Trust, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information filed later with the SEC, on our behalf, will automatically update
the information in this prospectus. In all cases, you should rely on the later
information over different information included in this prospectus or the
accompanying prospectus supplement. We incorporate by reference any future
annual, monthly and special SEC reports and proxy materials filed by or on
behalf of the trust until we terminate our offering of the notes.
As a recipient of this prospectus, you may request a copy of any document
incorporated by reference, except exhibits to the documents, unless the
exhibits are specifically incorporated by reference, at no cost, by writing or
calling us at: .
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Glossary
"addition date" means:
(1) with respect to aggregate addition accounts and new accounts, the
date from and after which such aggregate addition accounts and new
accounts are to be included as accounts; and
(2) with respect to participation interests, the date from and after
which such participation interests are to be included as assets of
the Trust.
"Adverse Effect" means any action, the result of which:
(1) causes an amortization event, reinvestment event or an event of
default; or
(2) materially and adversely effects the amount or timing of payments to
be made to the noteholders of any series or class.
"aggregate addition" means any participation interests to be included as
trust assets or any eligible accounts, other than new accounts, designated to
be included as accounts after the initial selection date.
"aggregate addition accounts" are eligible accounts designated to be
included as accounts.
"amortization event" means either a trust amortization event or a series
amortization event.
"Clearstream Luxembourg" means Clearstream Banking, societe anonyme.
"Code" means the Internal Revenue Code of 1986, as amended.
"controlled accumulation period" means the period during which principal is
accumulated in specified amounts per month and paid on an expected principal
payment date. The controlled accumulation period will commence at the close of
business on the date or dates specified in the prospectus supplement and ends
when any of the following occur:
(1) the notes of that series or class are paid in full;
(2) the early amortization or early accumulation period starts; or
(3) the series final maturity date.
"controlled amortization period" means the period during which principal is
paid in fixed amounts at scheduled intervals. The controlled amortization
period will commence at the close of business on the date or dates specified in
the prospectus supplement and ends when any of the following occur:
(1) the notes of that series or class are paid in full;
(2) the early amortization or early accumulation period starts; or
(3) the series final maturity date.
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"credit enhancement percentage" means the percentage interest of credit
enhancement providers.
"cut-off date" means [.], 2001.
"defaulted amounts" means, for any due period, an amount equal to:
(1) the amount of principal receivables which became defaulted
receivables in such due period, minus
(2) the amount of any defaulted receivables of which the transferor or
the servicer became obligated to accept reassignment or assignment,
as described under "Description of the Transfer and Servicing
Agreement--Representations and Warranties of the Transferors--
Regarding the Accounts and the Receivables."
"definitive notes" means notes issued in fully registered, certificated
form.
"determination date" means the earlier of the third business day and the
fifth calendar day, or if the fifth calendar day is not a business day the
preceding business day, preceding the fifteenth day of each calendar month.
"depositaries" Citibank, N.A., as depositary for Clearstream Luxembourg,
and Morgan Guaranty Trust Company of New York, as depositary for Euroclear.
"discount option" means the transferors' option to designate all or any
specified portion of principal receivables existing on and after the discount
option date to be treated as finance charge receivables.
"discount option receivables" means any principal receivables designated by
the transferors to be treated as finance charge receivables.
"discount percentage" means the percentage designated by the transferors,
which may be a fixed or variable percentage.
"DTC" The Depository Trust Company.
"early accumulation period" means the period following an amortization
event during which principal is accumulated in varying amounts each month based
on the amount of principal receivables collected. The early accumulation period
for a series or class starts on the day an amortization event occurs and ends
when any of the following occurs:
(1) the notes of that series or class are paid in full;
(2) an early amortization period for that series begins;
(3) the series final maturity date; or
(4) the trust termination date.
"early amortization period" means the period following an amortization
event during which principal is paid in varying amounts each month based on the
amount of principal
99
receivables collected. The early amortization period for a series or class
starts on the day an amortization event occurs and ends when any of the
following occurs:
(1) the notes of that series or class are paid in full;
(2) the series final maturity date; or
(3) the trust termination date.
"eligible account" has the meaning set forth on page [.] of this
prospectus.
"eligible institution" means:
(1) (a) a depository institution, which may include the owner trustee or
the indenture trustee;
(b) an entity organized under the laws of the United States or any one
of the states of the United States, including the District of
Columbia, or any domestic branch of a foreign bank; and
(c) which at all times is a member of the FDIC and has either a long-
term unsecured debt rating or a certificate of deposit rating
acceptable to each rating agency selected by the transferors to
rate a series or class of notes; or
(2) any other institution acceptable to each rating agency selected by
the transferors to rate a series or class of notes.
"eligible investments" means securities, instruments, security entitlements
or other investment property which evidence:
(1) direct obligations of, or obligations fully guaranteed as to timely
payment by, the United States of America;
(2) demand deposits, time deposits or certificates of deposit, having
original maturities of no more than 365 days, of depository
institutions or trust companies incorporated under the laws of the
United States or any state of the United States, including the
District of Columbia, or domestic branches of foreign banks, and
subject to supervision and examination of federal or state banking or
depository institution authorities; provided that at the time of the
trust's investment or contractual commitment to invest, the short-
term debt rating of that depository institution or trust company
shall be in the highest rating category of Standard & Poor's and
Moody's;
(3) commercial paper, having original or remaining maturities of no more
than 30 days, having, at the time of the trust's investment or
contractual commitment to invest, a rating in the highest rating
category of Standard & Poor's and Moody's;
(4) demand deposits, time deposits and certificates of deposit which are
fully insured by the FDIC having, at the time of the trust's
investment, a rating in the highest rating category of Standard &
Poor's and Moody's;
(5) bankers' acceptances, having original maturities of no more than 365
days, issued by any depository institution or trust company referred
to in clause (2) above;
100
(6) money market funds having, at the time of the trust's investment, a
rating in the highest rating category of Standard & Poor's and
Moody's, including funds for which the indenture trustee or any of
its affiliates is investment manager or advisor;
(7) time deposits, having maturities not later than the next distribution
date, other than those referred to in clause (4) above, with a person
whose commercial paper has a credit rating satisfactory to Standard &
Poor's and Moody's; or
(8) any other investment upon receipt of written confirmation from each
rating agency that the additional form of investment will not result
in a reduction or withdrawal of its rating of any outstanding series
or class.
"eligible receivable" has the meaning set forth on page [.] of this
prospectus.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"expected principal payment date" has the meaning set forth in the
prospectus supplement.
"events of default" has the meaning set forth on page [.] of this
prospectus.
"finance charge receivables" are periodic finance charges and other
amounts charged to credit card accounts, including cash advance fees, late
fees [and annual membership fees] plus [payments made by merchants under the
merchant agreements]. Finance charge receivables will include the interest
portion of any participation interests.
"foreign person" means any holder of a note who, as to the United States,
is a nonresident alien individual or a foreign corporation.
"funding period" is the period from the series' closing date to the
earlier of:
(1) the date the series' invested amount equals the principal amount of
that series of notes; and
(2) the date specified in the related prospectus supplement; provided
that the funding period shall not exceed one year.
"invested amount" for a series on any date will be equal to:
(1) the initial outstanding principal amount of that series of notes as
of the related closing date for that series; minus
(2) the amount of principal paid to the related noteholders prior to that
date; minus
(3) the amount of unreimbursed investor charge-offs with respect to that
series prior to that date.
101
If so specified in the prospectus supplement relating to any series of
notes, under limited circumstances the invested amount may be further adjusted
by funds on deposit in any specified account, and any other amount specified in
the accompanying prospectus supplement.
"investor charge-offs" means with respect to any series the excess of the
investor default amount for that series over the amount available to reimburse
such investor default amount described in the prospectus supplement.
"investor percentage" means for any class or series of notes, the investor
percentage calculated in the related prospectus supplement.
"new accounts" are those eligible accounts that either transferor may from
time to time, at its sole discretion, designate to be included as accounts
subject to the limitations and conditions specified in this paragraph. For
purposes of the definition of new accounts, eligible accounts will be deemed to
include only types of [credit accounts] which are included as initial accounts
or which have previously been included in any aggregate addition if the
assignment related to that aggregate addition provides that type of credit
account or other credit account is permitted to be designated as a new account.
To the extent new accounts are designated for inclusion in the trust, the
transferors will deliver to the trustee, at least quarterly on each
distribution date relating to each of the three consecutive due periods ending
in March, June, September and December, an opinion of counsel with respect to
the receivables in new accounts included as accounts confirming the creation
and perfection of a security interest in respect of each transfer of those
receivables. If the opinion of counsel with respect to receivables in any new
accounts is not so received, all receivables arising in the new accounts to
which that failure relates will be removed from the trust.
"note owner" means the beneficial owner of a note.
"partial amortization sfa amounts" means the amount withdrawn from the
special funding account and applied to one or more outstanding series of notes
to prevent those series from experiencing an amortization event based upon
insufficiency of yield.
["participations" are undivided interests in a pool of assets primarily
consisting of receivables arising under consumer revolving credit accounts.]
"paying agent" means the indenture trustee, acting as the initial paying
agent, together with any successor to the indenture trustee acting in that
capacity, and any entity specified in an indenture supplement to act in that
capacity for the related series.
"principal receivables" means the amounts charged by account obligors for
goods and services, cash advances and [consolidation or transfer of balances
from other credit cards] in accounts which have been designated to the trust.
"qualified account" means either a segregated trust account established
with the corporate trust department of a securities intermediary or a
segregated account with a securities intermediary that is an eligible
institution.
102
"rating agency" means any rating agency selected by the transferors to rate
the notes of a series or class issued by the trust.
"reinvestment event" means, if a series is subject to reinvestment events,
the definition of reinvestment event as it would appear in the prospectus
supplement.
"required delivery date" means:
(1) on or prior to the closing date in the case of the initial accounts;
(2) the date that is five business days after the applicable addition
date, in the case of an aggregate addition;
(3) the distribution date on which the opinion of counsel is required to
be delivered as described above, in the case of new accounts; and
(4) the date that is five business days after the applicable date of
removal, in the case of removed accounts.
"required minimum principal balance" means unless otherwise described in
the prospectus supplement, relating to a series having a paired series, with
respect to any date:
(1) the sum of the series adjusted invested amounts for each series
outstanding on such date; plus
(2) the required transferor amount; minus
(3) the amount on deposit in the special funding account.
"required transferor amount" means the product of the required transferor
percentage and the aggregate series adjusted invested amounts of all series
outstanding.
"required transferor percentage" means .
"revolving period" means, with respect to a series, a period during which
the trust will not pay or accumulate principal for payment to the noteholders
of that series. The revolving period for a series begins on the closing date
described in the applicable prospectus supplement and ends at the start of an
amortization period or an accumulation period.
"securities intermediary" means U.S. Bank Trust National Association or any
other entity which is a person, including a bank or broker, that in the
ordinary course of its business maintains securities accounts for others and is
acting in that capacity and which is also a depository institution organized
under the laws of the United States or any one of the states of the United
States, including the District of Columbia, or any domestic branch of a foreign
bank, and having a credit rating from each rating agency in one of its generic
credit rating categories which signifies investment grade.
"series amortization event" means an event which is designated as an
amortization event for a specific series, although the same event may
constitute a series amortization event for more than one or all series.
103
"series enhancer" means any provider of enhancement and/or any issuer of
any third-party credit enhancement.
"series final maturity date" means with respect to each series, the meaning
set forth in the related prospectus supplement.
"servicer default" has the meaning set forth on page [.].
"supplemental certificate" means a certificated or uncertificated interest
in the transferor's interest.
"tax opinion" means, with respect to any action, an opinion of counsel to
the effect that, for federal income tax purposes:
(1) such action will not adversely affect the tax characterization as
debt of the notes of any outstanding series or class that were
characterized as debt at the time of their issuance;
(2) such action will not cause the trust to be deemed to be an
association (or publicly traded partnership) taxable as a
corporation; and
(3) such action will not cause or constitute an event in which gain or
loss would be recognized by any noteholder.
"transferor certificate" means a certificate evidencing an interest in the
transferor interest.
"transferor interest" means an interest that represents the right to
receive all cash flows from the trust assets not required to make payments on
the notes or to credit enhancement providers.
"transferor percentage" means a percentage equal to:
(1) 100%; minus
(1) the total investor percentages for all outstanding series; and, if
applicable, minus
(2) the total credit enhancement percentages for all outstanding series.
"trust amortization event" means, with respect to all series issued by the
trust, the occurrence of any of the following events:
(1) bankruptcy, insolvency, liquidation, conservatorship, receivership or
similar events relating to the transferors, including any additional
transferor, Green Tree Bank or Conseco Finance or other account owner
or transferor, [unless written confirmation is received from each
rating agency that the removal of the bank from this amortization
event will not result in a reduction or withdrawal of its rating of
any outstanding series or class];
(2) a transferor is unable for any reason to transfer receivables to the
trust in accordance with the provisions of the transfer and servicing
agreement; or
104
(3) the trust becomes subject to regulation as an "investment company"
within the meaning of the Investment Company Act of 1940.
"trust portfolio" means the portfolio of accounts designated by [Green Tree
Bank, Conseco Finance and Conseco Bank] as accounts of the trust.
"trust termination date" means the earlier of:
(1) the day after the distribution date on which the principal amount
with respect to each series outstanding is zero; or
(2) January 1, 20[.].
105
Annex I
Global Clearance, Settlement and Tax Documentation Procedures
Except in limited circumstances, the globally offered Conseco Private Label
Credit Card Master Note Trust I Asset Backed Notes to be issued in series from
time to time will be available only in book-entry form. Investors in the global
securities may hold those global securities through any of The Depository Trust
Company, Clearstream Luxembourg or Euroclear. The global securities will be
tradable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding global securities
through Clearstream Luxembourg and Euroclear will be conducted in the ordinary
way in accordance with their normal rules and operating procedures and in
accordance with conventional eurobond practice (i.e., seven calendar day
settlement).
Secondary market trading between investors holding global securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream Luxembourg or Euroclear
and DTC participants holding notes will be effected on a delivery-against-
payment basis through the respective depositaries of Clearstream Luxembourg and
Euroclear, in that capacity, and as DTC participants.
Non-U.S. holders of global securities will be subject to U.S. withholding
taxes unless those holders meet requirements and deliver appropriate U.S. tax
documents to the securities clearing organizations or their participants.
Initial Settlement
All global securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the global securities
will be represented through financial institutions acting on their behalf as
direct and indirect participants in DTC. As a result, Clearstream Luxembourg
and Euroclear will hold positions on behalf of their participants through their
respective depositaries, which in turn will hold those positions in accounts as
DTC participants.
Investors electing to hold their global securities through DTC, other than
through accounts at Clearstream Luxembourg or Euroclear, will follow the
settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against
payment in same-day funds on the settlement date.
Investors electing to hold their global securities through Clearstream
Luxembourg or Euroclear accounts will follow the settlement procedures
applicable to conventional
A-1
eurobonds in registered form. Global securities will be credited to the
securities custody accounts on the settlement date against payment for value on
the settlement date.
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and transferor 's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
participants, other than Citibank, N.A. and Morgan Guaranty Trust Company of
New York as depositories for Clearstream Luxembourg and Euroclear,
respectively, will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream Customers and/or Euroclear
Participants. Secondary market trading between Clearstream customers or
Euroclear participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser. When
global securities are to be transferred from the account of a DTC participant,
other than Citibank and Morgan as depositories for Clearstream Luxembourg and
Euroclear, respectively, to the account of a Clearstream customer or a
Euroclear participant, the purchaser must send instructions to Clearstream
Luxembourg prior to settlement date 12:30. Clearstream Luxembourg or Euroclear,
as the case may be, will instruct Citibank or Morgan, respectively, to receive
the global securities for payment. Payment will then be made by Citibank or
Morgan, as the case may be, to the DTC participant's account against delivery
of the global securities. After settlement has been completed, the global
securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream
customer's or Euroclear participant's account. Credit for the global securities
will appear the next day (European time) and the cash debit will be back-valued
to, and the interest on the global securities will accrue from, the value date,
which would be the preceding day when settlement occurred in New York. If
settlement is not completed on the intended value date, for example, the trade
fails, the Clearstream Luxembourg or Euroclear cash debit will be valued
instead as of the actual settlement date.
Clearstream customers and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream Luxembourg or
Euroclear. Under this approach, they may take on credit exposure to Clearstream
Luxembourg or Euroclear until the global securities are credited to their
accounts one day later.
As an alternative, if Clearstream Luxembourg or Euroclear has extended a
line of credit to them, Clearstream customers or Euroclear participants can
elect not to pre-position funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure,
A-2
Clearstream customers or Euroclear participants purchasing global securities
would incur overdraft charges for one day, assuming they cleared the overdraft
when the global securities were credited to their accounts. However, interest
on the global securities would accrue from the value date. Therefore, in many
cases the investment income on the global securities earned during that one-day
period may substantially reduce or offset the amount of those overdraft
charges, although this result will depend on each Clearstream customer's or
Euroclear participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending global securities to
Citibank or Morgan for the benefit of Clearstream customers or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently from a trade between two DTC participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Clearstream customers and Euroclear
participants may employ their customary procedures for transactions in which
global securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC participant. The seller will send
instructions to Clearstream Luxembourg before settlement date 12:30. In these
cases, Clearstream Luxembourg or Euroclear will instruct Citibank or Morgan, as
appropriate, to credit the global securities to the DTC participant's account
against payment. The payment will then be reflected in the account of the
Clearstream customer or Euroclear participant the following day, and receipt of
the cash proceeds in the Clearstream customer's or Euroclear participant's
account would be back-valued to the value date, which would be the preceding
day, when settlement occurred in New York. If the Clearstream customer or
Euroclear participant has a line of credit with its respective clearing system
and elects to draw on that line of credit in anticipation of receipt of the
sale proceeds in its account, the back-valuation may substantially reduce or
offset any overdraft charges incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Clearstream customer's or Euroclear participant's
account would instead be valued as of the actual settlement date.
U.S. Federal Income Tax Documentation Requirements
A beneficial owner of global securities holding securities through
Clearstream Luxembourg or Euroclear, or through DTC if the holder has an
address outside the U.S., will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest, including original issue discount,
on registered debt issued by U.S. Persons, unless each clearing system, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and that beneficial owner takes
appropriate steps to obtain an exemption or reduced tax rate. See "Federal
Income Tax Consequences."
A-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder, other
than underwriting discounts and commissions.
Registration Fee.................................................... $250*
Printing and Engraving Expenses..................................... **
Trustee's Fees and Expenses......................................... **
Legal Fees and Expenses............................................. **
Accountants' Fees and Expenses...................................... **
Blue Sky Fees and Expenses.......................................... **
Rating Agency Fees.................................................. **
Miscellaneous Expenses.............................................. **
Total............................................................. $ **
====
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* Actual
** To be provided by amendment
Item 15. Indemnification of Directors and Officers.
Conseco Bank, Inc.
The bylaws of Conseco Bank provide that Conseco Bank shall indemnify an
individual made a party to a proceeding because the individual is or was a
director of Conseco Bank against liability incurred in the proceeding if it has
determined in accordance with Section 16-10a-902(1) of the Utah Revised
Business Corporation Act that:
(a) the individual's conduct was in good faith; and
(b) the individual reasonably believed that his conduct was in, or not
opposed to, the corporation's best interests; and
(c) in the case of any criminal proceeding, the individual had no
reasonable cause to believe his conduct was unlawful.
The bylaws, in accordance with Section 16-10a-902(4) of the Utah Revised
Business Corporation Act provide that Conseco Bank shall not indemnify a
director :
(a) in connection with a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation; or
(b) in connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action
in his official capacity, in which proceeding he was adjudged liable
on the basis that he derived an improper personal benefit.
The bylaws limit indemnification by or in the right of Conseco Bank to
reasonable expenses incurred in connection with the proceeding in accordance
with Section 16-10a-902(6) of the Utah Revised Business Corporation Act.
The bylaws provide for the indemnification of an individual made a party to
a proceeding because the individual is or was an officer, employee, fiduciary
or agent of Conseco Bank to the same extent as an individual made a party to a
proceeding because the individual is or was a director of Conseco Bank, or to a
greater extent, if not inconsistent with public policy, if provided for by
general or specific action of Conseco Bank's board of directors.
II-1
Pursuant to underwriting agreements which Conseco Bank, Inc. may enter into
with underwriters, a form of which is included as an exhibit to this
Registration Statement, officers and directors of Conseco Bank, Inc., and
affiliates thereof, may be entitled to indemnification by such underwriters or
agents against some liabilities, including liabilities under the Securities Act
of 1933, arising from information which has been furnished by such underwriters
and that appears in the Registration Statement or any Prospectus.
Conseco Finance Credit Card Funding Corp.
The Articles of Incorporation of Credit Card Funding Corp. provide that, to
the fullest extent permitted by the Minnesota Business Corporation Act, a
director of Credit Card Funding Corp. shall not be liable to Credit Card
Funding Corp. or its shareholders for monetary damages for breach of fiduciary
duty as a director.
Section 302A.251 subdivision 1 of the Minnesota Business Corporation Act
provides that a person who performs the duties of the position of a director in
good faith, in a manner the director reasonably believes to be in the best
interests of the corporation, and with the care an ordinarily prudent person in
a like position would exercise under similar circumstances, is not liable by
reason of being or having been a director of the corporation.
Section 302A.251 subdivision 4 of the Minnesota Business Corporation Act
provides that a director's personal liability to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director
may be eliminated or limited in the articles of the corporation. The articles
shall not eliminate or limit the liability of a director:
(a) for any breach of the director's duty of loyalty to the corporation
or its shareholders;
(b) for acts or omission not in good faith or that involve intentional
misconduct or a knowing violation of law;
(c) for being present at a meeting failing to vote against, or consenting
in writing to, an improper distribution; or for illegally selling a
security;
(d) for any transaction from which the director derived an improper
personal benefit; or
(e) for any act or omission occurring prior to the date when the
provision in the articles eliminating or limiting liability becomes
effective.
Pursuant to underwriting agreements which Credit Card Funding Corp. may
enter into with underwriters, a form of which is included as an exhibit to this
Registration Statement, officers and directors of Credit Card Funding Corp.,
and affiliates thereof, may be entitled to indemnification by such underwriters
or agents against some liabilities, including liabilities under the Securities
Act of 1933, arising from information which has been furnished by such
underwriters and that appears in the Registration Statement or any Prospectus.
II-2
Item 16. Exhibits.
(a) Exhibits
1.1 -- Form of Underwriting Agreement*
4.1 -- Form of Master Indenture
4.2 -- Form of Indenture Supplement, including form of Notes*
Form of Trust Agreement of Conseco Private Label Credit Card Master
4.3 -- Note Trust
5.1 -- Opinion of Dorsey & Whitney LLP with respect to validity*
8.1 -- Opinion of Dorsey & Whitney LLP with respect to tax matters*
10.1 -- Form of Transfer and Servicing Agreement
10.2 -- Form of Administration Agreement
Receivables Purchase Agreement between Green Tree Bank and Conseco
10.3 -- Bank*
Receivables Purchase Agreement between Conseco Bank and Conseco
10.4 -- Finance*
Form of Receivables Purchase Agreement between Conseco Finance and
10.5 -- Credit Card Funding Corp.
23.1 -- Consent of Dorsey & Whitney LLP (to be included in Exhibit 5.1)*
23.2 -- Consent of Dorsey & Whitney LLP (to be included in Exhibit 8.1)*
24.1 -- Powers of Attorney (included on pages II-5 and II-6)
25.1 -- Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of U.S. Bank Trust National
Association, as indenture trustee under the Indenture*
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* To be filed by amendment
(b) Financial Statements
All financial statements, schedules and historical information have been
omitted as they are not applicable.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that (a)(1)(i) and (a)(1)(ii) will not apply if the
information required to be included in a post-effective amendment thereby
is contained in periodic reports filed with or furnished to the Commission
by the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of
the offering.
(b)That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15
above, or otherwise, each Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of each issue.
(d)(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3, has reasonable grounds to
believe that the security rating requirement contained in Transaction
Requirement B.5. of Form S-3 will be met by the time of the sale of the
securities registered hereunder and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the city of St. Paul, state of Minnesota, on December 29, 2000.
CONSECO FINANCE CREDIT CARD FUNDING
CORP.
as co-originator of the Trust, Co-
Registrant and on behalf of the
Trust as Co-Registrant
/s/ Phyllis A. Knight
By:__________________________________
Name: Phyllis A. Knight
Title: Senior Vice President and
Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phyllis A. Knight and Brian F. Corey, and each
of them, his or her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for and in his or her own name, place and
stead, in any and all amendments (including post-effective amendments) to this
Registration Statement and any or all other documents in connection therewith,
and to file the same, with all exhibits thereto, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as might
or could be done in person, hereby ratifying and confirming all said attorneys-
in-fact and agents or any of them, or their substitute or substitutes, may
lawfully for or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on December 29, 2000 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/ Bruce A. Crittenden President and Director
- ------------------------------------------- (principal executive officer)
Bruce A. Crittenden
/s/ Keith Anderson Senior Vice President and Treasurer
- ------------------------------------------- (principal financial officer and principal
Keith Anderson accounting officer)
/s/ Brian F. Corey Senior Vice President, Secretary and
- ------------------------------------------- Director
Brian F. Corey
/s/ Paul A. Boyum
- -------------------------------------------
Paul A. Boyum Director
/s/ Gary P. Mills
- -------------------------------------------
Gary P. Mills Director
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3, has reasonable grounds to
believe that the security rating requirement contained in Transaction
Requirement B.5. of Form S-3 will be met by the time of the sale of the
securities registered hereunder and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the city of Salt Lake, state of Utah, on December 29, 2000.
CONSECO BANK, INC.
as co-originator of the Trust, Co-
Registrant and on behalf of the
Trust as Co-Registrant
/s/ Shawn R. Gensch
By:__________________________________
Name: Shawn R. Gensch
Title: Senior Vice President and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Phyllis A. Knight and Brian F. Corey and each of
them, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for and in his or her own name, place and
stead, in any and all amendments (including post-effective amendments) to this
Registration Statement and any or all other documents in connection therewith,
and to file the same, with all exhibits thereto, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as might
or could be done in person, hereby ratifying and confirming all said attorneys-
in-fact and agents or any of them, or their substitute or substitutes, may
lawfully for or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on December 29, 2000 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/ Brent H. Peterson Chairman, President, Chief Executive
- ------------------------------------------- Officer and Director
Brent H. Peterson (principal executive officer)
Senior Vice President and Chief Financial
/s/ Shawn R. Gensch Officer
- ------------------------------------------- (principal financial officer and principal
Shawn R. Gensch accounting officer)
/s/ Bruce A. Crittenden
- -------------------------------------------
Bruce A. Crittenden Director
/s/ Eric L. Statting, Jr.
- -------------------------------------------
Eric L. Statting, Jr. Director
/s/ Stephen D. Taylor
- -------------------------------------------
Stephen D. Taylor Director
/s/ Dan C. Jorgensen
- -------------------------------------------
Dan C. Jorgensen Director
II-6
EXHIBIT INDEX
1.1 -- Form of Underwriting Agreement*
4.1 -- Form of Master Indenture
4.2 -- Form of Indenture Supplement, including form of Notes*
Form of Trust Agreement of Conseco Private Label Credit Card Master
4.3 -- Note Trust
5.1 -- Opinion of Dorsey & Whitney LLP with respect to validity*
8.1 -- Opinion of Dorsey & Whitney LLP with respect to tax matters*
10.1 -- Form of Transfer and Servicing Agreement
10.2 -- Form of Administration Agreement
Receivables Purchase Agreement between Green Tree Bank and Conseco
10.3 -- Bank*
Receivables Purchase Agreement between Conseco Bank and Conseco
10.4 -- Finance*
Form of Receivables Purchase Agreement between Conseco Finance and
10.5 -- Credit Card Funding Corp.
23.1 -- Consent of Dorsey & Whitney LLP (to be included in Exhibit 5.1)*
23.2 -- Consent of Dorsey & Whitney LLP (to be included in Exhibit 8.1)*
24.1 -- Powers of Attorney (included on pages II-5 and II-6)
25.1 -- Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of U.S. Bank Trust National
Association, as indenture trustee under the Indenture*
- --------
*To be filed by amendment