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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1997.
REGISTRATION NO. 333-16103
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Post-Effective Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
DISCOVER CARD MASTER TRUST I
(Issuer with respect to the Certificates)
------------------------------------
GREENWOOD TRUST COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 6022 51-0020270
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
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12 READ'S WAY, NEW CASTLE, DELAWARE 19720
(302) 323-7826
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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GREENWOOD TRUST COMPANY
12 READ'S WAY, NEW CASTLE, DELAWARE 19720
ATTENTION: JOHN J. COANE
(302) 323-7474
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
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CARL E. WITSCHY, ESQ. RICHARD M. SCHETMAN, ESQ.
LATHAM & WATKINS CADWALADER, WICKERSHAM & TAFT
Sears Tower, Suite 5800 100 Maiden Lane
Chicago, Illinois 60606 New York, New York 10033
Counsel to Registrant Counsel to Underwriters
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number for the earlier effective registration statement
for the same offering. [ ]
If delivery of prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE
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Credit Card Pass-Through Certificates of
Discover Card Master Trust I............ $5,000,000,000 100% $5,000,000,000 $1,515,151.52
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(1) This registration statement and the registration fee pertain to the initial
offering of $5,000,000,000 aggregate principal amount of Credit Card
Pass-Through Certificates of Discover Card Master Trust I, and in addition
cover offers and sales related to market-making transactions by Morgan
Stanley & Co. Incorporated and Dean Witter Reynolds Inc., affiliates of the
registrant, and offers and sales in connection with the proportionate share
of underwriters' stabilization activities (if any) by Morgan Stanley & Co.
Incorporated and Dean Witter Reynolds Inc., with respect to all such Credit
Card Pass-Through Certificates.
(2) Estimated solely for purpose of calculating the registration fee.
Pursuant to Rule 429 promulgated under the Securities Act of 1933, the
Prospectus which forms part of this Registration Statement also relates to
$2,184,220,000 of Credit Card Pass-Through Certificates of Discover Card Master
Trust I registered under the Registrant's Registration Statement on Form S-3,
File No. 33-99448, which was declared effective on January 4, 1996.
------------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until 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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EXPLANATORY NOTE
This Registration Statement pertains to (i) the initial offering of
$5,000,000,000 aggregate principal amount of Credit Card Pass-Through
Certificates of Discover Card Master Trust I (all such Pass-Through
Certificates, the "Investor Certificates") registered hereunder by the
registrant, (ii) offers and sales in connection with the proportionate share of
underwriters' stabilization activities (if any) by Morgan Stanley & Co.
Incorporated and Dean Witter Reynolds Inc., affiliates of the registrant, with
respect to the Investor Certificates and (iii) offers and sales related to
market-making transactions in the Investor Certificates by Morgan Stanley & Co.
Incorporated and Dean Witter Reynolds Inc.
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Information contained herein is subject to completion or amendment. A
post-effective amendment to the registration statement relating to these
securities has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be accepted prior to
the time the post-effective amendment to the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS (Subject to Completion)
Dated , 199
Discover(R) Card Master Trust I
Credit Card Pass-Through Certificates
Greenwood Trust Company
Master Servicer, Servicer and Seller
------------------------
Greenwood Trust Company ("Greenwood") intends to sell from time to time up
to $7,184,220,000 aggregate principal amount of Credit Card Pass-Through
Certificates ("investor certificates") consisting of one or more series,
representing an undivided interest in the Discover Card Master Trust I (the
"Trust "), formed pursuant to a Pooling and Servicing Agreement between
Greenwood as Master Servicer, Servicer and Seller and First Bank National
Association (successor trustee to Bank of America Illinois, formerly Continental
Bank, National Association), as Trustee, dated as of October 1, 1993, as
amended. The property of the Trust includes a pool of receivables (the
"Receivables") arising under selected Discover Card accounts in the portfolio of
Discover Card accounts originated by Greenwood and all monies due or to become
due in payment of the Receivables. Investor certificates will be sold from time
to time under this Prospectus on terms determined for each series at the time of
sale and described in the related Prospectus Supplement. Each series will
consist of one or more classes of investor certificates. Each investor
certificate will represent an undivided interest in the Trust and the interest
of the investor certificateholders of each class of a series will include the
right to receive a varying percentage of each month's collections with respect
to the Receivables at the times, in the manner and to the extent described
herein and in the related Prospectus Supplement.
Although the specific terms of each series in respect to which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such series will not be subject to prior review by, or
consent of, the holders of the investor certificates of any previously issued
series.
Interest and principal payments with respect to each series will be made as
specified in the related Prospectus Supplement. One or more classes of a series
may be entitled to the benefits of a form of credit enhancement as specified in
the related Prospectus Supplement. In addition, each series may include one or
more classes that are subordinated in right and priority to payment of principal
of, and/or interest on, one or more other classes of such series or another
series, in each case, to the extent described in the related Prospectus
Supplement.
------------------------
THE INVESTOR CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF GREENWOOD TRUST COMPANY. NEITHER THE
INVESTOR CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The investor certificates may be sold through underwriting syndicates
represented by one or more managing underwriters, which may include Morgan
Stanley & Co. Incorporated or Dean Witter Reynolds Inc., by underwriters without
a syndicate, through agents designated from time to time, or directly to
purchasers. If underwriters or agents are involved in the offering of investor
certificates, the name of the managing underwriter or underwriters or agents
will be set forth in the related Prospectus Supplement. If an underwriter, agent
or dealer is involved in the offering of investor certificates, the
underwriter's discount, agent's commission or dealer's purchase price will be
set forth in, or may be calculated from the information contained in, the
related Prospectus Supplement, and the net proceeds to Greenwood from such
offering will be the public offering price of such investor certificates less
such discount in the case of an underwriter, the purchase price of such investor
certificates less such commission in the case of an agent, or the purchase price
of such investor certificates in the case of a dealer, and less, in each case,
the other expenses of Greenwood associated with the issuance and distribution of
such investor certificates. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
INVESTOR CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
MORGAN STANLEY DEAN WITTER
, 199
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TABLE OF CONTENTS
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Reports to Investor Certificateholders................. 2
Incorporation of Certain Documents by Reference........ 2
Prospectus Summary..................................... 3
Risk Factors........................................... 6
The Trust.............................................. 13
Formation of the Trust............................... 13
The Trustee.......................................... 13
Indemnification of the Trust and the Trustee......... 14
Sale and Assignment of Receivables to the Trust...... 14
Addition of Accounts................................. 15
Removal of Accounts.................................. 16
Termination of the Trust............................. 16
Description of the Investor Certificates............... 16
General.............................................. 17
Interest Payments.................................... 17
Principal Payments................................... 18
Issuance of Additional Series........................ 18
Collections Account and Group Collections Accounts... 19
Class Percentages and Seller Percentage.............. 20
Allocations, Reallocations and Subordination of
Collections........................................ 20
Adjustments to Receivables........................... 21
Distributions of Collections and Application of
Collections and Certain Other Amounts.............. 21
Additional Funds..................................... 22
Final Payment of Principal; Termination of Series.... 22
Credit Enhancement................................... 23
Repurchase of Trust Portfolio........................ 23
Repurchase of Specified Receivables.................. 24
Repurchase of a Series............................... 24
Repurchase of Investor Certificates.................. 25
Sale of Seller Interest.............................. 25
Reallocation of Series Among Groups.................. 26
Amendments........................................... 26
List of Investor Certificateholders.................. 27
Meetings............................................. 27
Book-Entry Registration.............................. 27
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Definitive Certificates.............................. 30
Servicing.............................................. 31
Master Servicer and Servicer......................... 31
Servicing Compensation and Payment of Expenses....... 31
Certain Matters Regarding the Master Servicer and the
Servicers.......................................... 32
Master Servicer Termination Events................... 32
Servicer Termination Events.......................... 33
Evidence as to Compliance............................ 34
The Seller............................................. 35
Greenwood............................................ 35
Insolvency-Related Matters........................... 35
Certain Legal Matters Relating to the Receivables...... 36
Transfer of Receivables.............................. 36
Certain UCC Matters.................................. 37
Consumer Protection Laws and Debtor Relief Laws
Applicable to the Receivables...................... 38
Claims and Defenses of Cardmembers Against the
Trust.............................................. 38
Use of Proceeds........................................ 39
Certain Federal Income Tax Consequences................ 39
General.............................................. 39
Tax Treatment of the Investor Certificates as
Indebtedness....................................... 39
United States Investor Certificateholders............ 40
Foreign Investor Certificateholders.................. 42
Backup Withholding and Information Reporting......... 43
Possible Characterization of the Investor
Certificates....................................... 44
Certain State Income Tax Consequences.................. 45
ERISA Considerations................................... 46
Plan of Distribution................................... 48
Legal Matters.......................................... 49
Available Information.................................. 49
Glossary of Terms...................................... 50
ANNEX I -- Global Clearance, Settlement and Tax
Documentation Procedures............................. 61
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REPORTS TO INVESTOR CERTIFICATEHOLDERS
Monthly and annual reports with respect to each outstanding series of
investor certificates containing information concerning the Trust and such
outstanding series of investor certificates, prepared by the Master Servicer,
will be made available to certificate owners free of charge upon request by
calling 302-323-7130, extension 328. See "Reports to Investor
Certificateholders" in the related Prospectus Supplement. The annual reports
will not contain financial information that has been examined and reported on by
independent public accountants. Greenwood does not intend to send any of its
financial reports to investor certificateholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
by Greenwood on behalf of the previously formed Trust are incorporated in this
Prospectus by reference: the Trust's Annual Reports on Form 10-K for the years
ended December 31, 1993, December 31, 1994, December 31, 1995 and December 31,
1996 and Current Reports on Form 8-K filed since the formation of the Trust.
All reports and other documents filed by Greenwood on behalf of the Trust
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Securities Exchange Act of 1934"), subsequent to the date
of this Prospectus and prior to the termination of the offering of the investor
certificates shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Master Servicer will provide without charge to each person, including
any beneficial owner of investor certificates, to whom a copy of this Prospectus
is delivered, a copy of any and all the documents incorporated herein by
reference (other than exhibits to such documents) upon request by calling
813-288-3418.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety with respect to any
series of investor certificates issued by the Trust by the more detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement. Reference is made to the Glossary of Terms contained in this
Prospectus and in the related Prospectus Supplement for the definitions of
certain capitalized terms. Unless the context requires otherwise, capitalized
terms used in this Prospectus relate separately to individual series of investor
certificates issued by the Trust.
OVERVIEW OF TRUST............ Discover Card Master Trust I has issued, and is
expected to issue, series of investor
certificates from time to time. The securities
offered in each series will represent a
Fractional Undivided Interest in the Trust. The
assets of the Trust include the accounts
receivable arising under certain Discover(R) Card
accounts selected from the Discover Card
Portfolio of accounts originated by Greenwood,
the cash received in payment of those Receivables
(including recoveries on charged-off
Receivables), Participation Interests, if any,
included in the Trust, funds available with
respect to the Credit Enhancement for any
outstanding series of investor certificates, any
additional funds that are included in the Trust,
currency swaps for any outstanding series of
investor certificates that has one or more
classes denominated in a foreign currency, and
interest rate cap or other interest rate
protection agreements for any outstanding series
of investor certificates that has one or more
classes with a floating certificate rate that is
not capped at a specified maximum rate.
The Trust was formed pursuant to the Pooling and
Servicing Agreement between Greenwood and the
Trustee. Upon formation of the Trust, Greenwood
transferred to the Trust all the Receivables in
the Accounts selected for inclusion in the Trust
prior to the Initial Closing Date. In addition,
Greenwood has transferred the Receivables in
Additional Accounts to the Trust, and may do so
again in the future. Greenwood also transfers
additional Receivables generated in the Accounts
to the Trust on an ongoing basis. Greenwood, the
originator of the Accounts, will continue to
service the Accounts. First Bank National
Association (successor trustee to Bank of America
Illinois, formerly Continental Bank, National
Association), is Trustee for the Trust.
The Trust, as a master trust, has issued series
of investor certificates, and is expected to
issue additional series of investor certificates
in the future, subject to certain requirements
and restrictions set forth in the Pooling and
Servicing Agreement. The consent of the
certificateholders of outstanding series will not
be required or requested in order for the Trust
to issue additional series of investor
certificates.
The terms governing each particular series of
investor certificates are set forth in the
Pooling and Servicing Agreement (which applies to
all series issued from the Trust) and will be set
forth in a Series Supplement (which will be
specific to each particular series). The Series
Supplement for each series will specify, among
other things, the number of classes of investor
certificates in the series, the size of the
series, its payment
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terms, and the kind and size of the Credit
Enhancement for the series.
The investor certificates of each series issued
from the Trust will represent a Fractional
Undivided Interest in the Trust and will be
entitled to receive a specified portion of funds
received in payment of the Receivables, plus the
benefits of the Credit Enhancement for that
series, the currency swap and interest rate cap
or other interest rate protection agreements for
that series, if any. The remaining Fractional
Undivided Interest in the Trust not represented
by investor certificates of any series is
represented by the Seller Certificate, which is
owned by Greenwood.
SELLER....................... Greenwood Trust Company ("Greenwood"). The
executive office of Greenwood (302-323-7184) is
located at 12 Read's Way, New Castle, Delaware
19720.
MASTER SERVICER AND
SERVICER..................... Greenwood.
TRUSTEE...................... First Bank National Association (successor
trustee to Bank of America Illinois, formerly
Continental Bank, National Association), its
successors and assigns.
INTEREST ON INVESTOR
CERTIFICATES............... Interest on the investor certificates will accrue
at the per annum rate either specified in, or
determined in the manner specified in, the
related Prospectus Supplement.
See "Description of the Investor Certificates --
Interest Payments" herein and in the related
Prospectus Supplement.
PRINCIPAL ON INVESTOR
CERTIFICATES............... The principal of the investor certificates of
each series will be scheduled to be paid either
in full on a date specified in the related
Prospectus Supplement (the "Expected Final
Payment Date"), in which case such series will
have an Accumulation Period as described below
under "-- Accumulation Period," or in
installments commencing on the Principal
Commencement Date specified in the related
Prospectus Supplement, in which case such series
will have a Controlled Liquidation Period as
described below under "-- Controlled Liquidation
Period." If a series has more than one class of
investor certificates, a different method of
paying principal, Expected Final Payment Date
and/or Principal Commencement Date may be
specified for each class. The payment of
principal with respect to the investor
certificates of a series or class may commence
earlier than the Expected Final Payment Date or
Principal Commencement Date specified in the
related Prospectus Supplement, and the final
principal payment with respect to the investor
certificates of a series or class may be made
earlier or later than the Expected Final Payment
Date or other expected date specified in the
related Prospectus Supplement, if an Amortization
Event occurs with respect to such series or class
or under certain other circumstances described
herein and in the related Prospectus Supplement.
See "Description of the Investor Certificates --
Principal Payments" herein and in the related
Prospectus Supplement.
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REVOLVING PERIOD............. The investor certificates of each series will
have a Revolving Period, which will commence on
the Series Cut-Off Date specified in the related
Prospectus Supplement and continue to, but not
including, the earlier of (i) the Principal
Commencement Date and (ii) the Amortization Date
with respect to such series.
CONTROLLED LIQUIDATION
PERIOD....................... If the related Prospectus Supplement specifies
that a series will have a Controlled Liquidation
Period, unless an Amortization Event has occurred
during the Revolving Period, the Controlled
Liquidation Period will begin on the Principal
Commencement Date specified in such Prospectus
Supplement and continue until the earliest of (i)
the payment in full of the Series Invested
Amount, (ii) the Amortization Commencement Date
with respect to such series and (iii) the Series
Termination Date.
ACCUMULATION PERIOD.......... If the related Prospectus Supplement specifies
that a series will have an Accumulation Period,
unless an Amortization Event has occurred during
the Revolving Period, the Accumulation Period
will begin on the Principal Commencement Date
specified in such Prospectus Supplement and
continue until the earliest of (i) the payment in
full of the Series Invested Amount, (ii) the
Amortization Commencement Date with respect to
such series and (iii) the Series Termination
Date.
AMORTIZATION PERIOD.......... The Amortization Period with respect to a series,
if any, will begin on the Amortization
Commencement Date and continue until the earlier
of (i) the payment in full of the Series Invested
Amount and (ii) the Series Termination Date.
CREDIT ENHANCEMENT........... The Credit Enhancement with respect to a series
may include a cash collateral account, a letter
of credit, a surety bond, an insurance policy or
any other form of credit enhancement described in
the related Prospectus Supplement. The Credit
Enhancement may also be provided to a series or
class of a series by subordination provisions
that require distributions of principal and/or
interest to be made with respect to the investor
certificates of such series or class before
distributions are made to one or more other
series or other classes of such series.
See "Risk Factors -- Credit Enhancement" herein
and "Description of the Investor Certificates --
Principal Payments" and "-- Credit Enhancement"
herein and in the related Prospectus Supplement.
CLEARANCE AND SETTLEMENT..... Investor certificateholders may elect to hold
their investor certificates through any of DTC
(in the United States) or Cedel or Euroclear (in
Europe). Transfers within DTC, Cedel or
Euroclear, as the case may be, will be in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other hand,
will be effected in DTC through the relevant
Depositaries of Cedel or Euroclear. See
"Description of the Investor Certificates --
Book-Entry Registration."
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RISK FACTORS
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters, if any, of any series will make a market in the investor
certificates for such series. There can be no assurance, however, that a
secondary market will develop or, if a secondary market does develop, that it
will provide holders of investor certificates of any particular series with
adequate liquidity or that it will continue until the termination of any such
series.
Certain Legal Aspects. Greenwood has agreed in the Pooling and Servicing
Agreement to repurchase all of the Receivables in the event that the transfer of
the Receivables by Greenwood or any Additional Seller to the Trust is neither a
sale of the Receivables to the Trust nor a grant to the Trust of a security
interest in the Receivables, or, if the transfer by a Seller to the Trust is
deemed to be a grant to the Trust of a security interest in the Receivables, the
Trustee does not have a perfected security interest therein of first priority
under the Uniform Commercial Code (the "UCC") as in effect in the state in which
the chief executive office of each Seller is located (the "Applicable State"
with respect to each Seller). See "Description of the Investor Certificates --
Repurchase of Trust Portfolio." Greenwood has taken certain actions to perfect
and will (along with Additional Sellers, if any) continue the perfection of the
Trust's interest in the Receivables. Unless continuation statements are filed
within the time specified in the UCC in respect of the security interest of the
Sellers or the Trust in the Receivables, the perfection of the security interest
will lapse. A tax or statutory lien on property of a Seller may have priority
over the Trust's interest in the Receivables.
It is anticipated that Greenwood will be the only Servicer until such time
as receivables in credit accounts other than accounts originated by Greenwood
are added to the Trust. See "The Trust -- Addition of Accounts." Under certain
conditions, a Servicer may use Collections received by it in each Due Period
until the related Distribution Date. If these conditions are not met, however,
the Servicer will pay from Collections with respect to Receivables serviced by
such Servicer for any day an amount equal to the sum of the Required Daily
Deposits for each series then outstanding with respect to such Servicer to, or
at the direction of, Greenwood as Master Servicer, for deposit into the
Collections Account, within two business days following the date of processing
of such Collections. Any such Collections not deposited into the Collections
Account will be used by the Servicer for its own benefit until the related
Distribution Date. If Greenwood or any other future Servicer is so entitled to
use Collections received by it and becomes insolvent, the Trust may not have a
perfected interest in such Collections. See "The Seller -- Insolvency-Related
Matters," "Certain Legal Matters Relating to the Receivables -- Transfer of
Receivables" and "Description of the Investor Certificates -- Collections
Account and Group Collections Accounts."
Effect of Subordination. With respect to any series having a class of
subordinated certificates (referred to herein as the "Class B Certificates"),
although the Class B Certificates may have the benefit of Credit Enhancement,
which may include the exclusive direct benefit of all or a portion of such
Credit Enhancement, the Class B Certificates will be subordinated in right of
payment to the senior certificates (the "Class A Certificates") to the extent
described herein and in the related Prospectus Supplement. See "Description of
the Investor Certificates -- Allocations, Reallocations and Subordination of
Collections -- Subordination of Class B Certificates" herein and, if applicable,
in the related Prospectus Supplement and, if applicable, "Description of the
Investor Certificates -- Distributions of Collections and Application of
Collections and Certain Other Amounts" in the related Prospectus Supplement. If
the Class B Investor Interest suffers a reduction as a result of such
subordination, the Class B Percentage of Finance Charge Collections and
Principal Collections on future Distribution Dates may be reduced and future
interest payments, as well as final payment of principal, also may be reduced or
delayed.
Consumer Protection Laws and Regulations. The Accounts and the Receivables
are subject to numerous federal and state consumer protection laws and
regulations that impose requirements on the making and enforcement of consumer
loans. Such laws, as well as any new laws or new rulings regarding new or
existing laws that may be adopted, may adversely affect a Servicer's ability to
6
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collect on the Receivables or maintain previous levels of monthly periodic
finance charges, and failure by any Servicer to comply with such requirements
could adversely affect such Servicer's ability to collect the Receivables with
respect to which it is the Servicer. Greenwood has agreed in the Pooling and
Servicing Agreement that if a Receivable was not created in compliance in all
material respects with all Requirements of Law applicable to a Seller with
respect to such Receivable, and if such noncompliance continues beyond a
specified cure period and has a material adverse effect on the interest of the
Trust in all the Receivables, Greenwood will repurchase all Receivables in the
Accounts containing the Receivables affected by such noncompliance. See
"Description of the Investor Certificates -- Repurchase of Specified
Receivables." It is not anticipated that the Trustee will make any examination
of the Receivables or the records relating thereto for the purpose of
establishing the presence or absence of defects in the Accounts, or for any
other purpose. See "Certain Legal Matters Relating to the Receivables --
Consumer Protection Laws and Debtor Relief Laws Applicable to the Receivables."
Consumer Protection Laws and Regulations; Litigation. Greenwood is involved
from time to time in various legal proceedings that arise in the ordinary course
of its business. Greenwood does not believe that the resolution of any of these
proceedings will have a material adverse effect on Greenwood's financial
condition or on the Receivables. There can be no assurance, however, regarding
any of these effects.
A class action suit was recently filed against Greenwood and its affiliate,
NOVUS Services, Inc. ("NSI"), in the United States District Court for the
District of Massachusetts. The suit alleges that, with respect to agreements by
certain cardmembers to reaffirm indebtedness that would otherwise have been
discharged in bankruptcy, Greenwood and NSI failed to comply with certain
requirements of the bankruptcy statutes. An action making similar allegations
has been filed against Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD") and
MSDWD's wholly-owned subsidiary, NOVUS Credit Services Inc. ("NOVUS"), the owner
of Greenwood, in the United States District Court for the Northern District of
California.
Although Greenwood and NSI intend to defend the Massachusetts action
vigorously (as do MSDWD and NOVUS the California action) and Greenwood has
determined that the total amount of Receivables in the Trust that are the
subject of reaffirmation agreements is not material to the Trust, Greenwood
intends, to the extent practicable and subject to Rating Agency approval, to
cause the Receivables in Accounts containing reaffirmed debt to be removed from
the Trust, thereby reducing the Seller Interest by the aggregate amount of
Receivables in such Accounts. It is a requirement of such Rating Agency approval
that the removals not cause the aggregate amount of Principal Receivables in the
Trust to fall below the Minimum Principal Receivables Balance; Greenwood expects
this condition to be satisfied. These removals will include Receivables arising
in such Accounts from post-bankruptcy extensions of credit and Receivables in
such Accounts with respect to which no failure of compliance has been alleged.
Even if these Receivables are not removed from the Trust, however, Greenwood
does not believe that the resolution of these proceedings will have a material
adverse effect on the interests of the Investor Certificateholders.
Legislation. The Competitive Equality Banking Act of 1987 ("CEBA") contains
provisions that limit the ability of nonbanking companies, such as MSDWD and
NOVUS, to own banks. However, the legislation permits any nonbanking company
that owned a bank on March 5, 1987 to retain control of the bank. MSDWD and
NOVUS are permitted to retain control of Greenwood under this legislation. CEBA
provides that if MSDWD, NOVUS or Greenwood fails to comply with certain
statutory restrictions, MSDWD and NOVUS will be required to divest control of
Greenwood or to limit its activities significantly. Greenwood believes, however,
that in light of the programs it has in place, the limitations of CEBA will not
have a material impact on Greenwood's ability to service, or maintain the level
of, the Receivables. In addition, future federal or state legislation,
regulation or interpretation of federal or state legislation or regulation could
adversely affect the business of Greenwood or the relationship of MSDWD or NOVUS
with Greenwood. See "The Seller -- Greenwood."
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Social, Legal and Economic Factors. Changes in account use and payment
patterns by cardmembers may result from a variety of social and economic
factors, as well as from legislative initiatives. Economic factors, including
the rate of inflation and relative interest rates offered for various types of
loans, also may be reflected in changes in account use and payment patterns,
including increased risk of defaults by cardmembers. Discover Card accounts from
all of the states of the United States and from the United States' territories
and possessions are represented in the Accounts. Greenwood is unable to
determine and has no basis to predict whether, or to what extent, economic or
social factors will affect future credit use or payment patterns. However,
heightened levels of consumer debt, large numbers of personal bankruptcies and a
weakened national economy may cause increases in delinquencies in, and
charge-offs of, credit card receivables underlying securities such as the
investor certificates.
Competition in the Credit Card Industry. The credit card industry in which
the Discover Card competes is highly competitive. This competition focuses on
features and financial incentives of credit cards such as annual fees, finance
charges, rebates and other enhancement features. The market includes bank-issued
credit cards (including "co-branded" cards issued by banks in cooperation with
industrial, retail or other companies) and charge cards issued by travel and
entertainment companies. The vast majority of the bank-issued credit cards bear
the Visa or MasterCard service mark and are issued by the many banks that
participate in one or both of the national bank card networks operated by Visa
U.S.A. Inc. and MasterCard International Incorporated. The Visa and MasterCard
associations have been in existence for approximately 25 years. Cards bearing
their service marks have worldwide acceptance by merchants of goods and services
and recognition by consumers and the general public. Co-branded credit cards,
which offer the cardholder certain benefits relating to the industrial, retail
or other business of the bank's co-branding partner (e.g., credits towards
purchases of airline tickets or rebates for the purchase of an automobile),
currently represent a rapidly growing segment of the bank-issued credit card
market. The majority of travel and entertainment cards are issued by American
Express Company, which has been issuing cards since 1958. Travel and
entertainment cards differ from bank cards in that they have no pre-established
credit limits and have limited provisions for repayment in installments.
American Express Company, through a subsidiary bank, also issues cards with both
a pre-established credit limit and provisions for repayment in installments. The
Discover Card was introduced nationwide in 1986 and competes with general
purpose credit cards issued by other banks and with travel and entertainment
cards. Greenwood currently is the primary issuer of the Discover Card. Greenwood
also issues, and intends from time to time to introduce, additional general
purpose credit, charge and financial transaction cards; however, none of the
accounts associated with these cards is included in the Discover Card Portfolio.
Many bank credit card issuers have instituted balance transfer programs.
Generally, under these transfer programs, cardholders are offered a favorable
annual percentage rate or other financial incentives for a specified length of
time on any portion of their account balances arising from the transfer to their
accounts of outstanding account balances maintained on another credit card. The
annual percentage rates for balance transfers often are more favorable to
cardholders than the annual percentage rates for account balances arising from
purchases or cash advances.
This competition affects Greenwood's ability to obtain applicants for
Discover Card accounts, to encourage usage of the accounts by cardmembers and to
obtain participation in the Discover Card program by service establishments. A
significant adverse change in any of these factors could result in a decrease in
the level of the Receivables, and of the receivables in the Discover Card
Portfolio. If there is a decrease in the level of Receivables, and if sufficient
Receivables in Additional Accounts or sufficient Participation Interests are not
available to be added to the Trust or are not added, an Amortization Event with
respect to one or more series could result, causing the commencement of the
Amortization Period with respect to such series. See "-- Payments and Maturity"
herein and "Description of the Investor Certificates -- Amortization Events" in
the related Prospectus Supplement.
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MSDWD, the indirect owner of Greenwood, pursues a general purpose credit
card strategy of multiple bank association and proprietary card products. For
example, in early 1994, MountainWest Financial Corporation, a Utah industrial
loan corporation that is indirectly owned by MSDWD, began participating in a
program by NationsBank of Delaware, N.A. to issue a new, nationally marketed co-
branded MasterCard(R) credit card under the name "Prime OptionSM." Greenwood
expects that from time to time additional general purpose credit card products
will be introduced through Greenwood or other MSDWD subsidiaries in order to
attract additional consumers. The introduction of a new general purpose credit
card product by any market competitor poses incremental competition for Discover
Card and for other credit card issuers. Although Greenwood currently does not
expect that the issuance of any new card by Greenwood or another MSDWD
subsidiary will have a materially greater impact on the Discover Card program
than the introduction of a comparable product by any other market competitor, no
assurance can be given with respect to the future competitive impact of such
programs on the Discover Card Portfolio.
Ability of the Seller to Change Terms of the Accounts. Pursuant to the
Pooling and Servicing Agreement, a Seller does not transfer Accounts to the
Trust, but only the Receivables arising in the Accounts. As owner of any
Account, the Seller has the right to determine the periodic finance charges
applicable from time to time to the Account, to alter the minimum monthly
payment required under the Account, to change the credit limit with respect to
the Account and to change various other terms with respect to the Account. A
decrease in the periodic finance charges or other fees with respect to an
Account could decrease the Finance Charge Collections, which would decrease the
effective yield on the Receivables and could also cause commencement of the
Amortization Period with respect to one or more series, as well as decreased
protection to investor certificateholders against shortfalls in Certificate
Interest and against charged-off Receivables. In addition, an increase in credit
limits could result in increases in Charged-Off Amounts, which could result in a
decrease in the level of the Receivables, and of the receivables in the Discover
Card Portfolio. If there is a decrease in the level of Receivables, and if
sufficient Receivables in Additional Accounts or sufficient Participation
Interests are not available to be added to the Trust or are not added, an
Amortization Event with respect to one or more series could result, causing the
commencement of the Amortization Period with respect to such series. See
"Description of the Investor Certificates -- Distributions of Collections and
Application of Collections and Certain Other Amounts" and "-- Amortization
Events" in the related Prospectus Supplement.
The Pooling and Servicing Agreement provides that each Servicer must
administer, process and enforce the Accounts with respect to which it is the
Servicer in accordance with its customary and usual servicing procedures for
servicing credit accounts comparable to the Accounts and in accordance with its
Credit Guidelines. Each Seller also must agree that the terms governing an
Account will not be changed unless the change is also made to the terms of other
accounts of such Seller of the same general type, obligors of which are resident
in a particular affected state or similar jurisdiction. There can be no
assurance that any such change may not affect the Accounts to a greater or
lesser degree than other such accounts. Except as set forth above, there are no
restrictions on the ability of any Seller to change the terms of the Accounts or
the Receivables.
There can be no assurance that changes in applicable laws, changes in the
marketplace or prudent business practice might not result in a determination by
Greenwood to take actions that would result in other changes in the terms of
some or all of the Greenwood Discover Card Accounts.
Payments and Maturity. The Receivables may be paid at any time, and there
is no assurance that there will be additional Receivables created in the
Accounts or that any particular pattern of payments will occur. Changes in
credit use and payment patterns may result from a variety of social, legal and
economic factors. A significant decline in the amount of Receivables generated
could result in a decline in the Seller Interest to an amount that would require
Greenwood to transfer to the Trust the Receivables in Additional Accounts or
Participation Interests in order to avoid an Amortization Event with respect to
one or more series and commencement of the Amortization Period with respect to
such series. Greenwood's ability to continue to compete in the current
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industry environment will affect the generation of new Receivables to be
conveyed to the Trust and also may affect payment patterns. In addition,
increased convenience use, where cardmembers pay their Receivables within the
grace period to avoid all finance charges on purchases of merchandise and
services, would decrease the effective yield on the Receivables and also could
cause commencement of the Amortization Period with respect to one or more
series, as well as decreased protection to the investor certificateholders
against shortfalls in Certificate Interest and against charged-off Receivables.
Conversely, the terms governing the Accounts require only a minimum monthly
payment, and a significant decrease in the percentage of repayment by
cardmembers or in the usage of the Accounts could delay the payment of principal
to the investor certificateholders of one or more series. Any delay in the
payment of principal with respect to any series will extend the period during
which charged-off Receivables may be allocated to the investor certificates of
such series. See "Description of the Investor Certificates -- Amortization
Events" and "Composition and Historical Performance of the Discover Card
Portfolio" in the related Prospectus Supplement.
Basis Risk. In general, accounts in the Discover Card Portfolio accrue
periodic finance charges at variable rates based upon factors such as the
prevailing prime rate, the amount of a cardmember's annual purchases and his or
her payment status (although certain account balances may accrue periodic
finance charges at fixed rates, in most instances for specified periods of
time). See "The Accounts -- Billing and Payments" in the related Prospectus
Supplement. As a result, a significant portion of the Receivables currently bear
interest at the prevailing prime rate plus a margin, while the investor
certificates of a series may bear interest at fixed rates or rates that float
against a different index, as specified in the related Prospectus Supplement. If
there is a decline in the prime rate, the amount of Series Finance Charge
Collections with respect to one or more series may be reduced, which could cause
the commencement of the Amortization Period with respect to such series or
result in either shortfalls of Certificate Interest or losses to the investor
certificateholders of such series. In addition, the investor certificates of a
series may bear interest at a floating rate and may not be subject to a maximum
rate. If increases in the Certificate Rate of such investor certificates are not
offset by increases in Series Finance Charge Collections, Series Excess Spread
may be reduced, which could cause the commencement of the Amortization Period
with respect to such series, and, in the event that the Available Class B Credit
Enhancement Amount of such Series has been reduced to zero, shortfalls of
Certificate Interest or losses to the investor certificateholders of such series
may result.
Rating of the Investor Certificates. Any rating assigned to the investor
certificates of a series or class of a series by a Rating Agency will not be a
recommendation to purchase, hold or sell such investor certificates, inasmuch as
the ratings do not reflect market price or suitability for a particular
investor. There is no assurance that such ratings will remain for any given
period of time or that those ratings will not be lowered or withdrawn entirely
if, in the judgment of the Rating Agencies, circumstances in the future so
warrant.
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the investor certificates of each class of a series will
be represented initially by one or more certificates registered in the name of
Cede & Co., the nominee for The Depository Trust Company ("DTC"), and will not
be registered in the names of the certificate owners or their nominees. Because
of this, unless and until definitive certificates are issued, certificate owners
will not be recognized by the Trustee as holders of such investor certificates,
as the term is used in the Pooling and Servicing Agreement or any Series
Supplement. Hence, until such time, certificate owners only will be able to
exercise the rights of investor certificateholders indirectly through DTC, Cedel
or Euroclear and their participating organizations. See "Description of the
Investor Certificates -- Book-Entry Registration" and "-- Definitive
Certificates."
Issuance of Additional Series. The Trust, as a master trust, has issued,
and in the future is expected to issue, from time to time additional series of
investor certificates. Although the terms of any such series will be specified
in a Series Supplement with respect to such series, the provisions of each
Series Supplement and, therefore, terms of any additional series will not be
subject to the
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prior review or consent of holders of the investor certificates of any
previously issued series. Such terms may include methods for determining
applicable Class Percentages and allocating Collections, provisions creating
different or additional security or other Credit Enhancement, provisions
establishing one or more classes of investor certificates (including one or more
classes subordinated to other classes of such series), provisions subordinating
such series to one or more other series (if the Series Supplement relating to
such series provides for such subordination), and any other amendment or
supplement to the Pooling and Servicing Agreement that is made applicable to
that series.
The Trustee will authenticate and deliver a new series of investor
certificates only upon satisfaction of certain conditions, including
confirmation from the Rating Agencies that the issuance of the new series will
not result in the reduction or withdrawal of the rating of any class of investor
certificates of any series outstanding at the time of such new issuance. See
"Description of the Investor Certificates -- Issuance of Additional Series."
There can be no assurance, however, that the issuance of one or more additional
series from time to time hereafter might not have an impact on the timing and
amount of payments received by an investor certificateholder of any previously
issued series.
The Pooling and Servicing Agreement permits the issuance of one or more
series that would be subordinate in right of payment to another series. The
terms of any such subordination will be set forth in the Series Supplement for
the Subordinate Series. Unless otherwise specified in the related Prospectus
Supplement, a series will not be subordinated to any other series. The Seller
may, but is under no obligation to, issue a series in the future that is
subordinate in right of payment to one or more series. See "Description of the
Investor Certificates -- Allocations, Reallocations and Subordination of
Collections -- Subordinate Series."
Credit Enhancement Account. Although Credit Enhancement may be provided
with respect to a series of investor certificates or any class thereof, the
amount available from such Credit Enhancement will be limited and may be subject
to certain reductions. If the amount under any Credit Enhancement is reduced to
zero, investor certificateholders of the series or class thereof covered by the
Credit Enhancement will bear directly the credit and other risks associated with
their Fractional Undivided Interest in the Trust. See "Description of the
Investor Certificates -- Adjustments to Receivables" and "-- Distributions of
Collections and Application of Collections and Certain Other Amounts --
Distributions and Application of Funds" in the related Prospectus Supplement and
"Description of the Investor Certificates -- Credit Enhancement" herein and in
the related Prospectus Supplement.
Reallocations of Cash Flows Among Series. The Series Supplement for a
series may provide that, under certain limited circumstances, Collections
originally available to one series in a Group will be reallocated to other
series in such Group. Under no circumstances, however, will Collections
originally allocated to one series on any Distribution Date be reallocated to
any other series unless all amounts to be funded with respect to the first
series by the Collections allocated to such series on that Distribution Date
have been funded. There can be no assurance that any series will not be moved
from its original Group to any other Group, in which event such provisions
allowing such reallocations with respect to the original Group may not be
operative and reallocation provisions with respect to the other Group may apply.
See "Description of the Investor Certificates -- Reallocation of Series Among
Groups" herein and "Description of the Investor Certificates -- Allocations,
Reallocations and Subordination of Collections" in the related Prospectus
Supplement.
Addition of Accounts. Greenwood has designated, and may voluntarily, and in
certain circumstances may be obligated to, designate Additional Accounts to be
included as Accounts, the receivables in which will be transferred to the Trust,
or to add Participation Interests to the Trust. Additional Accounts may be
Discover Card accounts originated by Greenwood or any other type of credit
account originated by Greenwood or an affiliate of Greenwood. Additional
Accounts also may be newly originated accounts. All assignments of Additional
Accounts or Participation Interests to the Trust are subject to certain
conditions set forth in the Pooling and Servicing Agreement, including, with
respect to Additional Accounts, the condition that the assignment of Additional
Accounts to the Trust comply with the conditions established by the Rating
Agencies or that the
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assignment of such Additional Accounts to the Trust will not cause the rating of
any class of any series of investor certificates then outstanding to be lowered
or withdrawn. See "The Trust -- Addition of Accounts." However, because any such
Additional Accounts, or the accounts underlying any Participation Interests,
need not be accounts of the same type as the Accounts already included in the
Trust, may contain a higher proportion of newly originated accounts than the
Accounts already included in the Trust or be composed entirely of newly
originated accounts, and may include accounts originated using criteria
different from those that were applied to the Accounts already included in the
Trust, there can be no assurance that any Additional Accounts, or the accounts
underlying any Participation Interests, will be of the same credit quality as
the Accounts already included in the Trust. Also, any Additional Accounts, or
the accounts underlying any Participation Interests, may consist of credit
accounts that have different terms than the Accounts already included in the
Trust, including lower periodic finance charges, which may have the effect of
reducing the average yield on the Accounts.
Effects of the Selection Process, Seasoning and Performance
Characteristics. The Accounts have been selected from accounts from all Discover
Card operations centers and from accounts of residents of the 50 states, the
District of Columbia and the United States' territories and possessions, and the
Accounts are consequently geographically diversified. Due to the absence of
comparative historical statistical data with respect to the Accounts and other
accounts in the Discover Card Portfolio and the inherent uncertainty of future
events, there can be no assurance that the payment performance of the Obligors
on the Accounts will be representative of the Discover Card Portfolio in all
material respects. Based on historical experience, fixed pools of accounts (such
as the Accounts) in general experience more volatile performance characteristics
(particularly in the first few months following the selection of such fixed
pools of accounts) and may also experience somewhat higher yields and
charge-offs than the portfolios of accounts from which they are selected (such
as the Discover Card Portfolio), and monthly variations may tend to be greater
than annual changes. See "The Accounts -- Effects of the Selection Process" and
"The Accounts
- -- Composition of the Accounts" in the related Prospectus Supplement. In
addition, less seasoned pools of accounts may experience somewhat higher
charge-offs and/or lower yields, as well as different payment characteristics,
than more seasoned pools of accounts. See "The Accounts -- Composition of the
Accounts -- Seasoning" and "Composition and Historical Performance of the
Discover Card Portfolio -- Composition of Discover Card Portfolio -- Seasoning"
in the related Prospectus Supplement.
Historical Information. All of the information describing the composition
and historical performance of the Discover Card accounts in the related
Prospectus Supplement reflects the composition and historical performance of the
Discover Card Portfolio (except as presented under "The Accounts -- Composition
of the Accounts" and where otherwise noted), and not that of the Accounts. See
"The Accounts -- Effects of the Selection Process" in the related Prospectus
Supplement. There can be no assurance that the historical performance of the
Discover Card Portfolio will be representative of its performance in the future
in all material respects.
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THE TRUST
FORMATION OF THE TRUST
The Trust was formed pursuant to the Pooling and Servicing Agreement
between Greenwood and the Trustee. As discussed below, the property of the Trust
currently includes, among other things, Receivables arising under certain
Greenwood Discover Card Accounts. Greenwood, pursuant to the Pooling and
Servicing Agreement, has transferred and will transfer to the Trust all
Receivables existing as of the Cut-Off Date and any Additional Account Cut-Off
Date. On a daily basis as the Receivables arise, Greenwood is obligated to
transfer and will continue to transfer to the Trust all Receivables arising in
the Accounts (including any Additional Accounts) from time to time until the
termination of the Trust. In exchange for the transfer of Receivables, Greenwood
received the Seller Certificate. As additional Receivables are transferred,
Greenwood receives an additional interest in the Seller Certificate. Greenwood
also received the net cash proceeds from the sale of the investor certificates
of each previously issued series and will receive the net cash proceeds from
each future sale of investor certificates.
The property of the Trust includes the Receivables, all monies due or to
become due thereunder, all proceeds of the Receivables, including Collections
that may be used by Greenwood or any other Servicer for its own benefit prior to
each Distribution Date, all monies on deposit in the Investor Accounts,
Participation Interests included in the Trust, if any, any additional funds that
may be added to the Trust from time to time, any Credit Enhancement and any
interest rate cap and currency swap or other interest rate protection agreements
with respect to any outstanding series of investor certificates. Pursuant to the
Pooling and Servicing Agreement, Greenwood has the right, and in some
circumstances the obligation, to designate Additional Accounts, which may be
Greenwood Discover Card accounts or credit accounts originated by Greenwood or
an affiliate of Greenwood, to be included as Accounts, or to add Participation
Interests to the Trust, subject to certain conditions. See "-- Addition of
Accounts." In addition, Greenwood has the right, subject to certain conditions,
to designate Accounts for removal from the Trust. See "-- Removal of Accounts."
The Trust was formed for the purpose of issuing investor certificates of
various series pursuant to the Pooling and Servicing Agreement and a Series
Supplement for each series. The Trust, as a master trust, has issued and is
expected to issue additional series from time to time and to continue as a trust
after the Series Termination Date of any particular series. The Trust will not
engage in any business activity other than acquiring and holding the Receivables
and the proceeds therefrom, issuing investor certificates and the Seller
Certificate and making payments thereon, investing funds on deposit in the
Investor Accounts pursuant to the Pooling and Servicing Agreement and the
relevant Series Supplements and entering into interest rate cap and currency
swap or other rate protection agreements and other agreements with third parties
for the benefit of the investor certificateholders of one or more series. As a
consequence, the Trust is not expected to have any need for additional capital
resources except for the Receivables in Additional Accounts or Participation
Interests, if applicable.
THE TRUSTEE
First Bank National Association (successor trustee to Bank of America
Illinois, formerly Continental Bank, National Association), is the Trustee under
the Pooling and Servicing Agreement. Greenwood and its affiliates may from time
to time enter into normal banking and trustee relationships with the Trustee.
The Trustee, Greenwood and any of their respective affiliates may hold investor
certificates in their own names. In addition, for purposes of meeting the legal
requirements of certain local jurisdictions, the Trustee has the power to
appoint a co-trustee or separate trustees of all or any part of the Trust. In
the event of such an appointment, all rights, powers, duties and obligations
conferred or imposed upon the Trustee by the Pooling and Servicing Agreement or
any Series Supplement will be conferred or imposed upon the Trustee and such
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separate trustee or co-trustee jointly or, in any jurisdiction in which the
Trustee will be incompetent or unqualified to perform certain acts, singly upon
such separate trustee or co-trustee, who will exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Master Servicer will
be obligated to appoint a successor Trustee. The Master Servicer also may remove
the Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Master Servicer may be obligated to appoint a successor
Trustee. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.
INDEMNIFICATION OF THE TRUST AND THE TRUSTEE
The Pooling and Servicing Agreement provides that the Holder of the Seller
Certificate will indemnify the Trust and the Trustee from and against any loss,
liability, expense, damage or injury suffered or sustained arising out of the
activities of the Sellers with respect to the Trust or the Trustee; provided,
however, that the Holder of the Seller Certificate will not indemnify (a) the
Trustee for liabilities imposed by reason of fraud, negligence, breach of
fiduciary duty or misconduct by the Trustee in the performance of its duties
under the Pooling and Servicing Agreement or any Series Supplement, (b) the
Trust or the investor certificateholders for liabilities arising from actions
taken by the Trustee at the request of investor certificateholders or (c) the
Trust or the investor certificateholders with respect to any federal, state or
local income or franchise taxes (or any interest or penalties with respect
thereto) required to be paid by the Trust or the investor certificateholders.
Any such indemnification only will be from the assets of the related Seller,
will be subordinate to the security interest of the Trust in the Receivables and
will not constitute a claim against such Seller in excess of the lesser of (i)
that Seller's assets available to pay such claim or (ii) the amount of such
claim multiplied by a fraction the numerator of which is the aggregate amount of
Principal Receivables in the Trust that were transferred to the Trust by that
Seller and the denominator of which is the aggregate amount of Principal
Receivables in the Trust.
SALE AND ASSIGNMENT OF RECEIVABLES TO THE TRUST
On the Initial Closing Date and the Addition Dates to date, Greenwood sold
and transferred to the Trust, and as of any future Addition Date Greenwood will
sell and transfer to the Trust, all of its right, title and interest in and to
existing Receivables and in and to all Receivables created thereafter, on a
daily basis as they arise, until the termination of the Trust, in exchange for
the Seller Certificate and the right to direct the issuance of, and receive the
proceeds from the sale of, new series of investor certificates. See "--
Formation of the Trust."
In connection with the transfer of the Receivables to the Trust by
Greenwood, Greenwood has indicated in its computer files that the Receivables
have been transferred to the Trust. In addition, Greenwood has provided (and,
with respect to any Additional Accounts, will provide) to the Trustee a computer
file containing a true and complete list of each Account (including each
Additional Account) identified by account number. Greenwood is not obligated to
deliver to the Trustee any other records or agreements relating to the Accounts
or the Receivables. Greenwood will not segregate the records and agreements that
it maintains relating to the Accounts and the Receivables from records and
agreements relating to other credit accounts and receivables, nor will Greenwood
mark these records or agreements to reflect the sale of the Receivables to the
Trust, except insofar as an electronic or other indicator is necessary to
service the Accounts in accordance with the Pooling and Servicing Agreement and
any Series Supplement. The Trustee will have reasonable access to these records
and agreements as required by applicable law and to enforce the rights of the
certificateholders. Greenwood filed a UCC-1 financing statement in accordance
with applicable state law to perfect the Trust's interest in the Receivables,
and will file any continuation
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statements with respect thereto which may be necessary to maintain such
perfection. See "Certain Legal Matters Relating to the Receivables."
ADDITION OF ACCOUNTS
Pursuant to the Pooling and Servicing Agreement, Greenwood, in its sole
discretion, has designated, and may again in the future designate, credit
accounts originated by Greenwood or an affiliate of Greenwood as Additional
Accounts, the receivables in which have been or will be transferred to the
Trust, or to convey Participation Interests to the Trust. In addition, Greenwood
will be required to designate Additional Accounts or convey Participation
Interests if the aggregate amount of Principal Receivables in the Trust on the
last day of any Due Period is less than the Minimum Principal Receivables
Balance.
Additional Accounts may consist of additional Discover Card accounts
originated by Greenwood or other credit accounts originated by Greenwood or an
affiliate of Greenwood, including, in each case, newly originated accounts. Each
assignment of Additional Accounts will be subject to certain conditions,
including the execution and delivery of a written assignment and an Opinion or
Opinions of Counsel relating to the Trust's security interest in the Receivables
in the Additional Accounts and insolvency and related matters, and delivery of a
certificate of a Servicing Officer regarding the selection criteria used to
select such Additional Accounts. Each assignment of Additional Accounts will
also be subject to the condition that either (i) the Rating Agencies confirm
that the proposed assignment of Additional Accounts will not cause the rating of
any class of any series of investor certificates then outstanding to be lowered
or withdrawn or (ii) the proposed assignment of Additional Accounts complies
with any limitations established by the Rating Agencies on the ability of
Greenwood to designate Additional Accounts. Unless each Rating Agency otherwise
consents, as of the last day of any calendar year, the number of Accounts
designated as Additional Accounts in reliance on clause (ii) of the preceding
sentence with respect to such calendar year or the amount of Principal
Receivables in those Accounts, as applicable, will not exceed a number equal to
20% of the number of Accounts in the Trust or the amount of Principal
Receivables in the Trust, as applicable, in each case as of the first day of
that calendar year; and, as of the last day of any three calendar month period,
the number of Accounts designated as Additional Accounts in reliance on clause
(ii) of the preceding sentence with respect to such three-month period or the
amount of Principal Receivables in those Accounts, as applicable, will not
exceed a number equal to 15% of the number of Accounts in the Trust or the
amount of Principal Receivables in the Trust, as applicable, in each case as of
the first day of such three-month period.
Additional Accounts will be selected on the basis of selection criteria
that are believed by the Servicer of such accounts to be not materially adverse
to the interests of the holders of any class of any series of investor
certificates then outstanding or any Credit Enhancement Provider.
The Trust will receive all Collections in respect of Receivables in
Additional Accounts in the same manner as Collections in respect of other
Receivables, except that Finance Charge Receivables deemed billed on the
Receivables in the Additional Accounts for the Due Period during which the
Additional Accounts were added to the Trust may be an estimate of such amount
prepared by the Servicer with respect to the Additional Accounts.
The terms governing any Additional Accounts or Participation Interests may
differ from the terms governing the Accounts initially included in the Trust,
including the possibility that some or all Additional Accounts or Participation
Interests will have lower periodic finance charges or fees than the initial
Accounts, which may have the effect of reducing the percentage of Finance Charge
Collections relative to the amount of Principal Collections.
The addition of Participation Interests to the Trust will be effected by an
amendment to the Pooling and Servicing Agreement that will not require the
consent of any investor certificateholders. Each conveyance of Participation
Interests to the Trust will be subject to certain conditions, including delivery
of a certificate of Greenwood stating that Greenwood reasonably believes that
the
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addition of the Participation Interests will not be materially adverse to the
interests of the holders of any class of any series of investor certificates
then outstanding or any Credit Enhancement Provider, delivery of an Opinion of
Counsel relating to the Trust's security interest in Participation Interests and
insolvency and related matters and confirmation from the Rating Agencies that
the proposed conveyance of Participation Interests will not cause the rating of
any class of any series of investor certificates then outstanding to be lowered
or withdrawn.
Additional Accounts or accounts underlying Participation Interests need not
be Discover Card accounts or accounts originated by Greenwood, may be composed
entirely of newly originated accounts or contain a higher proportion of newly
originated accounts than the Accounts currently included in the Trust and may
contain accounts originated using criteria different from those applied to the
Accounts currently included in the Trust. Accordingly, there can be no assurance
that any Additional Accounts or accounts underlying Participation Interests will
be of the same credit quality as the Accounts currently included in the Trust.
REMOVAL OF ACCOUNTS
Pursuant to the Pooling and Servicing Agreement, Greenwood may, but will
not be obligated to, designate Accounts for removal from the Trust (such
Accounts being referred to hereinafter as the "Removed Accounts"). Such removal
will be effective as of the last day of the Due Period in which Greenwood
designates Accounts for removal from the Trust.
Each removal of Accounts will be subject to certain conditions, including
the delivery of an Officer's Certificate confirming that (i) the aggregate
amount of Principal Receivables in the Trust less the aggregate amount of
Principal Receivables in the Removed Accounts is not less than the Minimum
Principal Receivables Balance, (ii) the removal of the Removed Accounts will
not, in the reasonable belief of Greenwood, cause either (A) an Amortization
Event to occur with respect to any series then outstanding or (B) the Deficit
Accumulation Amount or Deficit Liquidation Amount, as applicable, with respect
to any series then outstanding to be greater than zero on any Distribution Date
with respect to that series, (iii) no selection procedures believed by Greenwood
to be materially adverse to the investor certificateholders were utilized in
selecting the Removed Accounts and (iv) the Rating Agencies have advised
Greenwood that the removal will not cause the rating of any class of any
outstanding series of investor certificates to be lowered or withdrawn.
TERMINATION OF THE TRUST
The Pooling and Servicing Agreement provides that the Trust will terminate
on October 16, 2014 (the "Final Trust Termination Date") or, if earlier, at the
option of the Sellers, on the day after the Distribution Date on which funds
have been deposited into the Series Distribution Accounts sufficient to pay in
full the Aggregate Investor Interest plus all accrued and unpaid Certificate
Interest on all series then outstanding.
DESCRIPTION OF THE INVESTOR CERTIFICATES
The investor certificates of a series will be issued pursuant to the
Pooling and Servicing Agreement, which was filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and a Series
Supplement. The following summary of the investor certificates does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the Pooling and Servicing Agreement and the applicable Series Supplement. On
written request to the Trustee at its principal corporate trust office, the
Trustee will provide to any investor certificateholder without charge a copy of
the Pooling and Servicing Agreement (without exhibits or schedules) and the
applicable Series Supplement (without exhibits).
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GENERAL
Each series will be issued pursuant to the Pooling and Servicing Agreement
and a Series Supplement. The Series Supplement will consist of two parts, a
Series Term Sheet and an Annex. The Series Term Sheet will set forth the basic
terms pertaining to the series. The Annex will constitute the bulk of the Series
Supplement and will contain the detailed provisions regarding allocations of
Collections and payments to the investor certificateholders of the series. The
Annex is designed to be used for a variety of different types of series, and,
accordingly, contains some provisions that will not be applicable to all series.
The Series Term Sheet, in conjunction with the Annex, will set forth all of the
specific terms of the series.
Each series will consist of one or more classes of investor certificates.
Each investor certificate will represent a Fractional Undivided Interest in the
Trust, including the right to a percentage of all Collections on the Receivables
in the Trust. See "-- Class Percentages and Seller Percentage." Each investor
certificate of a series will represent the right to receive payments of interest
on Interest Payment Dates with respect to such series at the applicable
Certificate Rate on the Class Invested Amount with respect to such investor
certificate. If a series has a Controlled Liquidation Period, each investor
certificate of such series will represent the right to receive monthly payments
of principal during the Controlled Liquidation Period and the Amortization
Period, if any, with respect to such series. If a series has an Accumulation
Period, each investor certificate of such series will represent the right to
receive repayment of principal on an applicable Expected Final Payment Date and
monthly payments of principal during the Amortization Period, if any, with
respect to such series. See "Description of the Investor Certificates --
Interest Payments" and "-- Principal Payments" herein and in the related
Prospectus Supplement. With respect to a series having a class of subordinated
certificates, the rights of the Class B Certificateholders to receive payments
will be subordinated to the rights of the Class A Certificateholders with
respect to such series to the extent described in the related Prospectus
Supplement. See "Description of the Investor Certificates -- Allocations,
Reallocations and Subordination of Collections -- Subordination of Class B
Certificates" herein and in the related Prospectus Supplement.
Greenwood holds a residual interest in the Trust (the "Seller Interest"),
which is represented by the Seller Certificate. The Seller Interest represents
the interest in the Principal Receivables not represented by the investor
certificates of any series outstanding at any given time. The Seller Certificate
represents an undivided interest in the Principal Receivables, including the
right to a varying percentage (the "Seller Percentage") of all Collections on
the Receivables in the Trust. See "-- Class Percentages and Seller Percentage."
The amount of Principal Receivables in the Trust will vary each day as new
Principal Receivables are created and others are paid. The amount of the Seller
Interest, therefore, will fluctuate each day to reflect the changes in the
amount of Principal Receivables in the Trust. The amount of the Seller Interest
also will change when additional series are issued, when the Series Investor
Interest for any series declines as principal payments are made to, or
segregated into Investor Accounts for the benefit of, the investor
certificateholders of that series, and when Receivables in Additional Accounts
are added to the Trust or Receivables in Removed Accounts are removed from the
Trust.
INTEREST PAYMENTS
Interest will accrue on the Invested Amount of the investor certificates of
a series or class at the per annum rate either specified in or determined in the
manner specified in the related Prospectus Supplement. Except as otherwise
provided herein or in the related Prospectus Supplement, Finance Charge
Collections and certain other amounts allocable to the investor
certificateholders of a series will be used to make interest payments to
investor certificateholders of such series on each Interest Payment Date
specified in the related Prospectus Supplement. If the Interest Payment Dates
for a series or class occur less frequently than monthly, such Finance Charge
Collections or other
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amounts (or the portion thereof allocable to such series or class) will be
deposited in one or more Series Interest Funding Accounts and used to make
interest payments to investor certificateholders of such series or class on the
following Interest Payment Date. If a series has more than one class of investor
certificates, each such class may have a separate Interest Funding Account.
Funds on deposit in a Series Interest Funding Account will be invested in
Permitted Investments. Any earnings (net of losses and investment expenses) on
funds in a Series Interest Funding Account will be paid to, or at the direction
of, Greenwood except as otherwise specified in the Prospectus Supplement.
Interest with respect to the investor certificates of each series will accrue
and be calculated on the basis described in the related Prospectus Supplement.
PRINCIPAL PAYMENTS
The investor certificates of each series will have a Revolving Period
during which no distributions of Principal Collections will be made to the
investor certificateholders unless otherwise specified in the related Prospectus
Supplement. Principal Collections allocable to the investor certificates during
the Revolving Period will first be made available, under certain circumstances,
to fund Certificate Principal with respect to other series then outstanding in
the Group to which such series belongs that are eligible for such reallocation.
Any remaining Principal Collections generally will be paid to Greenwood, up to
the amount of the Seller Interest. See "-- Allocations, Reallocations and
Subordination of Collections -- Allocations Among Series and to Sellers."
Unless otherwise specified in the related Prospectus Supplement, following
the Revolving Period, unless an Amortization Period commences with respect to a
series, each series will have either an Accumulation Period or a Controlled
Liquidation Period. If a series has an Accumulation Period, the principal of the
investor certificates of the series will be scheduled to be paid in full on an
Expected Final Payment Date. If a series has a Controlled Liquidation Period,
the principal of the investor certificates of the series will be paid in
installments commencing on the Principal Commencement Date. If a series has more
than one class of investor certificates, a different method of paying principal,
Expected Final Payment Date and/or Principal Commencement Date may be specified
for each class. If an Amortization Event occurs with respect to a series, the
payment of principal with respect to the investor certificates of such series
may commence earlier than the Expected Final Payment Date or Principal
Commencement Date, as applicable, and the final principal payment with respect
to the investor certificates of such series may be made earlier or later than
the Expected Final Payment Date or other expected date. See "Description of the
Investor Certificates -- Distributions of Collections and Application of
Collections and Certain Other Amounts" in the related Prospectus Supplement.
ISSUANCE OF ADDITIONAL SERIES
Series of investor certificates have previously been issued and are
outstanding. The Pooling and Servicing Agreement provides that Greenwood may
direct the Trustee from time to time to issue additional series of investor
certificates, subject to certain conditions (each such issuance, a "New
Issuance"). Each New Issuance will be pursuant to the Pooling and Servicing
Agreement and a Series Supplement. Unless otherwise specified in the related
Prospectus Supplement, each New Issuance will have the effect of reducing the
amount of the Seller Interest by an amount equal to the Series Initial Investor
Interest for the new series.
Pursuant to the Pooling and Servicing Agreement, Greenwood will designate
the terms of any New Issuance including, but not limited to, its Series Initial
Investor Interest, the number of classes, the Class Initial Investor Interest
for each class, the Certificate Rate for each class, the Payment Dates, the
Series Termination Date and the Group to which the series will belong. The
Pooling and Servicing Agreement does not require the consent of investor
certificateholders of any series to issue a new series, and Greenwood, any
Additional Sellers, the Master Servicer, the Servicer and the Trustee do not
intend to request the consent of investor certificateholders of any series to
the issuance of a new series.
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Greenwood and any Additional Sellers may offer for sale any series under a
prospectus or other disclosure document in transactions either registered under
the Securities Act of 1933, as amended (the "Securities Act of 1933"), or exempt
from registration thereunder. Such offerings may be direct, through one or more
underwriters or placement agents, in fixed price offerings or in negotiated
transactions or otherwise. Any such series may be issued in fully registered or
book-entry form (or in bearer form, if offered outside the United States), in
minimum denominations determined by the Sellers. Greenwood intends to offer
additional series from time to time, but is under no obligation to do so. See
"Plan of Distribution."
COLLECTIONS ACCOUNT AND GROUP COLLECTIONS ACCOUNTS
The Trustee has established and maintains in the name of the Trust a
"Collections Account" and, for each Group of series, a "Group Collections
Account." Each such account is a segregated trust account established with the
Trustee or a "Qualified Institution," defined as a depository institution
organized under the laws of the United States or any one of the states thereof
that at all times has a short-term certificate of deposit rating of A-1/P-1 or
better from the Rating Agencies and whose deposits are insured by the FDIC.
Funds on deposit in the Collections Account or any Group Collections Account are
invested in Permitted Investments pursuant to the Pooling and Servicing
Agreement. The Master Servicer has the revocable power to instruct the Trustee
to make withdrawals from the Collections Account and each Group Collections
Account for the purpose of carrying out its duties under the Pooling and
Servicing Agreement and any Series Supplement.
Greenwood as Servicer deposits from Collections for any day an amount equal
to the sum of its Required Daily Deposits for each series then outstanding
directly into the Collections Account within two Business Days following the
Date of Processing of such Collections. Any Collections with respect to
Greenwood Discover Card Accounts not deposited into the Collections Account are
used by Greenwood for its own benefit until the Distribution Date on which those
Collections are to be allocated to certificateholders. Greenwood may cease to
deposit Collections into the Collections Account, and instead use all
Collections with respect to Greenwood Discover Card Accounts received in each
Due Period until the Distribution Date on which those Collections are to be
allocated to certificateholders, if and when such use will not result in the
lowering or withdrawal of the rating of any class of any series of investor
certificates then outstanding by the Rating Agencies. In the event that there
are additional Servicers, each such additional Servicer also will deposit from
Collections for any day an amount equal to the sum of its required daily
deposits for each series then outstanding directly into the Collections Account
within two Business Days following the Date of Processing of such Collections,
unless the use by such Servicer of Collections received by it for its own
account prior to the applicable Distribution Date will not result in the
lowering or withdrawal of the rating of any class of any series then outstanding
by the Rating Agencies.
On or before each Distribution Date with respect to each Group, Greenwood
as Master Servicer directs the Trustee, first, to withdraw that portion of the
amount of Collections allocable to the Seller Interest with respect to that
Distribution Date from the Collections Account and pay such amount to the Holder
of the Seller Certificate and second, to withdraw all remaining Collections from
the Collections Account and deposit such Collections in each Group Collections
Account, on or before the Distribution Date with respect to that Group, in an
amount equal to the sum of (x) the sum of the Series Finance Charge Collections
for each series that is a member of that Group and (y) the sum of the Series
Principal Collections for each series that is a member of that Group. However,
allocations to Investor Accounts may be deemed to be made and payments to the
Holder of the Seller Certificate or to the Master Servicer may be made, prior to
a Distribution Date, on the date the Master Servicer delivers the monthly master
servicer statement and the information required to be included in the monthly
investor certificateholders' statement with respect to each series then
outstanding to the Trustee. With respect to each Group, Collections in the Group
Collections Account for such Group will be allocated, deposited or paid on or
prior to each Distribution Date with
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respect to such Group according to the terms of each Series Supplement relating
to the outstanding series in such Group.
Any earnings (net of losses and investment expenses) on funds on deposit in
the Collections Account or any Group Collections Account will be paid to the
Holder of the Seller Certificate.
CLASS PERCENTAGES AND SELLER PERCENTAGE
Pursuant to the Pooling and Servicing Agreement and all Series Supplements
for series then outstanding, the Master Servicer will allocate among the Class
Investor Interests for each class of each series then outstanding, the Seller
Interest, and any other interests in the Receivables (such as, under certain
circumstances, the CCA Investor Interest with respect to certain outstanding
series), all Finance Charge Collections, all Principal Collections and the
Charged-Off Amount. The Master Servicer will make each allocation by multiplying
the amount of Finance Charge Collections, Principal Collections and the
Charged-Off Amount by the applicable Class Percentage, Seller Percentage or
other percentage.
For convenience, this Prospectus refers to the Class Percentage for each
class (and certain other percentages with respect to outstanding series) with
respect to Finance Charge Collections, Principal Collections and the Charged-Off
Amount as if those percentages will not in each case vary. The Class Percentages
(and certain other percentages), however, may vary in each case as detailed in
the "Glossary of Terms" contained in the related Prospectus Supplement. The
method of calculating Class Percentages and other percentages with respect to
each series of investor certificates will be set forth in the applicable Series
Supplement. The Seller Percentage, in all cases, will equal 100% minus the sum
of the Series Percentages for each series then outstanding.
ALLOCATIONS, REALLOCATIONS AND SUBORDINATION OF COLLECTIONS
Allocations Among Series and to Sellers. On or before each Distribution
Date, the Master Servicer will deposit into the Collections Account that portion
of Collections with respect to the related Due Period that are to be allocated
on that Distribution Date and that have not previously been deposited into the
Collections Account and direct the Trustee to withdraw from the Collections
Account and pay to Greenwood that portion of the sum of (x) the total amount of
Finance Charge Collections for the related Due Period less the sum of the amount
of Series Finance Charge Collections for each series then outstanding for the
related Due Period and (y) the total amount of Principal Collections for the
related Due Period less the sum of the amount of Series Principal Collections
for each series then outstanding for the related Due Period that is to be
allocated to the Holder of the Seller Certificate for that Distribution Date.
The Master Servicer will direct the Trustee to withdraw from the Collections
Account and pay to each Group Collections Account, on or before the Distribution
Date with respect to that Group, the sum of (x) the Series Finance Charge
Collections for each series that is a member of that Group and (y) the Series
Principal Collections for each series that is a member of that Group.
Allocations of Collections to the series within each Group will be as set forth
in the Series Supplements for each series within such Group. With respect to
each Group, Collections in the Group Collections Account for such Group will be
allocated, deposited or paid on or prior to each Distribution Date with respect
to such Group according to the terms of each Series Supplement relating to the
outstanding series of such Group.
Subordinate Series. The Pooling and Servicing Agreement permits the
issuance of series of investor certificates that are subordinate in right of
payment, in whole or in part, to one or more other series (any such subordinate
series, a "Subordinate Series"). Unless otherwise specified in the related
Prospectus Supplement, a series will not be subordinate to any other series.
Unless otherwise specified in the related Prospectus Supplement, the Series
Supplement for each series, however, will provide for the possibility that a
Subordinate Series with respect to such series may be issued in the future. The
Seller may, but is under no obligation to, issue a series that is subordinate to
one or more series at any time. The extent to which such Subordinate Series, if
issued, will be
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subordinated to one or more series will be set forth in the Series Supplement
with respect to such Subordinate Series.
Subordination of Class B Certificates. Unless otherwise specified in the
related Prospectus Supplement, in the case of a series of investor certificates
issued with two classes, the Class B Certificates will be subordinated to the
Class A Certificates. Certain amounts originally allocable to the Class B
Certificates may be reallocated to the extent necessary to fund certain amounts
with respect to the Class A Certificates. If these reallocations are not
reimbursed, the Investor Interest with respect to the Class B Certificates will
be reduced. If applicable, see "Description of the Investor Certificates --
Allocations, Reallocations and Subordination of Collections -- Subordination of
Class B Certificates" in the related Prospectus Supplement.
ADJUSTMENTS TO RECEIVABLES
The aggregate amount of Receivables will increase or decrease, as the case
may be, to the extent any Receivable is adjusted without payment by or on behalf
of a cardmember. Such adjustments include, but are not limited to, any
Receivable that was created as a result of a fraudulent or counterfeit charge
that the Servicer with respect to such Receivable adjusts, increases, reduces,
modifies or cancels in accordance with its Credit Guidelines, or any Receivable
that was created in respect of merchandise returned by the cardmember. If the
exclusion of the amount of an adjustment from the calculation of the Seller
Interest would cause the Seller Interest to be an amount less than zero,
Greenwood is obligated to make, no later than the business day following the
last day of the Due Period during which the adjustment is made, a deposit into
the Collections Account in immediately available funds in an amount equal to the
amount by which the adjustment exceeds the Seller Interest.
In addition, under certain limited circumstances, a credit account that is
not an Account may be combined with an Account. Such a combination may result in
an increase or decrease in the amount of Receivables, depending on whether the
Account is the account surviving the combination. Greenwood has no reason to
believe that such account combinations will have a material effect on the
aggregate amount of Receivables in the Trust.
DISTRIBUTIONS OF COLLECTIONS AND APPLICATION OF COLLECTIONS AND CERTAIN OTHER
AMOUNTS
Distribution Among Series. On or before each Distribution Date, Greenwood
as Master Servicer will direct the Trustee to withdraw from the Collections
Account and pay to each Group Collections Account, on or before the Distribution
Date with respect to that Group, an amount equal to the sum of (x) the sum of
the Series Finance Charge Collections for each series that is a member of that
Group and (y) the sum of the Series Principal Collections for each series that
is a member of that Group. On or before each Distribution Date with respect to
each Group, amounts on deposit in the Group Collections Account with respect to
that Group will be distributed in accordance with the terms of the Series
Supplements for each series in that Group. With respect to each Group,
Collections in the Group Collections Account for such Group will be allocated,
deposited or paid on or prior to each Distribution Date with respect to the
series in such Group according to the terms of each Series Supplement relating
to the outstanding series in such Group.
Net Payments. All payments made pursuant to the Pooling and Servicing
Agreement or any Series Supplement on any Trust Distribution Date or
Distribution Date on which Greenwood is the Master Servicer, between the Master
Servicer or the Holder of the Seller Certificate and the Investor Accounts, may
be aggregated for such Trust Distribution Date or Distribution Date. Therefore,
Greenwood, acting as Master Servicer and as agent of the Holder of the Seller
Certificate, may make only one payment to each account in satisfaction of all
payments of the Holder of the Seller Certificate and the Master Servicer
pursuant to the Pooling and Servicing Agreement or any Series Supplement, to the
extent that all payment obligations of the Master Servicer and of the Holder of
the Seller Certificate to each account on each Trust Distribution Date or
Distribution Date exceed all
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amounts to be paid out of that account to the Master Servicer and the Holder of
the Seller Certificate on such Trust Distribution Date or Distribution Date.
ADDITIONAL FUNDS
The Pooling and Servicing Agreement provides that Greenwood may, from time
to time, elect to add certain funds to the Trust ("Additional Funds") by
delivering a written notice of the election to the Trustee, the Master Servicer
and the Rating Agencies, which notice will specify the method of calculating the
amount of such funds to be added to the Trust as of any Distribution Date and
the source of those funds. No election will become effective until Standard &
Poor's has advised the Master Servicer and Greenwood that the election will not
cause the rating of any class of any series then outstanding to be lowered or
withdrawn. During any time that Additional Funds are being added to the Trust,
with respect to each series then outstanding, on or before the Distribution Date
with respect to each such series, the Master Servicer will cause an amount equal
to the product of (i) a fraction the numerator of which will be the Series
Investor Interest and the denominator of which will be the Aggregate Investor
Interest and (ii) the amount of Additional Funds for the preceding Due Period,
to be deposited into the Series Collections Account for each series. The amount
of Additional Funds allocated to each series will be further allocated in
accordance with the provisions of each Series Supplement. Unless otherwise
specified in the related Prospectus Supplement, the Series Supplement for each
series will specify that any Additional Funds allocated to such series will be
further allocated between the classes of such series based on the Class Investor
Interest of each class as of the relevant Distribution Date (the "Class
Additional Funds" for each class). Unless otherwise specified in the related
Prospectus Supplement, no Additional Funds have been added to the Trust as of
any Series Closing Date, and Greenwood is under no obligation to add Additional
Funds to the Trust at any time in the future.
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF SERIES
The final payment of principal and interest on investor certificates of a
series will be due and payable no later than the Series Termination Date
specified in the related Prospectus Supplement.
The final payment of principal of and interest on any investor certificate
will be made only upon presentation and surrender of such investor certificate
at the office or agency specified in the notice from the Trustee to the investor
certificateholders regarding the final distribution. The Trustee will provide
such notice to the investor certificateholders not later than the tenth day of
the month of the final distribution.
Each series will terminate on the earlier of (i) the Series Termination
Date with respect to such series and (ii) the day following the Distribution
Date on which the final payment of principal is made to the investor
certificateholders of such series.
If, as of the Distribution Date in the month preceding the Series
Termination Date with respect to a series (after giving effect to all transfers,
withdrawals and deposits to occur on such Distribution Date), the Series
Investor Interest with respect to such series would be greater than zero,
Receivables (or interests therein) in an amount sufficient to yield proceeds
equal to the Series Investor Interest plus any accrued but unpaid Certificate
Interest will be sold; provided, however, that the amount of Receivables to be
sold will not exceed the product of (i) the aggregate amount of Receivables in
the Trust and (ii) a fraction, the numerator of which is the Series Investor
Interest and the denominator of which is the Aggregate Investor Interest, in
each case on the Distribution Date in the month preceding the Series Termination
Date; and provided, further, that the Receivables selected to be sold will not
be materially different from the Receivables remaining in the Trust as of that
Distribution Date. The proceeds from this sale will be deposited into the Series
Distribution Account and paid to the investor certificateholders of such series
on the Distribution Date immediately following the deposit. The payment will be
deemed to be the final distribution with respect to the investor certificates of
such series.
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CREDIT ENHANCEMENT
The Credit Enhancement with respect to a series may include a cash
collateral account, a letter of credit, a surety bond, an insurance policy or
any other form of credit enhancement described in the related Prospectus
Supplement. Credit Enhancement also may be provided to a series or class of a
series by subordination provisions that require distributions of principal
and/or interest be made with respect to the investor certificates of such series
or class before distributions are made to one or more other series or other
classes of such series.
A description of any Credit Enhancement provided with respect to a series
will be set forth in the related Prospectus Supplement. The description will
include such information as (a) the amount payable under the Credit Enhancement,
(b) any conditions to such payment, (c) the circumstances under which the Credit
Enhancement will be available, (d) the class or classes of the series that will
receive the direct benefit of the Credit Enhancement, (e) the conditions (if
any) under which the amount payable under the Credit Enhancement may be
terminated, reduced or replaced and (f) other material provisions of the related
Credit Enhancement Agreement.
REPURCHASE OF TRUST PORTFOLIO
A Trust Portfolio Repurchase Event will occur upon discovery that as of the
Initial Closing Date or, with respect to any Additional Accounts, as of any date
on which there is an assignment of the Receivables in such Additional Accounts
to the Trust, (a) the Pooling and Servicing Agreement or appropriate assignment,
as the case may be, does not constitute a valid and binding obligation of each
Seller, subject to usual and customary exceptions relating to bankruptcy,
insolvency and general equity principles, (b) the Pooling and Servicing
Agreement or appropriate assignment, as the case may be, does not constitute (1)
a valid transfer and assignment to the Trust of all right, title and interest of
each Seller in and to the Receivables, whether then existing or thereafter
created, and the proceeds thereof, or (2) the grant of a perfected security
interest of first priority under the UCC as in effect in the Applicable State
with respect to each Seller in such Receivables and proceeds thereof effective
as to each Receivable upon the creation thereof, (c) any Seller or a Person
claiming through or under any Seller has any claim to or interest in any
Investor Account, other than the interests of the investor certificateholders or
the interest of any Seller as a debtor for purposes of the UCC as in effect in
the Applicable State with respect to each Seller, or (d) certain representations
and warranties of any Seller regarding (1) its corporate status, authority with
regard to the assignment of Receivables and performance of such Seller's
obligations under the Pooling and Servicing Agreement and any Series Supplement
and (2) the accuracy of information furnished by such Seller to the Trustee, are
not true and the breach is not cured within a specified time period.
Upon the occurrence of a Trust Portfolio Repurchase Event, either the
Trustee or holders of investor certificates evidencing undivided interests in
the Trust aggregating not less than 51% of the Aggregate Invested Amount may
direct Greenwood to purchase Receivables transferred to the Trust on or before
the Distribution Date with respect to each series then outstanding within 60
days of such notice; provided, however, that if an assignment of Additional
Accounts results in a Trust Portfolio Repurchase Event, only the Receivables in
those Additional Accounts will be repurchased. Greenwood will not be required to
make such a purchase, however, if, on any day during the applicable period, the
Trust Portfolio Repurchase Event does not adversely affect in any material
respect the interests of the investor certificateholders as a whole. The
determination of materiality referred to above will be made by an officer of the
Master Servicer in his sole reasonable judgment.
The price for any such purchase with respect to each series then
outstanding will be equal to the sum of the Series Investor Interest and all
accrued but unpaid Certificate Interest with respect to the series; provided,
however, that if an assignment of Additional Accounts results in a Trust
Portfolio Repurchase Event, only the Receivables in those Additional Accounts
shall be repurchased at a price with respect to each series equal to the product
of (i) the Series Investor Percentage with
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respect to Principal Collections for the next following Distribution Date with
respect to the series and (ii) the amount of Receivables attributable to the
Additional Accounts, and the purchase price shall be applied as Collections in
respect of those Receivables in accordance with each applicable Series
Supplement and deposited in the Group Collections Account relating to that
series. In the event that the obligation of Greenwood to repurchase the Trust
portfolio is at any time the subject of concurrent obligations of one or more
other parties to the Seller Certificate Ownership Agreement then Greenwood's
obligation to repurchase the Trust portfolio will be conditioned on Greenwood's
ability to enforce those concurrent obligations against one or more other
parties to the Seller Certificate Ownership Agreement.
REPURCHASE OF SPECIFIED RECEIVABLES
A Receivable Repurchase Event will occur in the event that each Receivable
that is transferred to the Trust is not, as of the time of such transfer, an
Eligible Receivable and such event has a material adverse effect on the investor
certificateholders' interest in the Receivables as a whole and is not cured
within 60 days of the earlier of (i) actual knowledge of the breach by the
relevant Seller or (ii) receipt by such Seller of written notice of any such
event given by the Trustee. The determination of materiality referred to above
will be made by an officer of the Master Servicer in his sole reasonable
judgment. "Eligible Receivable" means each Receivable (a) that is payable in
United States dollars, (b) that was created in compliance, in all material
respects, with all Requirements of Law applicable to the Seller and the Servicer
with respect to the Receivable and pursuant to a Credit Agreement that complies,
in all material respects, with all Requirements of Law applicable to the Seller
and Servicer, (c) as to which, if the Receivable was created before the Initial
Closing Date or the relevant Addition Date, as applicable, (i) at the time of
the creation of the Receivable, the applicable Seller had good and marketable
title thereto free and clear of all liens ("Liens") arising under or through the
Seller and (ii) at the time of the conveyance of such Receivable to the Trust,
the Seller had, or the Trust will have, good and marketable title thereto free
and clear of all Liens arising under or through the Seller, (d) as to which, if
the Receivable was created on or after the Initial Closing Date, at the time of
the creation of the Receivable, the Trust will have good and marketable title
thereto free and clear of all Liens arising under or through the Seller and (e)
which constitutes, or would have constituted, an "account" or "general
intangible" under and as defined in Article 9 of the UCC as then in effect in
the Applicable State with respect to the Receivable. Greenwood will purchase all
the Receivables in each Account in which there is any Receivable to which the
Receivable Repurchase Event relates ("Ineligible Receivables") on the terms and
conditions set forth below.
Greenwood will purchase the Receivables in those Accounts by directing the
Master Servicer to deduct the amount of the Receivables that are Principal
Receivables from the aggregate amount of Principal Receivables in the Trust. In
the event that the exclusion of those Receivables from the calculation of the
Seller Interest would cause the Seller Interest to be an amount less than zero,
on the following Trust Distribution Date, Greenwood will deposit into the
Collections Account in immediately available funds an amount equal to the amount
by which the Seller Interest would be reduced below zero. The deposit will be
considered a repayment in full of the Receivables, and will be treated as
Collections in respect of Principal Receivables for such Due Period. See
"Description of the Investor Certificates -- Distributions of Collections and
Application of Collections and Certain Other Amounts" herein and in the related
Prospectus Supplement. In the event that the obligation of Greenwood to
repurchase Receivables is at any time the subject of concurrent obligations of
one or more other parties to the Seller Certificate Ownership Agreement, then
Greenwood's obligation to repurchase Receivables will be conditioned on
Greenwood's ability to enforce those concurrent obligations against one or more
other parties to the Seller Certificate Ownership Agreement.
REPURCHASE OF A SERIES
A Series Repurchase Event with respect to a series will occur upon
discovery that as of the Series Closing Date, the applicable Series Supplement
does not constitute a legal, valid and binding
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obligation of each Seller enforceable against each Seller in accordance with its
terms, subject to usual and customary exceptions relating to bankruptcy,
insolvency and general equity principles.
Upon the occurrence of a Series Repurchase Event with respect to a series,
either the Trustee or holders of investor certificates of such series evidencing
undivided interests in the Trust aggregating not less than 51% of the Series
Invested Amount with respect to such series may direct Greenwood to purchase the
investor certificates of such series within 60 days after Greenwood receives a
direction to purchase the investor certificates. Greenwood will not be required
to make the purchase, however, if, on any day during the 60-day period, the
Series Repurchase Event does not adversely affect in any material respect the
interests of the investor certificateholders of such series as a whole.
On the Distribution Date set for the purchase, Greenwood will deposit into
the Series Distribution Account with respect to such series an amount equal to
the sum of the Series Investor Interest and all accrued but unpaid Certificate
Interest. The amount on deposit in the Series Distribution Account will be paid
to the investor certificateholders of such series upon presentation and
surrender of their investor certificates.
REPURCHASE OF INVESTOR CERTIFICATES
The Pooling and Servicing Agreement provides that Sellers may become
holders of investor certificates and that Greenwood may cancel any investor
certificates owned by a Seller by providing notice of such cancellation to the
Trustee; provided, however, that Class B Certificates of any series may not be
cancelled unless Greenwood has been advised by the Rating Agencies that such
cancellation will not cause the ratings of any investor certificates then
outstanding to be lowered or withdrawn. Simultaneously with any cancellation of
investor certificates of a series, the Class Invested Amount of the applicable
class of such series and the Series Invested Amount with respect to such series
will be reduced, and the Seller Interest will be increased, by the aggregate
Class Invested Amount represented by the cancelled investor certificates of such
series. No reduction of Class Invested Amount as described in the preceding
sentence will result in a decrease in any Class Percentage with respect to the
affected class if a Fixed Principal Allocation Event with respect to such series
has previously occurred.
SALE OF SELLER INTEREST
The Seller Certificate was issued to Greenwood. Any Additional Sellers also
will become holders of the Seller Certificate, as tenants-in-common with
Greenwood, and will enter into a Seller Certificate Ownership Agreement with
Greenwood. In such event, all references to actions taken by Greenwood as Holder
of the Seller Certificate shall be deemed to be taken by Greenwood on behalf of
the Holders of the Seller Certificate. Pursuant to the Pooling and Servicing
Agreement, neither Greenwood nor any Additional Seller (if any) may transfer,
assign, sell or otherwise convey, pledge or hypothecate or otherwise grant a
security interest in any portion of the Seller Interest represented by the
Seller Certificate, except for the transfer of all or part of any Seller's
interest in the Seller Certificate to an affiliate of Greenwood that is included
in the same "affiliated group" as Greenwood for United States federal income tax
purposes; provided, however, that any Seller may transfer a portion of the
Seller Interest on terms substantially similar to the terms of the Pooling and
Servicing Agreement so long as the agreements and other documentation relating
thereto are consistent with, and subject to, the terms of the Pooling and
Servicing Agreement and any Series Supplement and do not require any action
prohibited or prohibit any action that is either required on the part of the
Master Servicer, any Seller, the Trustee or any Servicer by the terms of the
Pooling and Servicing Agreement and any Series Supplement or necessary to
protect the interests of the investor certificateholders; and provided, further,
that the Seller is advised by the Rating Agencies that the rating of any class
of any series then outstanding would not be lowered or withdrawn as a result of
such transfer. Notwithstanding the above, no such advice from the Rating
Agencies is required if the transfer is made to comply with certain regulatory
requirements.
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REALLOCATION OF SERIES AMONG GROUPS
The Pooling and Servicing Agreement provides that the Master Servicer may
elect, at any time, subject to certain conditions, to move any series from the
Group of which it is then a member to any other Group, including without
limitation to a new Group established at such time of which the series to be
moved is the only series. A series may be moved from one Group to another only
if the following conditions are satisfied: (i) the Group from which the series
is moved and the Group to which the series is moved have the same Distribution
Date; (ii) the Master Servicer shall have certified to the Trustee that the
Master Servicer reasonably believes that the movement of the applicable series
would not (a) result in any delay in the payment of principal to the investor
certificateholders of any series then outstanding, or (b) cause an Amortization
Event to occur with respect to any series then outstanding; and (iii) the Rating
Agencies shall have advised the Master Servicer and Greenwood that the movement
of the applicable series would not cause the rating of any class of any series
then outstanding to be lowered or withdrawn.
AMENDMENTS
The Pooling and Servicing Agreement and any Series Supplement may be
amended from time to time by the Master Servicer, the Sellers, the Trustee and
the Servicers, without the consent of the investor certificateholders of any
outstanding series, for any of the following purposes: (i) to add to the
covenants and agreements contained therein or to surrender any right or power
therein reserved to or conferred upon the Sellers, the Master Servicer or any
Servicer; provided, however, that such action will not adversely affect in any
material respect the interests of the holders of any class of any series then
outstanding; (ii) to add provisions to or change or eliminate any of the
provisions of the Pooling and Servicing Agreement or any Series Supplement;
provided, however, that any such addition, change or elimination will not
adversely affect in any material respect the interests of the holders of any
class of any series then outstanding; (iii) to add provisions to or change any
of the provisions of the Pooling and Servicing Agreement or any Series
Supplement for the purpose of accommodating the addition of Participation
Interests to the Trust; or (iv) to cure any ambiguity or to correct or
supplement any defective or inconsistent provision contained in the Pooling and
Servicing Agreement, in any Series Supplement or in any amendment to the Pooling
and Servicing Agreement or any Series Supplement.
The Pooling and Servicing Agreement and the Series Supplement for any
series also may be amended from time to time by the Master Servicer, the
Sellers, the Trustee and the Servicers with the consent of the holders of
investor certificates evidencing Fractional Undivided Interests aggregating not
less than 66 2/3% of the Class Invested Amount of each class of such series
adversely affected for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, the Pooling and Servicing
Agreement or the applicable Series Supplement, or of modifying in any manner the
rights of the investor certificateholders of such series; provided, however,
that the Trustee will have been advised by each Rating Agency that such
amendment will not result in the withdrawal or lowering of the ratings assigned
to the investor certificates of such series by that Rating Agency; and,
provided, further, that no such amendment will materially and adversely affect
the interests of the investor certificateholders of any class of such series by
reducing in any manner the amount of, or delaying the timing of, distributions
that are required to be made to any investor certificate without the consent of
the affected investor certificateholders, or by reducing the aforesaid
percentage required to consent to any such amendment, without the consent of
each investor certificateholder of each affected class. For purposes of
calculating whether a 66 2/3% consent has been achieved, the applicable Class
Invested Amount or Series Invested Amount will be calculated without taking into
account the Class Invested Amount represented by any investor certificates
beneficially owned by any Seller or any affiliate of any Seller, and no Seller
or affiliate of a Seller will be entitled to vote on any amendment described in
this paragraph. If any such amendment to the Pooling and Servicing Agreement
would adversely affect the interests of any class of any other series of
investor certificates then outstanding the
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consent of the investor certificateholders of each class adversely affected by
such amendment to the Pooling and Servicing Agreement also will be required.
Promptly after the execution of any amendment or consent described in this
paragraph, the Trustee will notify the investor certificateholders of the
substance of the amendment.
None of the execution and delivery of any Series Supplement, the addition
of Receivables to the Trust, the removal of Receivables from the Trust, the
addition or removal of any Seller or Servicer in connection with an addition to
or removal from the Trust of Receivables, or the replacement of any Servicer,
Master Servicer or Trustee will constitute an amendment to the Pooling and
Servicing Agreement or any Series Supplement for the purposes of the preceding
two paragraphs, provided that any such action described in this sentence is
completed in accordance with the provisions of the Pooling and Servicing
Agreement and/or any applicable Series Supplement, as applicable.
LIST OF INVESTOR CERTIFICATEHOLDERS
In the event that Definitive Certificates are issued with respect to the
investor certificates of any series, upon written request of three or more
investor certificateholders of record of any class of such series representing
Fractional Undivided Interests in the Trust aggregating not less than 5% of the
Class Invested Amount, after having been adequately indemnified by those
investor certificateholders for its costs and expenses, the Trustee will afford
those investor certificateholders access during business hours to the current
list of investor certificateholders of such series for purposes of communicating
with other investor certificateholders of such series with respect to their
rights under the Pooling and Servicing Agreement and the applicable Series
Supplement. See "-- Definitive Certificates."
MEETINGS
The Pooling and Servicing Agreement does not provide for any annual or
other meetings of investor certificateholders of any series.
BOOK-ENTRY REGISTRATION
The information in this section concerning DTC, Cedel Bank, societe anonyme
("Cedel") and Euroclear and their book-entry systems and procedures has been
obtained from sources that Greenwood and the Trust believe to be reliable, but
Greenwood and the Trust take no responsibility for the accuracy of the
information in this section.
Certificate Owners may hold their investor certificates through DTC (in the
United States) or Cedel or Euroclear (in Europe). The investor certificates will
be registered in the name of the nominee of DTC. Cedel and Euroclear will hold
omnibus positions on behalf of the Cedel Participants and the Euroclear
Participants, respectively, through customers' securities accounts in Cedel's
and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
Greenwood has been informed by DTC that DTC's nominee will be Cede & Co.
("Cede"). Accordingly, Cede is expected to be the holder of record of the
investor certificates. The investor certificates will be available for purchase
in book-entry form in minimum denominations of $1,000 and integral multiples
thereof. No person acquiring an interest in the investor certificates (each, a
"Certificate Owner") will be entitled to receive a certificate representing that
person's interest in the investor certificates. Unless and until Definitive
Certificates are issued under the limited circumstances described herein, all
references herein to actions by investor certificateholders will refer to
actions taken by DTC upon instructions from its Participants, as hereinafter
defined, and all references herein to distributions and notices to investor
certificateholders will refer to distributions and notices to DTC or Cede, as
the registered holder of the investor certificates, for distribution to
Certificate Owners in accordance with DTC procedures. See "-- Definitive
Certificates."
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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 UCC and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movements of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other hand, will be effected in
DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC. For additional information regarding clearance and settlement procedures
for the investor certificates, see Annex I, hereto, and for information with
respect to tax documentation procedures relating to the investor certificates,
see Annex I, hereto and "Certain Federal Income Tax Consequences -- Non-United
States Investor Certificateholders."
Certificate Owners that are not Participants or Indirect Participants may
purchase, sell or otherwise transfer ownership of, or other interests in, the
investor certificates only through Participants and Indirect Participants. In
addition, Certificate Owners will receive all distributions of principal and
Certificate Interest from the Trustee through the Participants. Under a
book-entry format, Certificate Owners may experience some delay in their receipt
of payments, since the payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward the payments to its Participants, which
thereafter will forward them to Indirect Participants or Certificate Owners. It
is anticipated that the only investor certificateholder will be Cede, as nominee
of DTC. Certificate Owners will not be recognized by the Trustee as investor
certificateholders, as that term is used in the Pooling and Servicing Agreement,
and Certificate Owners only will be permitted to exercise the rights of investor
certificateholders indirectly through the Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts
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with respect to the investor certificates and is required to receive and
transmit distributions of the principal of and interest on the investor
certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the investor certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge investor certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of those
investor certificates, may be limited due to the lack of a physical certificate
for those investor certificates.
DTC has advised Greenwood that it will take any action permitted to be
taken by an investor certificateholder under the Pooling and Servicing Agreement
or any applicable Series Supplement only at the direction of one or more
Participants to whose account with DTC the investor certificates are credited.
DTC may take conflicting action with respect to other undivided interests in the
investor certificates to the extent that those actions are taken on behalf of
Participants whose holdings include those undivided interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations or
customers ("Cedel Participants") and facilitates the clearance and settlement of
securities transactions between Cedel Participants through electronic book-entry
changes in accounts of Cedel Participants, thereby eliminating the need for
physical movement of certificates. Transactions may now be settled in Cedel in
any of 28 currencies, including United States dollars. Cedel provides to its
Cedel Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depository, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters. Indirect access to Cedel
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 33
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 (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of
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Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to investor certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Consequences." Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by an investor certificateholder under the Pooling and Servicing
Agreement or any applicable Series Supplement on behalf of a Cedel Participant
or Euroclear Participant only in accordance with its relevant rules and
procedures and subject to its Depositary's ability to effect such actions on its
behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of investor certificates among participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
A class of investor certificates will be issued in fully registered,
certificated form to Certificate Owners or their nominees ("Definitive
Certificates"), rather than to DTC or its nominees, only if (i) the Master
Servicer advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to such
class, and the Trustee or the Master Servicer is unable to locate a qualified
successor, (ii) the Master Servicer, at its option, elects to terminate the
book-entry system through DTC, or (iii) after the occurrence of a Master
Servicer Termination Event, Certificate Owners representing in the aggregate not
less than 51% of the respective Class Invested Amount advise the 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
Certificate Owners of such class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates of such class affected by
the event. Upon surrender by DTC of the applicable definitive certificates and
upon the issuance of instructions for re-registration, the Trustee will issue
the applicable investor certificates as Definitive Certificates. Thereafter the
Trustee will recognize the registered holders of such Definitive Certificates as
investor certificateholders under the Pooling and Servicing Agreement and the
applicable Series Supplement.
The Trustee will distribute principal and interest on the investor
certificates directly to Holders of Definitive Certificates in accordance with
the procedures set forth in the Pooling and Servicing Agreement and the
applicable Series Supplement. Distributions on each Distribution Date will be
made to Holders in whose names the Definitive Certificates were registered at
the close of business on the related Record Date by check mailed to the address
of such Holder as it appears on the register maintained by the Trustee. The
final payment on any investor certificate (whether Definitive Certificates or
one of the investor certificates registered in the name of Cede representing the
investor certificates), however, will be made only upon presentation and
surrender of the investor
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certificate at the office or agency specified in the notice of final
distribution to investor certificateholders. The Trustee will provide the notice
to registered investor certificateholders not later than the tenth day of the
month of such final payment.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee, or at such other office as Greenwood designates. No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent may require payment of a sum sufficient to cover any tax or
other governmental charge imposed in connection therewith.
SERVICING
MASTER SERVICER AND SERVICER
Greenwood acts as Master Servicer with respect to the Trust. In addition to
the Master Servicer, there also may be one or more Servicers, each of which will
be a "Servicer" for purposes of the Trust with respect to the Accounts which
that Servicer services. Currently, Greenwood, as Servicer with respect to the
Greenwood Discover Card Accounts, is the only Servicer. Additional Servicers may
be added to the Trust at a later date if receivables in accounts other than
credit accounts originated by Greenwood are added to the Trust. Each Servicer
will perform servicing functions with respect to the Accounts for which it is
the Servicer. The Master Servicer, in its role as Master Servicer, will
coordinate the activities of the various Servicers with respect to the Trust.
The duties of the Master Servicer include aggregating Collections from the
Servicers and distributing such Collections to the various Investor Accounts,
directing the investment of funds on deposit in the Investor Accounts and the
Credit Enhancement Accounts in Permitted Investments, receiving the Monthly
Servicing Fee and allocating it among the Servicers, preparing reports for
investor certificateholders and making any filings on behalf of the Trust with
the Securities and Exchange Commission or other governmental agencies. The
Master Servicer has no duty to pay any amount in lieu of Collections from its
own funds in the event of a failure on the part of any Servicer to transfer
Collections to the Master Servicer or to the Trust, at the direction of the
Master Servicer. Upon the appointment of any additional Servicer, Greenwood as
Master Servicer and Servicer and the additional Servicer will enter into a
Master Servicing Agreement, which will govern the relationship among the Master
Servicer and the Servicers.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer is paid a monthly servicing fee, on behalf of the
investor certificateholders of each series then outstanding and the Sellers, in
respect of each Due Period in an amount equal to no less than 2% per annum
(calculated on the basis of a 360-day year of twelve 30-day months) of the
amount of Principal Receivables in the Trust on the first day of such Due Period
(the "Monthly Servicing Fee"), as compensation for its activities as Master
Servicer and reimbursement for its expenses. In the event that there is more
than one Servicer, the Master Servicer's expenses will include the payment of a
servicing fee to each Servicer, pursuant to the terms of a Master Servicing
Agreement to be entered into by Greenwood as Master Servicer and Servicer and
any other Servicer. The Monthly Servicing Fee is allocated among the Seller
Interest and each series then outstanding. The share of each Monthly Servicing
Fee allocable to the Holder of the Seller Certificate (the "Seller Servicing
Fee") on any Trust Distribution Date is equal to the product of (i) the product
of (x) the Investor Servicing Fee Percentage and (y) and the amount of Principal
Receivables in the Trust as of the first day of the Due Period related to that
Trust Distribution Date and (ii) a fraction the numerator of which is the amount
of the Seller Interest and the denominator of which is the greater of (a) the
amount of Principal Receivables in the Trust and (b) the Aggregate Investor
Interest, and is paid to the Master Servicer by the Holder of the Seller
Certificate on or before each Trust Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, the portion of the fee allocated
to the Class Investor Interest for each class of each series (the
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"Class Monthly Servicing Fee") is equal to the product of the amount of the
Investor Servicing Fee for a given Due Period and a fraction the numerator of
which is the Class Investor Interest and the denominator of which is the Series
Investor Interest, in each case on the first day of that Due Period. The
Investor Servicing Fee for any given Due Period with respect to each Series will
be equal to the product of the Investor Servicing Fee Percentage and the Series
Investor Interest on the first day of the Due Period (or in the case of the
first Distribution Date, on the Series Cut-Off Date). The Class Monthly
Servicing Fee for each class will be funded from Class Finance Charge
Collections and may be funded from certain other sources as described in
"Description of the Investor Certificates -- Distributions of Collections and
Application of Collections and Certain Other Amounts" in the related Prospectus
Supplement. The remainder of the Monthly Servicing Fee will be allocated to each
other outstanding series. Neither the Trustee nor the investor
certificateholders of any series will have any obligation to pay that portion of
the Monthly Servicing Fee that is payable by any class of any other series
issued by the Trust or that is payable by the Sellers.
The Master Servicer pays from its servicing compensation the servicing fees
for each Servicer and certain other expenses incurred in connection with
servicing the Receivables. These include, without limitation, payment of the
fees and disbursements of the Trustee and independent accountants and other fees
and expenses of the Trust not expressly stated in the Pooling and Servicing
Agreement or any Series Supplement to be for the account of the
certificateholders; provided that neither the Master Servicer nor any Servicer
will be liable for any federal, state or local income or franchise tax, or any
interest or penalties with respect thereto, assessed on the Trust, the Trustee
or the certificateholders.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE SERVICERS
Pursuant to the Pooling and Servicing Agreement, neither the Master
Servicer nor any Servicer may resign from its obligations and duties as Master
Servicer or Servicer under the Pooling and Servicing Agreement or any Series
Supplement, except upon determination that such duties are no longer permissible
under applicable law and under certain other limited circumstances. No such
resignation will become effective until the Trustee or a successor to the Master
Servicer or Servicer, as applicable, has assumed such Master Servicer's or
Servicer's responsibilities and obligations under the Pooling and Servicing
Agreement and such Series Supplements.
The Master Servicer or any Servicer may delegate any of its duties under
the Pooling and Servicing Agreement or any Series Supplement; provided, however,
that the delegation of any duties will not relieve the Master Servicer or such
Servicer of its liabilities and responsibilities with respect to such duties and
will not constitute a resignation under the Pooling and Servicing Agreement.
Any corporation into which, in accordance with the Pooling and Servicing
Agreement, the Master Servicer or any Servicer may be merged or consolidated, or
any corporation resulting from any merger or consolidation to which the Master
Servicer or any Servicer is a party, or any corporation succeeding to the
business of the Master Servicer or any Servicer will be, upon execution of a
supplement to the Pooling and Servicing Agreement and each Series Supplement
then outstanding, the successor to the Master Servicer or that Servicer, as
applicable, under the Pooling and Servicing Agreement and those Series
Supplements.
MASTER SERVICER TERMINATION EVENTS
If any Master Servicer Termination Event occurs, either the Trustee or
investor certificateholders evidencing Fractional Undivided Interests
aggregating not less than 51% of the Class Invested Amount for any class of any
series then outstanding that is materially adversely affected thereby, by
written notice to Greenwood as Master Servicer (and to the Trustee if given by
the investor certificateholders), may terminate all of the rights and
obligations of Greenwood as Master Servicer under the Pooling and Servicing
Agreement and any Series Supplement then outstanding. The Trustee will appoint a
successor Master Servicer as promptly as possible. If the Trustee has not
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appointed a successor Master Servicer who has accepted the appointment by the
time Greenwood ceases to act as Master Servicer, all authority, power and
obligations of Greenwood as Master Servicer under the Pooling and Servicing
Agreement and any Series Supplement then outstanding will pass to and be vested
in the Trustee.
A "Master Servicer Termination Event" refers to any of the following
events:
(a) failure by the Master Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any withdrawal, on
the date it is required to do so under the Pooling and Servicing Agreement,
any Series Supplement or the Master Servicing Agreement (or within the five
business days thereafter);
(b) failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Master Servicer set forth in the Pooling and Servicing Agreement, any
Series Supplement or the Master Servicing Agreement that continues
unremedied for a period of 60 days after written notice of the failure
requiring the same to be remedied has been given to the Master Servicer by
the Trustee or to the Master Servicer and the Trustee by holders of
investor certificates evidencing Fractional Undivided Interests aggregating
not less than 25% of the Class Invested Amount for any class of any series
materially adversely affected thereby;
(c) any representation, warranty or certification made by the Master
Servicer in the Pooling and Servicing Agreement, any Series Supplement, the
Master Servicing Agreement or in any certificate delivered pursuant to the
Pooling and Servicing Agreement, any Series Supplement or the Master
Servicing Agreement proves to have been incorrect when made, which has a
material adverse effect on the rights of the investor certificateholders of
any class of any series then outstanding, and which continues to be
incorrect in any material respect for a period of 60 days after written
notice of such failure requiring the same to be remedied has been given to
the Master Servicer by the Trustee or to the Master Servicer and the
Trustee by holders of investor certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Class Invested Amount for
any class of any series materially adversely affected thereby; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Master Servicer. However, the FDIC may have the power
to prevent the Trustee or investor certificateholders from effecting a
transfer of servicing if the relevant Master Servicer Termination Event
relates only to the appointment of a conservator or receiver or the
insolvency of Greenwood, or any other FDIC-insured depository institution,
as Master Servicer. Similarly, if a Master Servicer Termination Event
occurs with respect to a Master Servicer subject to Title 11 of the United
States Code, and no Master Servicer Termination Event exists other than the
filing of a bankruptcy petition by or against such Master Servicer, the
Trustee or investor certificateholders may be prevented from effecting a
transfer of servicing.
SERVICER TERMINATION EVENTS
If any Servicer Termination Event occurs with respect to any Servicer,
either the Trustee or investor certificateholders evidencing Fractional
Undivided Interests aggregating not less than 51% of the Class Invested Amount
for any class of any series then outstanding that is materially adversely
affected thereby, by written notice to Greenwood as Master Servicer and to the
Servicer to which any such Servicer Termination Event relates (and to the
Trustee if given by the investor certificateholders), may terminate all of the
rights and obligations of that Servicer under the Pooling and Servicing
Agreement, any Series Supplement then outstanding and the Master Servicing
Agreement. The Trustee will appoint a successor Servicer with respect to the
Servicer as promptly as possible. If the Trustee has not appointed a successor
Servicer who has accepted the appointment by the time the Servicer ceases to act
as a Servicer, all authority, power and
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obligations of that Servicer under the Pooling and Servicing Agreement, any
Series Supplement then outstanding and the Master Servicing Agreement will pass
to and be vested in the Trustee.
A "Servicer Termination Event," with respect to any Servicer, refers to any
of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit
on the date it is required to do so under the Pooling and Servicing
Agreement, any Series Supplement or the Master Servicing Agreement (or
within the five business days thereafter);
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in the Pooling and Servicing Agreement, any Series Supplement or the
Master Servicing Agreement which continues unremedied for a period of 60
days after written notice of the failure requiring the same to be remedied
has been given to that Servicer by the Trustee or to the Servicer and the
Trustee by holders of investor certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Class Invested Amount for
any class of any series materially adversely affected thereby;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement, any Series Supplement, the Master
Servicing Agreement or in any certificate delivered pursuant to the Pooling
and Servicing Agreement, any Series Supplement or the Master Servicing
Agreement proves to have been incorrect when made, which has a material
adverse effect on the rights of the investor certificateholders of any
class of any series then outstanding, 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 has been given to that Servicer
by the Trustee or to the Servicer and the Trustee by holders of investor
certificates evidencing Fractional Undivided Interests aggregating not less
than 25% of the Class Invested Amount for any class of any series
materially adversely affected thereby; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer. However, the FDIC may have the power to
prevent the Trustee or investor certificateholders from effecting a
transfer of servicing if the relevant Servicer Termination Event relates
only to the appointment of a conservator or receiver or the insolvency of
that Servicer, or any other FDIC-insured depository institution, as
Servicer. Similarly, if a Servicer Termination Event occurs with respect to
a Servicer subject to Title 11 of the United States Code, and no Servicer
Termination Event exists other than the filing of a bankruptcy petition by
or against that Servicer, the Trustee or investor certificateholders may be
prevented from effecting a transfer of servicing.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or about April 15 of
each calendar year the Master Servicer will cause a firm of nationally
recognized independent public accountants to furnish a report to the Trustee,
the Master Servicer and each Servicer (i) to the effect that those accountants
are of the opinion that the system of internal accounting controls in effect on
the date of such report relating to the servicing procedures performed by the
Master Servicer and each Servicer under the Pooling and Servicing Agreement and
any Series Supplement were sufficient for the prevention of errors and
irregularities that would be material to the assets of the Trust and that
nothing has come to the accountants' attention that would cause them to believe
such servicing has not been conducted in compliance with the Pooling and
Servicing Agreement and any Series Supplement, except for such exceptions as the
accountants believe to be immaterial and such other exceptions as will be set
forth in such report and (ii) to the effect that those accountants have compared
the mathematical calculations of the amounts set forth in the Master Servicer's
monthly certificates delivered during the preceding calendar year covered by
such report with the computer reports of the Master Servicer and each Servicer
that generated those amounts, confirming that
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those amounts are in agreement, except for such exceptions as the accountants
believe to be immaterial and such other exceptions as will be set forth in the
report. The procedures to be followed by those accountants will not constitute
an audit conducted in accordance with generally accepted auditing standards.
The Pooling and Servicing Agreement provides for delivery to the Trustee,
Greenwood on behalf of the Holder of the Seller Certificate and the Rating
Agencies on or before April 15 of each calendar year of an annual statement
signed by an officer of the Master Servicer to the effect that (a) in the course
of the officer's duties as an officer of the Master Servicer, the officer would
normally obtain knowledge of any Master Servicer Termination Event, and (b)
whether or not the officer has obtained knowledge of any such Master Servicer
Termination Event and, if so, specifying each Master Servicer Termination Event
of which the signing officer has knowledge and the nature of such Master
Servicer Termination Event. The Pooling and Servicing Agreement also provides
for delivery of a similar annual statement by each Servicer with respect to
Servicer Termination Events.
THE SELLER
GREENWOOD
Greenwood is a wholly owned subsidiary of NOVUS and an indirect subsidiary
of MSDWD. Greenwood was acquired by NOVUS in January 1985. Greenwood was
chartered as a banking corporation under the laws of the State of Delaware in
1911, and its deposits are insured by the FDIC. Greenwood is not a member of the
Federal Reserve System. The executive office of Greenwood is located at 12
Read's Way, New Castle, Delaware 19720. In addition to the experience obtained
by Greenwood in the bank card business since 1985, a majority of the senior
management of the credit, operations and data processing functions for the
Discover Card at Greenwood and NOVUS Services, Inc. ("NSI") has had extensive
experience in the credit operations of other credit card issuers. NSI performs
sales and marketing activities, provides operational support for the Discover
Card program and maintains merchant relationships.
By virtue of the enactment of CEBA, there are certain limitations placed on
Greenwood, including a requirement that Greenwood not engage in activities in
which it was not engaged as of March 5, 1987. Since its acquisition by NOVUS, as
a result of these and earlier limitations, Greenwood has not engaged in the
business of making commercial loans. See "Risk Factors -- Legislation."
Greenwood believes that in light of the programs it has in place, the
limitations of CEBA will not have a material impact on the level of the
Receivables or on Greenwood's ability to service the Receivables.
INSOLVENCY-RELATED MATTERS
It is possible that a receiver or conservator of Greenwood may argue that
the transaction between Greenwood and the Trust, whereby Greenwood has
transferred to the Trust all of its right, title and interest in and to the
Receivables, whether existing on the Cut-Off Date or thereafter arising, is a
pledge of the Receivables rather than an absolute transfer. Accordingly,
Greenwood has granted to the Trustee, on behalf of the Trust, a security
interest in the Receivables. To the extent that this security interest is
validly perfected prior to an insolvency of Greenwood and not taken in
contemplation of such insolvency or with the intent to hinder, delay or defraud
Greenwood or its creditors, this security interest should not be subject to
avoidance by a receiver or conservator of Greenwood, and payments made in
respect of the Receivables (other than payments made to Greenwood by the Trust
with respect to Greenwood's interest in the Seller Certificate) should not be
subject to recovery by a receiver or conservator of Greenwood. If, however, a
receiver or conservator of Greenwood were to assert a contrary position or were
to require the Trust to establish its right to cash Collections in the
possession of Greenwood as Servicer or otherwise by submitting a claim and
completing the administrative claims procedure established under the
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Federal Deposit Insurance Act, as amended, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. In addition, the Federal Deposit Insurance Corporation, if appointed as
conservator or receiver for Greenwood, has the power under the Federal Deposit
Insurance Act, as amended, to repudiate contracts, including contracts of
Greenwood such as the Pooling and Servicing Agreement. The Federal Deposit
Insurance Act, as amended, provides that a claim for damages arising from the
repudiation of a contract is limited to "actual direct compensatory damages." In
the event the Federal Deposit Insurance Corporation were to be appointed as
conservator or receiver of Greenwood and were to repudiate the Pooling and
Servicing Agreement, then the amount payable out of available collateral to the
Certificateholders could be lower than the outstanding principal and accrued
interest on the Certificates. In a 1993 case involving the repudiation by the
Resolution Trust Corporation, which has ceased to exist as of December 31, 1995
(the Federal Deposit Insurance Corporation has taken over its responsibilities),
of certain secured zero-coupon bonds issued by a savings association, a United
States federal district court held that "actual direct compensatory damages" in
the case of a marketable security meant the market value of the repudiated bonds
as of the date of repudiation.
Unless otherwise specified in the related Prospectus Supplement, Greenwood
will receive, on each Series Closing Date, an opinion of Latham & Watkins,
counsel to Greenwood, concluding on a reasoned basis (although there is no
precedent based on directly similar facts) that subject to certain facts,
assumptions and qualifications specified therein (including matters set forth
under "Certain Legal Matters Relating to the Receivables -- Transfer of
Receivables" and "-- Certain UCC Matters"), (i) under New York law, the
perfection and the effect of perfection or nonperfection of a security interest
in the Receivables are governed by the law of the jurisdiction in which the
debtor is located, (ii) if the transfer of the Receivables to the Trust by
Greenwood constitutes an absolute transfer, then the transfer is a transfer of
all right, title and interest of Greenwood in and to those Receivables to the
Trust and (iii) if the transfer is deemed not to be an absolute transfer, it
would be treated as a security interest created by the Pooling and Servicing
Agreement in favor of the Trust in Greenwood's right, title and interest in and
to the Receivables. Unless otherwise specified in the related Prospectus
Supplement, Greenwood also will receive, on each Series Closing Date, an opinion
of Young, Conaway, Stargatt & Taylor, Delaware counsel to Greenwood, concluding
on a reasoned basis that, subject to certain facts, assumptions and
qualifications specified therein (including matters set forth under "Certain
Legal Matters Relating to the Receivables -- Transfer of Receivables" and "--
Certain UCC Matters"), (i) to the extent Delaware law applies, the security
interest created by the Pooling and Servicing Agreement in favor of the Trust is
a valid security interest in all right, title and interest of Greenwood in and
to the Receivables, (ii) the security interest is a perfected security interest
and (iii) the security interest is a first priority security interest.
The above descriptions are qualified in their entirety by reference to the
forms of opinions filed as exhibits to the Registration Statement of which this
Prospectus is a part.
CERTAIN LEGAL MATTERS RELATING TO THE RECEIVABLES
TRANSFER OF RECEIVABLES
Upon formation of the Trust, Greenwood conveyed to the Trust without
recourse, all Receivables existing under the Accounts as of the Cut-Off Date. In
addition, Greenwood conveyed to the Trust all Receivables existing under
Additional Accounts as of the applicable Additional Account Cut-Off Date, and
may do so again in the future. Greenwood also transfers additional Receivables
generated in the Accounts to the Trust on an ongoing basis. In exchange,
Greenwood received the Seller Certificate and the right to direct the issuance
of, and receive the proceeds from the sale of, new series of investor
certificates. Greenwood has agreed to repurchase Receivables if either the sale
of the Receivables is not a valid transfer of all right, title and interest of
Greenwood or any Additional Seller in and to the Receivables or, if the transfer
of Receivables by Greenwood or any
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Additional Seller to the Trust is deemed to be a pledge of Receivables, the
Trust does not have a first priority perfected security interest in the
Receivables. In the event that the obligation of Greenwood to repurchase
Receivables is at any time the subject of concurrent obligations of one or more
other parties to the Seller Certificate Ownership Agreement, then Greenwood's
obligation to repurchase Receivables will be conditioned on Greenwood's ability
to enforce those concurrent obligations against one or more parties to the
Seller Certificate Ownership Agreement. A tax or statutory lien on property of
Greenwood arising before Receivables came into existence may have priority over
the Trust's interest in those Receivables. In addition, subject to certain
conditions, each Servicer will be permitted to use all or a portion of the cash
Collections received by it during any given Due Period until the applicable
Distribution Date and, in the event of the receivership, custodianship or
bankruptcy of any such Servicer, the Trust may not have a perfected interest in
such Collections. See "Description of the Investor Certificates -- Repurchase of
the Trust Portfolio."
The Receivables are "accounts" or "general intangibles" as defined in
Article 9 of the UCC as in effect in the Applicable State with respect to each
Receivable. To the extent the Receivables constitute accounts, both the absolute
transfer of such Receivables and the transfer of such Receivables as security
for an obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions, including the filing of
financing statements to perfect the Trust's security interest. To the extent
Receivables constitute general intangibles and the transfer of such Receivables
is deemed to be a transfer as security for an obligation, Article 9 of the UCC
is applicable to the same extent as it is applicable to Receivables constituting
accounts. A financing statement has been filed, and continuation statements
covering the Receivables will be filed, under the UCC as in effect in Delaware
to protect the Trust in the event the transfer of Receivables to the Trust by
Greenwood is subject to Article 9 of the UCC. If a transfer of Receivables
constituting general intangibles is deemed to be an absolute transfer, then the
UCC is not applicable, and no further action is required to perfect the Trust's
interest in such Receivables from third-party claims. However, if the FDIC were
appointed as receiver of Greenwood, certain administrative expenses of the
receiver might have priority over the interest of the Trust in Receivables
originated by Greenwood, whether such Receivables are accounts or general
intangibles.
CERTAIN UCC MATTERS
Unless continuation statements are filed within the time specified in the
UCC in respect of the security interest of the Sellers or the Trust in the
Receivables, the perfection of the security interest will lapse.
There are also certain limited circumstances under the UCC under which
Receivables could be subject to an interest that has priority over the interest
of the Sellers or the Trust. Under the Pooling and Servicing Agreement, however,
Greenwood has agreed to repurchase the Receivables in any Account containing a
Receivable that has been transferred to the Trust and that is not free and clear
of the lien of any third party, if the existence of such liens has a material
adverse effect on the certificateholders' interest in the Receivables as a
whole. In the event that the obligation of Greenwood to repurchase Receivables
is at any time the subject of concurrent obligations of one or more other
parties to the Seller Certificate Ownership Agreement, then Greenwood's
obligation to repurchase Receivables will be conditioned on Greenwood's ability
to enforce those concurrent obligations against one or more parties to the
Seller Certificate Ownership Agreement. See "Description of the Investor
Certificates -- Repurchase of Specified Receivables." Each Seller also will
covenant that it will not sell, pledge, assign, transfer or grant any lien on
any of the Receivables transferred by it (or any interest therein) other than to
the Trust. A tax or other statutory lien on property of a transferor also may
have priority over the interest of the Sellers or the Trust in the Receivables.
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Because the Trust's interest in the Receivables is dependent upon the
relevant Seller's interest in the Receivables, any adverse change in the
priority or perfection of a Seller's security interest would correspondingly
affect the Trust's interest in the affected Receivables.
As set forth under "Risk Factors -- Certain Legal Aspects," under certain
circumstances all or a portion of the cash Collections of Receivables received
by each Servicer will be made available for use by such Servicer prior to each
Distribution Date. In the event of the insolvency or receivership of any such
Servicer or, in certain circumstances, the lapse of certain time periods, the
Trust may not have a perfected interest in those cash Collections.
CONSUMER PROTECTION LAWS AND DEBTOR RELIEF LAWS APPLICABLE TO THE RECEIVABLES
The relationships among credit cardmembers, credit card issuers and sellers
of merchandise and services in transactions financed by the extension of credit
under credit accounts are extensively regulated by federal and state consumer
protection laws and regulations. Such laws and regulations include the Federal
Truth-in-Lending Act and Fair Credit Billing Act (and the provisions of the
Federal Reserve Board's Regulation Z issued under each of them), Equal Credit
Opportunity Act (and the provisions of the Federal Reserve Board's Regulation B
issued thereunder), Fair Credit Reporting Act and Fair Debt Collection Practices
Act. These statutes and regulations require credit disclosures on credit card
applications and solicitations, on an initial disclosure statement required to
be provided when a credit card account is first opened, and with each monthly
billing statement. They also prohibit certain discriminatory practices in
extending credit, impose certain limitations on the charges that may be imposed
and regulate practices utilized in collections. In addition, cardmembers are
entitled, under these laws and regulations, to have payments and credits
promptly applied on credit accounts and to require billing errors to be promptly
resolved. A cardmember may be entitled to assert violations of certain of these
consumer protection laws and, in certain cases, claims against the lender or
seller, by way of set-off against his obligation to pay amounts owing on his
account. For example, under the Federal Truth-in-Lending Act, a credit card
issuer is subject to all claims (other than tort claims) and defenses arising
out of transactions in which a credit card is used to purchase merchandise or
services, if certain conditions are met. These conditions include requirements
that the cardmember make a good faith attempt to obtain satisfactory resolution
of the dispute from the person honoring the credit card and meet certain
jurisdictional requirements. Where the seller of the goods or services is the
same party as the card issuer, or controls or is controlled by the card issuer
directly or indirectly, these jurisdictional requirements are not applicable.
These statutes further provide that in certain cases a cardmember's liability
may not exceed $50 with respect to charges to the credit card account that
resulted from unauthorized use of the credit card. The application of federal
and state consumer protection, bankruptcy and debtor relief laws would affect
the interests of the investor certificate-holders if those laws result in any
Receivables being charged off as uncollectible. Greenwood has agreed in the
Pooling and Servicing Agreement that if a Receivable was not created in
compliance in all material respects with all Requirements of Law with respect to
such Receivable, and if such noncompliance continues beyond a specified cure
period and has a material adverse effect on the interest of the Trust in all the
Receivables, Greenwood will repurchase all Receivables in the Accounts
containing the Receivable affected by such noncompliance. Greenwood also has
agreed in the Pooling and Servicing Agreement to indemnify the Trust, among
other things, for any liability arising from such violations. For a discussion
of the Trust's rights arising from the breach of these warranties, see "The
Trust -- Indemnification of Trust and Trustee." See also "Risk Factors --
Consumer Protection Laws and Regulations; Litigation."
CLAIMS AND DEFENSES OF CARDMEMBERS AGAINST THE TRUST
The UCC provides that (a) unless an obligor has made an enforceable
agreement not to assert defenses or claims arising out of a sale, the rights of
the Trust, as assignee, are subject to all the terms of the contract between
Greenwood and the obligor and any defense or claim arising
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therefrom and to any other defense or claim of the obligor against Greenwood
that accrues before the obligor receives notification of the assignment and (b)
any obligor is authorized to continue to pay Greenwood until (i) the obligor
receives notification, reasonably identifying the rights assigned, that the
amount due or to become due has been assigned and that payment is to be made to
the Trustee and (ii) if requested by the obligor, the Trustee has furnished
reasonable proof of the assignment.
USE OF PROCEEDS
The net proceeds from the sale of each series of the investor certificates
will be paid to Greenwood. Unless otherwise specified in the related Prospectus
Supplement, Greenwood will add the proceeds received by it to its general funds
and initially will use the proceeds to effect a reduction of short-term
borrowings.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary of certain anticipated federal income tax
consequences of the purchase, ownership and disposition of investor certificates
of a series is based on the advice of Latham & Watkins ("Tax Counsel") as
counsel to Greenwood. The summary is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable Treasury
Regulations and judicial and administrative rulings and decisions ("Current
Law"). There can be no assurance that the Internal Revenue Service (the "IRS")
will not take a contrary view, and no ruling from the IRS has been or will be
sought. Legislative, judicial or administrative changes may be forthcoming that
could alter or modify the statements and conclusions set forth herein. Any
legislative, judicial or administrative changes or interpretations may or may
not be retroactive and could affect tax consequences to investor
certificateholders of one or more series.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investor certificateholders in light of
their individual circumstances, and, except for certain limited discussions of
particular topics, is not intended for investor certificateholders subject to
special treatment under the federal income tax laws (e.g., life insurance
companies, tax-exempt organizations, financial institutions, broker-dealers and
investors that have a functional currency other than the United States dollar or
hold their investor certificates as part of a hedge, straddle or conversion
transaction). PROSPECTIVE INVESTOR CERTIFICATEHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF INVESTOR
CERTIFICATES.
The discussion assumes that an investor certificate (i) is issued in
registered form, (ii) has all payments denominated in United States dollars and
not determined by reference to the value of any other currency, and (iii) has a
term that exceeds one year. Moreover, the discussion assumes that, unless
Section 1272(a)(6) applies to the investor certificate, the interest formula for
the investor certificate meets the requirements for "qualified stated interest"
under Treasury regulations relating to original issue discount ("OID"), and that
any OID on the investor certificate arising from any excess of the principal
amount of the investor certificate over its issue price is de minimis (i.e., is
less than 1/4% of its principal amount multiplied by the number of full years
until its maturity date). If these conditions are not satisfied, additional tax
considerations will be disclosed in the applicable Prospectus Supplement.
TAX TREATMENT OF THE INVESTOR CERTIFICATES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement, Tax
Counsel will advise Greenwood that, in their opinion, although the matter is not
free from doubt, under Current Law the
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investor certificates of a series will be treated as indebtedness of Greenwood
for federal income tax purposes. There can be no assurance, however, that the
IRS or the courts will agree with the conclusions of Tax Counsel. In that
regard, the Pooling and Servicing Agreement and the Series Supplement of a
series generally refer to the transfer of the Receivables as a "sale," and
Greenwood has informed Tax Counsel (i) that different criteria are used in
determining the non-tax accounting treatment of the transaction and (ii) that,
for regulatory and financial accounting purposes, Greenwood will treat the
transfer of the Receivables under the Pooling and Servicing Agreement and the
Series Supplement with respect to such series as a transfer of an ownership
interest in the Receivables and not as the creation of a debt obligation.
Notwithstanding the foregoing, Greenwood will treat the investor certificates as
indebtedness for federal, state and local income and franchise tax purposes and
the investor certificateholders, by acceptance of the investor certificates,
agree to treat such investor certificates of a series as indebtedness of
Greenwood for federal, state and local income and franchise tax purposes. Except
for the discussion in "-- Possible Characterization of the Investor
Certificates," the following discussion of federal income tax consequences
assumes that the investor certificates of a series will be treated as
indebtedness of Greenwood for federal income tax purposes.
UNITED STATES INVESTOR CERTIFICATEHOLDERS
The rules set forth below apply to investor certificateholders who are
"United States Persons." A "United States Person" is (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
the United States or under the laws of the United States or of any state, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) for tax years beginning on or before
December 31, 1996, a trust the income of which is subject to United States
federal income taxation regardless of its source; and for tax years beginning
after December 31, 1996 (and, if a trustee so elects, for tax years ending after
August 20, 1996), a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust, and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust. Recently proposed legislation provides that,
notwithstanding the foregoing, regulations may be issued which would allow any
nongrantor trust, the income of which is, and was on August 19, 1996, subject to
United States taxation regardless of its source to elect to continue to be
treated as a United States Person.
Stated Interest on Investor Certificates. Subject to the discussion below,
interest paid on the investor certificates will be taxable as ordinary income
when received or accrued by investor certificateholders in accordance with their
method of accounting. Generally, interest received on the investor certificates
will constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
Original Issue Discount. In general, the excess of the stated redemption
price at maturity of the investor certificates of a series over their issue
price will constitute OID, unless such excess is within a statutorily-defined de
minimis exception.
If the investor certificates of a series are issued with OID, investor
certificateholders generally will be required to include OID in income for each
accrual period in advance of receipt of the cash representing such OID. A holder
of a debt instrument issued with OID is required to recognize as ordinary income
the amount of OID on the debt instrument as such discount accrues, in accordance
with a constant yield method. Under Section 1272(a)(6) of the Code, special
provisions apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. Under these
provisions, the computation of OID (and market discount, see "-- Market
Discount") on such debt instruments must be determined by taking into account
both the prepayment assumptions used in pricing the debt instrument and the
actual prepayment experience. As a result, the amount of OID on such debt
instruments that will accrue in any given accrual period may either increase or
decrease depending upon the actual prepayment rate. Because no Treasury
Regulations have been issued interpreting Section 1272(a)(6), investor
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certificateholders should consult their own tax advisors regarding the impact of
the OID rules in the event the investor certificates of a series are issued with
OID.
Market Discount. Investor certificateholders should be aware that the
resale of an investor certificate may be affected by the market discount
provisions of the Code. These rules generally provide that, subject to a
statutorily-defined de minimis exception, if an investor certificateholder
acquires an investor certificate at a market discount (i.e., at a price below
its stated redemption price at maturity or its revised issue price if it was
issued with OID) and thereafter recognizes gain upon a disposition of the
investor certificate (or disposes of it in certain non-recognition transactions
such as a gift), the lesser of such gain (or appreciation, in the case of an
applicable non-recognition transaction) or the portion of the market discount
that accrued while the investor certificate was held by such investor
certificateholder will be treated as ordinary interest income at the time of the
disposition. The market discount rules also provide that an investor
certificateholder who acquires an investor certificate at a market discount may
be required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry the
investor certificate until the investor certificateholder disposes of the
investor certificate in a taxable transaction.
Principal payments on the investor certificates of a series will be made
monthly, semi-annually or at other regular intervals as specified in the
Prospectus Supplement. An investor certificateholder who acquired an investor
certificate at a market discount would be required to treat as ordinary interest
income the portion of any principal payment attributable to accrued market
discount on such investor certificate.
An investor certificateholder who acquired an investor certificate at a
market discount may elect to include market discount in income as the discount
accrues, either on a ratable basis or, if elected, on a constant interest rate
basis. The current inclusion election, once made, applies to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the
IRS. If an investor certificateholder elects to include market discount in
income in accordance with the preceding sentence, the foregoing rules with
respect to the recognition of ordinary income on sales, principal payments and
certain other dispositions of the investor certificates and the deferral of
interest deductions on indebtedness related to the investor certificates will
not apply.
Amortizable Bond Premium. Generally, if the price or tax basis of an
investor certificate held as a capital asset exceeds the sum of all amounts
payable on the investor certificate after the acquisition date (other than
payments of qualified stated interest), such excess may constitute amortizable
bond premium that the investor certificateholder may elect to amortize under the
constant interest rate method over the period from the investor
certificateholder's acquisition date to the investor certificate's maturity
date. Proposed Treasury regulations, which are not yet effective, exclude debt
instruments subject to Section 1272(a)(6) of the Code from the amortizable bond
premium rules contained in such regulations. See discussion of Section
1272(a)(6) in "-- Original Issue Discount." Amortizable bond premium generally
will be treated as an offset to interest income on the investor certificate,
rather than as a separate interest deduction item subject to the investment
interest limitations of the Code. An investor certificateholder that elects to
amortize bond premium must reduce the tax basis in the related investor
certificate by the amount of bond premium used to offset interest income. If an
investor certificate purchased at a premium is redeemed in full prior to its
maturity, an investor certificateholder who has elected to amortize bond premium
should be entitled to a deduction for any remaining unamortized bond premium in
the taxable year of redemption.
Sales of Investor Certificates. In general, an investor certificateholder
will recognize gain or loss upon the sale, exchange, redemption or other taxable
disposition of an investor certificate measured by the difference between (i)
the amount of cash and the fair market value of any property received (other
than the amount attributable to, and taxable as, accrued but unpaid interest)
and (ii) the investor certificateholder's tax basis in the investor certificate
(as increased by any OID or market
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discount previously included in income by the investor certificateholder and
decreased by any deductions previously allowed for amortizable bond premium and
by any payments reflecting principal or OID received with respect to such
investor certificate).
Subject to the OID and market discount rules discussed above and to the
one-year holding period requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain or loss, provided the
investor certificate was held as a capital asset. The maximum federal income tax
rate applicable to capital gains and ordinary income for corporations is 35%.
Moreover, capital losses generally may be used only to offset capital gains. The
ordinary federal income tax rate for individuals, estates and trusts is 36% (for
married individuals filing joint returns with taxable income in excess of
$151,750 ($124,650 for unmarried individuals)) whereas the long-term capital
gains rate for such taxpayers is 28% (recently proposed legislation would
generally reduce the long-term capital gains rate for such taxpayers). A further
10% surtax will be imposed on ordinary income of individuals with taxable
incomes in excess of $271,050 (for married individuals filing joint returns and
for unmarried individuals) and estates and trusts with taxable incomes in excess
of $8,100 (thereby creating a maximum federal income tax rate to such taxpayers
of 39.6%).
FOREIGN INVESTOR CERTIFICATEHOLDERS
Set forth below is a general discussion of the United States federal income
and estate tax consequences of the purchase, ownership, sale or other
disposition of an investor certificate by an investor certificateholder that,
for United States federal income tax purposes, is (i) a foreign corporation,
(ii) a non-resident alien individual, (iii) a foreign estate or trust or (iv) a
foreign partnership, as such terms are defined in the Code (a "non-U.S.
Holder"). Some non-U.S. Holders (including certain residents of certain United
States possessions or territories) may be subject to special rules not discussed
herein.
Interest (including OID, if any) paid to a non-U.S. Holder of investor
certificates will not be subject to a required withholding of United States
federal income tax, provided that (i) such interest payments are effectively
connected with the conduct of a trade or business of the non-U.S. Holder within
the United States and such non-U.S. Holder provides an appropriate statement to
such effect, or (ii)(a) the holder is not (1) a "10 percent shareholder" of
Greenwood or (2) a "controlled foreign corporation" with respect to which
Greenwood is a "related person" within the meaning of the Code and (b) the
beneficial owner (and, if relevant, a financial institution on the beneficial
owner's behalf) provides an appropriate statement, signed under penalties of
perjury, certifying that the beneficial owner of such investor certificate is
not a United States Person and providing the beneficial owner's name and
address. The statement generally must be provided in the year a payment occurs
or in either of the two preceding years. For years after 1997, non-binding
Proposed Treasury Regulations specify that the statement must be provided prior
to payment.
A non-U.S. Holder generally will not be subject to United States federal
income tax on gain realized on the disposition of an investor certificate (other
than gain attributable to accrued interest or OID, which is addressed in the
preceding paragraph); provided that (i) the gain is not effectively connected
with the conduct of a trade or business within the United States by the non-U.S.
Holder and (ii) in the case of an individual holder, (A) the non-U.S. Holder is
not present in the United States for 183 days or more in the taxable year of the
sale, exchange or redemption or (B) (1) the non-U.S. Holder does not have a "tax
home" in the United States and (2) the gain is not attributable to an office or
other fixed place of business maintained in the United States by the non-U.S.
Holder.
If the interest or gain on an investor certificate held by a non-U.S.
Holder is effectively connected with the conduct of a trade or business within
the United States by the non-U.S. Holder, then the non-U.S. Holder (although
exempt from the withholding of tax previously discussed if the non-U.S. Holder
provides an appropriate statement) generally will be subject to United States
federal income tax on the interest (including OID, if any), or gain at regular
federal income tax rates in a similar fashion to a United States Person. See "--
United States Investor Certificateholders." In addition, if the non-U.S. Holder
is a foreign corporation, it may be subject to a branch profits tax
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equal to 30% of its "effectively connected earnings and profits" within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable tax treaty.
An investor certificate held by an individual who at the time of death is a
non-U.S. Holder will not be subject to United States federal estate tax as a
result of such individual's death if, immediately before death, (i) the
individual was not a "10 percent shareholder" of Greenwood and (ii) interest on
such investor certificate was not effectively connected with the conduct of a
trade or business within the United States by the individual.
THE FOREGOING DESCRIPTION OF THE POTENTIAL UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS IS NECESSARILY INCOMPLETE. NON-U.S.
HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE FOREGOING MATTERS TO THEM.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting requirements apply to certain payments of principal
of and interest on (and the amount of OID, if any, accrued on) an obligation,
and to proceeds of certain sales of an obligation before maturity, to certain
nonexempt investor certificateholders who are United States Persons. In
addition, a backup withholding tax also may apply with respect to such amounts
if such investor certificateholders fail to provide correct taxpayer
identification numbers and other information. The backup withholding tax rate is
31%. Greenwood, or a paying agent or a broker, as the case may be, will be
required to withhold from any payment that is subject to backup withholding
unless the investor certificateholder furnishes its taxpayer identification
number in the manner prescribed in applicable Treasury Regulations and certain
other conditions are met.
In the case of payments of principal of and interest on (and the amount of
OID, if any, accrued on) investor certificates by Greenwood or its paying agents
to non-U.S. Holders, Temporary Treasury Regulations provide that backup
withholding and information reporting will not apply to payments with respect to
which either requisite certification has been received or an exemption has
otherwise been established (provided that neither Greenwood nor its paying
agents has actual knowledge that the holder is a United States Person or that
the conditions of any other exemption are not in fact satisfied). Payments of
the proceeds of the sale of an investor certificate to or through a foreign
office of a United States broker or foreign brokers with certain types of
relationships to the United States, however, are subject to certain information
reporting requirements, unless the payee is an exempt recipient or such broker
has evidence in its records that the payee is not a United States Person and no
actual knowledge that such evidence is false and certain other conditions are
met. Temporary Treasury Regulations indicate that such payments are not
currently subject to backup withholding. Under current Treasury Regulations,
payments of the proceeds of a sale to or through the United States office of a
broker will be subject to information reporting and backup withholding unless
the payee certifies under penalties of perjury as to his status as a non-United
States Person and certain other qualifications (and no agent of the broker who
is responsible for receiving or reviewing such statement has actual knowledge
that it is incorrect) and provides his name and address or the payee otherwise
establishes an exemption.
Temporary Treasury Regulations indicate that the United States Treasury
Department is studying the possible application of backup withholding to
payments made by foreign offices of certain United States and United States
related intermediaries, including brokers, as well as the standard of evidence
required to prove foreign status for information reporting purposes.
Any amounts withheld under the backup withholding rules from a payment to
an investor certificateholder will be allowed as a refund or a credit against
such investor certificateholder's United States federal income tax.
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POSSIBLE CHARACTERIZATION OF THE INVESTOR CERTIFICATES
The foregoing discussion assumes that the investor certificates of a series
will be treated as indebtedness of Greenwood for federal income tax purposes.
However, although Tax Counsel will opine to such effect with respect to each
series of investor certificates, the matter is not free from doubt, and there
can be no assurance that the IRS or the courts will agree with Tax Counsel's
opinion. If the IRS were to contend successfully that the investor certificates
of a series are not indebtedness of Greenwood for federal income tax purposes,
it could find that the arrangement created by the Pooling and Servicing
Agreement and the related Series Supplement constitutes a partnership which
could be treated as a "publicly traded partnership" taxable as a corporation.
If the investor certificates of a series were treated as interests in a
partnership, the partnership in all likelihood would be treated as a "publicly
traded partnership." If the partnership were nevertheless not taxable as a
corporation (for example, because of an exception for a "publicly traded
partnership" whose income is interest that is not derived in the conduct of a
financial business), such partnership would not be subject to federal income
tax. Rather, the investor certificateholders of such series would be required to
include in income their share of the income and deductions generated by the
assets of the Trust, as determined under partnership tax accounting rules. In
such event, the amount, timing and character of the income required to be
recognized by an investor certificateholder could differ materially from the
amount, timing and character thereof if the investor certificates were
characterized as indebtedness of Greenwood. It also is possible that such a
partnership could be subject to tax in certain states where the partnership is
considered to be engaged in business, and that the investor certificateholders,
as partners in such a partnership, could be taxed on their share of the
partnership's income in such states.
In addition, if such a partnership is considered to be engaged in a trade
or business within the United States, the partnership would be subject to a
withholding tax on distributions to (or, at its election, income allocable to)
non-U.S. Holders, and each such non-U.S. Holder would be credited for such
non-U.S. Holder's share of the withholding tax paid by the partnership.
Moreover, the non-U.S. Holder generally would be subject to United States
federal income tax at regular federal income tax rates, and possibly a branch
profits tax (in the case of a corporate non-U.S. Holder), as previously
described. See "-- Foreign Investor Certificateholders." Further, even if the
partnership is not considered to be engaged in a trade or business within the
United States, it appears that partnership withholding will be required in the
case of any such non-U.S. Holder that is engaged in a trade or business within
the United States to which the investor certificate income is effectively
connected.
Alternatively, although there may be arguments to the contrary, it appears
that if such a partnership is not considered to be engaged in a trade or
business within the United States and if income with respect to an investor
certificate is not otherwise effectively connected with the conduct of a trade
or business within the United States by a non-U.S. Holder, the non-U.S. Holder
would be subject to United States federal income tax and withholding at a rate
of 30% (unless reduced by an applicable treaty) on such non-U.S. Holder's
distributive share of the partnership's interest income.
If the investor certificates of a series were treated as interests in a
"publicly traded partnership" taxable as a corporation, the income from the
assets of the Trust would be subject to federal income tax and tax imposed by
certain states where the entity would be considered to have operations at
corporate rates, which would reduce the amounts available for distribution to
the investor certificateholders. See "Certain State Tax Consequences." Under
such circumstances, the investor certificates may be treated as debt of an
entity taxable as a corporation or, alternatively, as equity of such an entity
in which latter case interest payments to investor certificateholders could be
treated as dividends and, if made to non-U.S. Holders, could be subject to
United States federal income tax and withholding at a rate of 30% (unless
reduced by an applicable tax treaty).
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Finally, with respect to a series having a class of subordinated
certificates, the IRS might contend that even though the Class A certificates
are properly classified as debt obligations for federal income tax purposes, the
Class B certificates are not properly classified as such. Under this approach,
the Class B certificates might be viewed as equity interests in an entity (such
as Greenwood or a joint venture consisting of Greenwood and the Class B
certificateholders), with the Class A certificates treated as debt obligations
of such entity. If such an entity were characterized as a partnership not
taxable as a corporation, the entity would not be subject to federal income tax,
although the Class B certificateholders would be subject to the tax consequences
previously described with respect to interests in a partnership that is not
taxable as a corporation. Alternatively, if such an entity were characterized as
a "publicly traded partnership" taxable as a corporation, the tax liability on
the income of the entity might, in certain circumstances, reduce distributions
on both the Class A certificates and the Class B certificates, and the Class B
certificateholders would be subject to the tax consequences previously described
with respect to interests in a "publicly traded partnership" taxable as a
corporation. In addition, any non-U.S. Holder of a Class A certificate who is
the actual or constructive owner of 10% or more of the outstanding principal
amount of the Class B certificates may be treated as a "10 percent shareholder."
See "-- Foreign Investor Certificateholders."
Based on Tax Counsel's advice as to the likely treatment of the investor
certificates for federal income tax purposes, Greenwood and the Trust will not
attempt to cause the arrangement created by the Pooling and Servicing Agreement
and the Series Supplement with respect to a series to comply with the federal or
state income tax reporting requirements applicable to partnerships or
corporations. If such arrangement were later held to constitute a partnership or
corporation, the manner of bringing it into compliance with such requirements is
unclear.
Prospective investor certificateholders should consult their own tax
advisors as to the risk that the investor certificates will not be treated as
indebtedness of Greenwood, and the possible tax consequences of potential
alternative treatments.
CERTAIN STATE INCOME TAX CONSEQUENCES
The following summary of certain anticipated state tax consequences with
respect to the investor certificates of a series is based on the advice of Tax
Counsel as counsel to Greenwood. The summary is based upon currently applicable
statutes, regulations and judicial and administrative rulings and decisions of
certain states. There can be no assurance that the taxing authorities of such
states will not take a contrary view, and no ruling therefrom has been or will
be sought. Legislative, judicial or administrative changes may be forthcoming
that could alter or modify the statements and conclusions set forth herein. Any
such changes or interpretations may or may not be retroactive and could affect
the tax consequences to investor certificateholders of such series. Except as
set forth below, this discussion of state tax consequences assumes that the
investor certificates of a series will be treated as indebtedness of Greenwood
for federal tax purposes.
State tax consequences to each investor certificateholder will depend upon
the provisions of the state tax laws to which the investor certificateholder is
subject. Most states modify or adjust the taxpayer's federal taxable income to
arrive at the amount of income potentially subject to state tax. Resident
individuals usually pay state tax on 100% of such state-modified income, while
corporations and other taxpayers generally pay state tax only on that portion of
state-modified income assigned to the taxing state under the state's own
apportionment and allocation rules. Because each state's tax laws vary, it is
impossible to predict the tax consequences to the investor certificateholders in
all of the state taxing jurisdictions in which they are already subject to tax.
Delaware is the location of Greenwood's headquarters, where Greenwood
originates and owns the Accounts and services the Receivables pursuant to the
Pooling and Servicing Agreement. Unless otherwise specified in the related
Prospectus Supplement, Tax Counsel will advise Greenwood with respect to a
series, that, in their opinion, although the matter is not free from doubt, the
investor certificates of such series will be treated as indebtedness of
Greenwood for purposes
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of the Delaware income tax. Accordingly, although the matter is not free from
doubt, if the investor certificates of a series are treated as indebtedness of
Greenwood in Delaware, investor certificateholders not otherwise subject to
taxation in Delaware will not become subject to the Delaware income tax solely
because of their ownership of the investor certificates.
Generally, an investor certificateholder is required to pay, in states in
which such investor certificateholder already is subject to state tax,
additional state tax as a result of interest earned on such holder's investment
in investor certificates. Moreover, a state could claim that the Trust has
undertaken activities therein and is subject to taxation by that state. Were any
state to make and sustain that claim, the treatment of the investor certificates
for purposes of such state's tax laws would be determined thereunder, and there
can be no assurance that the investor certificates would be treated as
indebtedness of Greenwood for purposes of such state taxation.
If such investor certificates of a series were treated as interests in a
partnership or a corporation, the state tax consequences to the investor
certificateholders of such series could be materially different, especially in
states which may be considered to have a business connection with the
Receivables. See "Certain Federal Income Tax Consequences -- Possible
Characterization of the Investor Certificates."
THE FOREGOING DESCRIPTION OF THE POTENTIAL STATE TAX CONSEQUENCES IS
INCOMPLETE. INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE APPLICATION OF THE FOREGOING MATTERS TO THEM.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on those employee benefit plans,
including Individual Retirement Accounts and Individual Retirement Annuities
(collectively "IRAs"), to which they apply ("Plans") and on those persons who
are fiduciaries with respect to such Plans. In accordance with ERISA's general
fiduciary standards, before investing in investor certificates, a Plan fiduciary
should determine whether such an investment is permitted under the governing
Plan instruments and is appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio.
Other provisions of ERISA and the Code prohibit certain transactions involving
the assets of a Plan and persons who have certain specified relationships to the
Plan ("parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code). Prohibited transactions may generate
excise taxes and other liabilities; prohibited transactions involving IRAs may
result in the disqualification of the IRAs. Thus, a Plan fiduciary considering
an investment in investor certificates should also consider whether such an
investment might constitute or give rise to a prohibited transaction under ERISA
or the Code.
Certain transactions involved in the operation of the Trust might be deemed
to constitute prohibited transactions under ERISA and the Code, if assets of the
Trust were deemed to be assets of an investing Plan. ERISA and the Code do not
define "plan assets." The U.S. Department of Labor (the "DOL") has published a
regulation (the "Regulation"), which took effect March 13, 1987, concerning
whether or not a Plan's assets will be deemed to include an interest in the
underlying assets of an entity (such as the Trust) for purposes of the reporting
and disclosure and fiduciary responsibility provisions of ERISA and of the
excise tax provisions related to prohibited transactions in the Code if the Plan
acquires an "equity interest" in that entity. The Regulation only applies to the
purchase by a Plan of an "equity interest" in an entity. An equity interest is
defined in the Regulation as an interest in an entity other than an instrument
that is treated as debt under applicable local law and that has no substantial
equity features. Unless otherwise specified in the related Prospectus
Supplement, Tax Counsel will advise Greenwood that investors will be taxed as if
the investor certificates are debt of Greenwood for federal income tax purposes.
If under ERISA the investor certificates are deemed to be debt and are not
deemed to have substantial equity features, the Trust's assets would not be
treated as Plan assets solely as a result of the purchase of the investor
certificates by a Plan.
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Assuming that either the investor certificates are equity interests under
applicable local law or are deemed to have substantial equity features, the
Regulation contains an exception that provides that if a Plan acquires a
"publicly-offered security," the issuer of the security is not deemed to hold
Plan assets. A publicly-offered security is a security that is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another by the conclusion of the
offering and (iii) either is (A) part of a class of securities registered under
section 12(b) or 12(g) of the Securities Exchange Act of 1934, or (B) sold to
the Plan as part of an offering of securities to the public pursuant to an
effective registration statement under the Securities Act of 1933 and the class
of securities of which such security is a part is registered under the
Securities Exchange Act of 1934 within 120 days (or such later time as may be
allowed by the Securities and Exchange Commission) after the end of the fiscal
year of the issuer during which the offering of the securities to the public
occurred.
Whether the investor certificates of a series meet the criteria of
publicly-offered securities will be set forth in the related Prospectus
Supplement.
If the investor certificates were deemed to be an extension of credit for
ERISA purposes, the purchase of the investor certificates by a Plan with respect
to which Greenwood or one of its affiliates is a "party in interest" or
"disqualified person" might be considered a prohibited extension of credit under
Section 406 of ERISA and Section 4975 of the Code unless an exemption is
applicable. There are at least four prohibited transaction class exemptions
issued by the DOL that might apply, depending in part on who decided to acquire
the investor certificates for the Plan: DOL Prohibited Transaction Exemption
("PTE") 84-14 (Class Exemption for Plan Asset Transactions determined by
Independent Qualified Professional Asset Managers); PTE 91-38 (Class Exemption
for Certain Transactions Involving Bank Collective Investment Funds); PTE 90-1
(Class Exemption for Certain Transactions Involving Insurance Company Pooled
Separate Accounts); and PTE 96-23 (Class Exemption for Plan Asset Transactions
Determined by In-House Asset Managers).
Moreover, whether the investor certificates are debt or equity for ERISA
purposes, a possible violation of the prohibited transaction rules could occur
if the investor certificates were purchased during the offering with assets of a
Plan if Greenwood, the Trustee, any Underwriter or any of their affiliates were
a fiduciary with respect to such Plan. Under ERISA and the Code, a person is a
"fiduciary" with respect to a Plan to the extent (i) he exercises any
discretionary authority or discretionary control respecting management of such
Plan or exercises any authority or control respecting management or disposition
of its assets, (ii) he renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys or other property
of such Plan, or has any authority or responsibility to do so or (iii) he has
any discretionary authority or discretionary responsibility in the
administration of such Plan. Accordingly, the fiduciaries of any Plan should not
purchase the investor certificates during the offering with assets of any Plan
if Greenwood, the Trustee, the Underwriters or any of their affiliates is a
fiduciary with respect to the Plan.
In light of the foregoing, fiduciaries of Plans considering the purchase of
the investor certificates should consult their own tax or other appropriate
counsel regarding the application of ERISA and the Code to their purchase of the
investor certificates.
In particular, insurance companies considering the purchase of investor
certificates should consult their own benefits counsel or other appropriate
counsel with respect to the United States Supreme Court's decision in John
Hancock Mutual Life Insurance Co. v. Harris Trust & Savings Bank, 114 S. Ct. 517
(1993) ("John Hancock"), DOL PTE 95-60 (Class Exemption for Certain Transactions
Involving Insurance Company General Accounts) and Section 401(c) of ERISA. In
John Hancock, the Supreme Court held that the assets held in an insurance
company's general account may be deemed to be "plan assets" under certain
circumstances. Subject to numerous conditions and limitations, PTE 95-60
effectively reverses this portion of the holding in John Hancock. Section 401(c)
of ERISA was added by the Small Business Job Protection Act of 1996 and requires
the Secretary of Labor to issue final regulations by December 31, 1997 which are
to provide guidance for the purpose of determining, in cases where an insurer
issues one or more policies
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(supported by the assets of the insurer's general account) to or for the benefit
of an employee benefit plan, which assets of such insurer (other than assets
held in a separate account) constitute "plan assets" for the purposes of the
fiduciary responsibility provisions of ERISA and Section 4975 of the Code. Such
regulations shall only apply with respect to policies which are issued by an
insurer on or before December 31, 1998, to or for the benefit of an employee
benefit plan which is supported by the assets of such insurer's general account.
With respect to policies issued on or before December 31, 1998, such regulations
shall take effect at the end of the 18-month period following the date on which
such regulations become final. Section 401(c) of ERISA also provides that no
person will be subject to liability under Section 4975 of the Code and the
fiduciary responsibility provisions of ERISA on the basis of a claim that the
assets of an insurer (other than assets held in a separate account) are "plan
assets," for conduct occurring before the date which is 18 months following the
date such regulations become final.
Accordingly, investors should analyze whether John Hancock, PTE 95-60,
Section 401(c) of ERISA and any regulations issued pursuant to Section 401(c) of
ERISA may have an impact with respect to their purchase of investor
certificates.
PLAN OF DISTRIBUTION
Greenwood may sell investor certificates (i) through underwriters or
dealers; (ii) directly to one or more purchasers; or (iii) through agents. Any
such underwriters, dealers or agents in the United States may include Morgan
Stanley & Co. Incorporated or Dean Witter Reynolds Inc. The related Prospectus
Supplement will set forth the terms of the offering of such investor
certificates, including the name or names of any underwriters, the purchase
price of such investor certificates and the proceeds to Greenwood from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial offering price, any discounts or concessions allowed
or reallowed or paid to dealers and any securities exchanges on which such
investor certificates may be listed. Only underwriters so named in the related
Prospectus Supplement shall be deemed to be underwriters in connection with the
investor certificates offered thereby.
If underwriters are used in the sale, the investor certificates will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed price or at varying prices determined at the time of sale or at negotiated
prices. Such investor certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. The obligations of the underwriters to purchase such
investor certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the investor certificates of the
series offered by the related Prospectus Supplement if any of such investor
certificates are purchased. Any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
Investor certificates may also be sold directly by the Company or through
agents designated by Greenwood from time to time. Any agent involved in the
offering and sale of the investor certificates will be named, and any
commissions payable by Greenwood to such agent will be set forth, in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, any such agent is acting solely as an agent for the period of its
appointment.
If so indicated in the related Prospectus Supplement, Greenwood will
authorize agents, underwriters or dealers to solicit offers by certain
institutional investors to purchase investor certificates providing for payment
and delivery on a future date specified in the related Prospectus Supplement.
There may be limitations on the minimum amount which may be purchased by any
such institutional investor or on the portion of the aggregate principal amount
of the particular investor certificates which may be sold pursuant to such
arrangements. Institutional investors to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and such
other institutions as may be approved by Greenwood. Unless otherwise specified
in the related Prospectus Supplement, the obligations of any such purchasers
pursuant to such delayed delivery and
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payment arrangements will not be subject to any conditions except (i) the
purchase by an institution of the particular investor certificates shall not at
the time of delivery be prohibited under the laws of any jurisdiction of the
United States to which such institution is subject, and (ii) if the particular
investor certificates are being sold to underwriters, Greenwood shall have sold
to such underwriters the total principal amount of such investor certificates
less the principal amount thereof covered by such arrangements. Underwriters
will not have any responsibility in respect of the validity of such arrangements
or the performance of Greenwood or such institutional investors thereunder.
Underwriters, dealers and agents that participate in the distribution of
the investor certificates may be deemed to be underwriters, and any discounts or
commissions received by them from Greenwood and any profit on the resale of the
investor certificates by them may be deemed to be underwriting discounts and
commissions, under the Securities Act of 1933. Under arrangements which may be
entered into by Greenwood, underwriters, dealers and agents that participate in
the distribution of investor certificates may be entitled to indemnification by
Greenwood against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribution with respect to payments that the
underwriters, dealers or agents may be required to make with respect thereto.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, Greenwood in the ordinary course of their respective businesses.
The investor certificates may or may not be listed on a national securities
exchange. There is no assurance that a secondary market will develop for the
investor certificates or, if it does develop, that it will continue.
The distribution of investor certificates will conform to the requirements
set forth in Rule 2720 of the National Association of Securities Dealers, Inc.
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, the
legality of the investor certificates and certain legal matters relating to the
tax consequences of the issuance of the investor certificates will be passed
upon for Greenwood by Latham & Watkins and certain matters concerning creditors'
rights will be passed upon for Greenwood by Latham & Watkins and Young, Conaway,
Stargatt & Taylor. Unless otherwise specified in the related Prospectus
Supplement, the legality of the investor certificates will be passed upon for
any Underwriters by Cadwalader, Wickersham & Taft.
AVAILABLE INFORMATION
Greenwood, as originator of the Trust, has filed a Registration Statement
under the Securities Act of 1933 with the Securities and Exchange Commission
(the "Commission") on behalf of the Trust with respect to the investor
certificates offered pursuant to this Prospectus and the related Prospectus
Supplement. For further information, reference is made to the Registration
Statement and amendments thereof and exhibits thereto and the reports and other
documents incorporated herein by reference as described previously under
"Incorporation of Certain Documents by Reference," which are available for
inspection without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 7 World
Trade Center, Suite 1300, New York, New York 10048; and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Such
reports and other documents may also be obtained from the web site that the
Commission maintains at http://www.sec.gov. The Trust is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith, Greenwood, on behalf of the Trust, will file reports and
other information with the Commission. Copies of the Registration Statement and
amendments thereof and exhibits thereto, as well as such materials relating to
the Trust, may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
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GLOSSARY OF TERMS
Investor certificates will be issued pursuant to the Pooling and Servicing
Agreement and a Series Supplement. The following Glossary of Terms does not
purport to be complete and, with respect to any series of investor certificates
issued by the Trust, is subject to, and is qualified in its entirety by
reference to, the Pooling and Servicing Agreement and the related Series
Supplement. A copy of the Pooling and Servicing Agreement is filed as an exhibit
to the Registration Statement of which this Prospectus is a part. Certain
definitions contained in this Glossary of Terms are applicable only to certain
series of investor certificates offered pursuant to the related Prospectus
Supplement and are not necessarily applicable to other series of investor
certificates that may be issued by the Trust. On written request to the Trustee
at its corporate trust office, the Trustee will provide to investor
certificateholders without charge a copy of the Pooling and Servicing Agreement
(without exhibits and schedules) and a related Series Supplement (without
exhibits). Unless the context requires otherwise, capitalized terms used in this
Prospectus and Glossary of Terms relate separately to individual series of
investor certificates issued by the Trust.
"Account" will mean (i) a Discover Card account established pursuant to a
Credit Agreement between Greenwood and any Person, receivables under which are
transferred to the Trust pursuant to the Pooling and Servicing Agreement or
pursuant to an Assignment of Additional Accounts (a "Greenwood Discover Card
Account"); (ii) a Discover Card account established pursuant to a Credit
Agreement between an Additional Seller and any Person, receivables under which
are transferred to the Trust pursuant to an Assignment of Additional Accounts;
and (iii) a credit account (that is not a Discover Card account) established
pursuant to a Credit Agreement between Greenwood or an Additional Seller and any
Person, receivables under which are transferred to the Trust pursuant to an
Assignment of Additional Accounts. No Account will be a Charged-Off Account as
of (i) the Account Selection Date, with respect to Accounts the Receivables in
which are transferred to the Trust on the Initial Closing Date or (ii) the date
an Account is selected for addition to the Trust, with respect to Accounts the
Receivables in which are transferred to the Trust pursuant to an Assignment of
Additional Accounts. The definition of an Account will include a surviving
credit account (a "Surviving Account") in the event that (i) an Account or
another credit account is combined with an Account pursuant to the Credit
Guidelines for such Account (an "Account Combination") and (ii) the surviving
Account of such Account Combination was an Account prior to such combination.
The term "Account" will be deemed to refer to an Additional Account only from
and after the Addition Date with respect thereto. The definition of Account will
not include any Account removed from the Trust after it has been reassigned to
the Holder of the Seller Certificate.
"Account Selection Date" will mean, for any Account transferred to the
Trust on the Initial Closing Date, January 22, 1993, July 14, 1993 or September
22, 1993 and, for any Additional Account, the date such account was selected to
be transferred to the Trust.
"Accumulation Period," if applicable, will mean the period, unless an
Amortization Event has occurred during the Revolving Period, from the Principal
Commencement Date until the earliest of (i) the payment in full of the Series
Invested Amount, (ii) the Amortization Commencement Date and (iii) the Series
Termination Date.
"Addition Date" will mean each date as of which Additional Accounts will be
included as Accounts or as of which Participation Interests will be conveyed to
the Trust.
"Additional Account Cut-Off Date" will mean, for any Additional Account,
the date specified as such in the Assignment of Additional Accounts for such
Additional Account.
"Additional Accounts" will mean credit accounts originated by Greenwood or
affiliates of Greenwood, receivables under which are added to the Trust after
the Initial Closing Date.
"Additional Funds" will have the meaning set forth in "Description of the
Investor Certificates -- Additional Funds." The initial amount of Additional
Funds, if any, will be as set forth in the related Prospectus Supplement.
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"Additional Seller" will mean an affiliate of Greenwood that is included in
the same "affiliated group" as Greenwood for United States federal income tax
purposes and that transfers Receivables in Additional Accounts to the Trust.
"Aggregate Invested Amount" will mean at any time the sum of the Series
Invested Amounts of all series of investor certificates then issued and
outstanding.
"Aggregate Investor Interest" will mean at any time the sum of the Series
Investor Interests of all series of investor certificates then issued and
outstanding.
"Aggregate Investor Percentage" will mean at any time the sum of the Series
Percentages of all series of investor certificates then issued and outstanding.
"Amortization Commencement Date" will mean the date on which an
Amortization Event is deemed to occur.
"Amortization Event" will mean any event specified as such in the Pooling
and Servicing Agreement or the applicable Series Supplement. See "Description of
the Investor Certificates -- Amortization Events" in the related Prospectus
Supplement.
"Amortization Period" will mean the period from, and including, the
Amortization Commencement Date to, and including, the earlier of (i) the date of
the payment in full of the Series Invested Amount and (ii) the Series
Termination Date. The first Distribution Date of the Amortization Period will be
the Distribution Date in the calendar month following the Amortization
Commencement Date.
"Applicable State" will mean, with respect to any Receivable, the state in
which the chief executive office of the Seller with respect to such Receivable
is located and with respect to any Seller, the state in which the chief
executive office of such Seller is located.
"Book-Entry Certificates" will mean certificates evidencing a beneficial
interest in the investor certificates, ownership and transfers of which will be
made through book entries by a Clearing Agency; provided, that after the
occurrence of a condition whereupon book-entry registration and transfer are no
longer permitted and Definitive Certificates are to be issued to the certificate
owners, the investor certificates will no longer be "Book-Entry Certificates."
"Business Day" will mean any day other than a Saturday, a Sunday or a day
on which banking institutions in (i) New York, New York, (ii) the County of New
Castle, Delaware, (iii) the city in which the Corporate Trust Office is located,
(iv) the city in which the principal executive offices of any Additional Seller
is located or (v) the city in which the principal banking or executive offices
of any Credit Enhancement Provider is located, are authorized or obligated by
law or executive order to be closed.
"CCA Investor Interest," if applicable, shall have the meaning set forth in
the applicable Series Supplement.
"Certificate" will mean the Seller Certificate or any investor certificate
of any series of investor certificates then issued and outstanding.
"Certificate Interest" will be as specified in the related Prospectus
Supplement.
"Certificate Owner" will mean, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency).
"Certificate Principal" will mean, with respect to each class of any
series, the principal payable in respect of such class.
"Certificate Rate," will mean, with respect to any class, the certificate
rate set forth in the related Prospectus Supplement with respect to the series
to which such class belongs.
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"Certificate Register" will mean the register maintained pursuant to the
Pooling and Servicing Agreement providing for the registration of Investor
Certificates in fully registered form and transfers and exchanges thereof.
"Certificateholder" or "Holder" will mean an investor certificateholder or
a Person in whose name a Certificate is registered in the Certificate Register.
"Charged-Off Account" will mean each Account with respect to which the
Servicer has charged off the Receivables in such Account as uncollectible.
"Charged-Off Amount" will mean, with respect to any Trust Distribution
Date, the aggregate amount of Receivables in Accounts that become Charged-Off
Accounts in the related Due Period, less (i) the cumulative, uncollected amount
previously billed by the Servicers to Accounts that became Charged-Off Accounts
during the related Due Period with respect to finance charges, cash advance
fees, annual membership fees, fees for transactions that exceed the credit limit
on the Account, late payment charges and any other type of charges that the
Servicer has designated as "Finance Charge Receivables" with respect to Accounts
that are not Charged-Off Accounts and (ii) the full amount of any such
Receivables that have been repurchased by Greenwood.
"Class" will mean all the investor certificates designated by the same
letter of the alphabet, pursuant to the Series Supplement for the series.
"Class Finance Charge Collections" will be as specified in the related
Prospectus Supplement.
"Class Initial Investor Interest" will be as specified in the related
Prospectus Supplement.
"Class Invested Amount" will be as specified in the related Prospectus
Supplement.
"Class Investor Interest" will be as specified in the related Prospectus
Supplement.
"Class Monthly Servicing Fee" will mean, for any Distribution Date, an
amount equal to the product of (i) a fraction the numerator of which is the
Class Investor Interest and the denominator of which is the Series Investor
Interest, in each case on the first day of the related Due Period and (ii) the
amount of the Investor Servicing Fee for the related Due Period.
"Class Percentage" will be as specified in the related Prospectus
Supplement.
"Clearing Agency" will mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934.
"Collections" will mean (i) all payments by or on behalf of an Obligor
received by a Servicer in respect of Receivables in the form of cash, checks,
wire transfers or other forms of payment in accordance with the relevant Credit
Agreement in effect from time to time and (ii) amounts treated as Collections
pursuant to the terms of the Pooling and Servicing Agreement or the applicable
Series Supplement. A Collection will be deemed to have been received at the end
of the day on the Date of Processing of such Collection.
"Collections Account" will mean the non-interest bearing segregated trust
account established and maintained by the Trustee with an office or branch of
the Trustee or a Qualified Institution for the benefit of the
certificateholders.
"Controlled Liquidation Period," if applicable, will mean, unless an
Amortization Event has occurred during the Revolving Period, the period from the
Principal Commencement Date until the earliest of (i) the payment in full of the
Series Invested Amount, (ii) the Amortization Commencement Date and (iii) the
Series Termination Date.
"Corporate Trust Office" will mean the principal office of the Trustee at
which at any particular time its corporate trust business will be administered,
which office currently is located at 111 East Wacker Drive, Suite 3000, Chicago,
Illinois 60601 Attention: Corporate Trust Department.
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"Credit Agreement" will mean, with respect to an Account, the contract
governing such Account.
"Credit Enhancement" will mean any credit enhancement obtained by the
Master Servicer in accordance with the applicable Series Supplement.
"Credit Enhancement Account" will mean any non-interest bearing segregated
trust account established and maintained by the Trustee with an office or branch
of the Trustee or a Qualified Institution with respect to the Credit
Enhancement.
"Credit Enhancement Agreement" will mean any Agreement among the Sellers,
the Master Servicer, the Trustee and a Credit Enhancement Provider with respect
to any Credit Enhancement.
"Credit Enhancement Provider" will mean, unless otherwise specified in the
related Prospectus Supplement, collectively, the one or more lenders that will
make a loan in order to provide the initial funds on deposit in the Credit
Enhancement Account.
"Credit Guidelines" will mean, with respect to any Account, the policies
and procedures relating to the operation of such Account and similar accounts
administered by the Servicer of such Account, including, without limitation, the
written policies and procedures and the exercise of judgment by employees of the
Servicer with respect to such accounts in accordance with such Servicer's normal
practice for determining the creditworthiness of customers holding such
accounts, the extension of credit to customers, and relating to the maintenance
of such accounts and the collection of receivables with respect to such
accounts, as such policies and procedures may be amended from time to time by
the Servicer of such accounts, and as such policies and procedures may be
implemented by any Person to whom such Servicer has delegated any of its duties.
"Cut-Off Date" will mean October 1, 1993.
"Date of Processing" with respect to any transaction will mean the date on
which such transaction is first recorded on the cardmember master file of the
accounts maintained by or on behalf of the relevant Servicer (without regard to
the effective date of such recordation).
"Deficit Accumulation Amount," if applicable, will be as specified in the
related Prospectus Supplement.
"Deficit Liquidation Amount," if applicable, will be as specified in the
related Prospectus Supplement.
"Discover Card," when used to modify the term "account," will mean that
access to such account is afforded by, among other means, a card bearing on its
face the DISCOVER service mark or, if the use of such service mark is suspended
and another service mark is substituted therefor, a card bearing such substitute
service mark.
"Distribution Date" will be as specified in the related Prospectus
Supplement.
"Due Period" will mean, with respect to any Trust Distribution Date or
Distribution Date, the calendar month next preceding the calendar month in which
such Trust Distribution Date or Distribution Date occurs.
"Eligible Receivable" will mean each Receivable: (i) which is payable in
United States dollars; (ii) which was created in compliance, in all material
respects, with all Requirements of Law applicable to the Seller and the Servicer
with respect to such Receivable, and pursuant to a Credit Agreement that
complies, in all material respects, with all Requirements of Law applicable to
such Seller and Servicer; (iii) as to which, if such Receivable was created
before the Initial Closing Date or the relevant Addition Date, as applicable,
(a) at the time of the creation of such Receivable, the Seller with respect to
such Receivable had good and marketable title thereto free and clear of all
Liens arising under or through such Seller, and (b) at the time of the
conveyance of such Receivable to the Trust, such Seller had, or the Trust will
have, good and marketable title free and
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clear of all Liens arising under or through such Seller; (iv) as to which, if
such Receivable was created on or after the Initial Closing Date or the relevant
Addition Date, as applicable, at the time of the creation of such Receivable,
the Trust will have good and marketable title thereto free and clear of all
Liens arising under or through the Seller with respect to such Receivable; and
(v) which constitutes an "account" or "general intangible" under and as defined
in Article 9 of the UCC as then in effect in the Applicable State with respect
to such Receivable.
"Expected Final Payment Date" will be as specified in the related
Prospectus Supplement.
"FDIC" will mean the Federal Deposit Insurance Corporation acting through
either the Savings Association Insurance Fund or the Bank Insurance Fund.
"Final Trust Termination Date" will mean October 16, 2014.
"Finance Charge Collections" with respect to any Due Period will mean the
sum of (i) the lesser of the aggregate amount of Finance Charge Receivables for
the preceding Due Period and Collections actually received in such Due Period
and (ii) all Recovered Amounts received during such Due Period. If there is more
than one Seller, the obligation of Greenwood to deposit certain cash advance
fees and late payment fees into the Collections Account will be conditioned on
Greenwood's ability to enforce concurrent obligations against one or more other
parties to the Seller Certificate Ownership Agreement.
"Finance Charge Receivables" will mean, with respect to any Account for any
Due Period, the net amount billed by the Servicer during such Due Period as
periodic finance charges on such Account and cash advance fees, annual
membership fees, fees for transactions that exceed the credit limit on such
Account, late payment charges billed during such Due Period to such Account and
any other charges that the Servicer may designate as "Finance Charge
Receivables" from time to time (provided that the Servicer shall not designate
amounts owing for the payment of goods and services or cash advances as "Finance
Charge Receivables"), less, in the event that such Account becomes a Charged-Off
Account during such Due Period, the cumulative, uncollected amount previously
billed by the Servicer to such Account as periodic finance charges, cash advance
fees, annual membership fees, if any, fees for transactions that exceed the
credit limit on such Account, late payment charges and any other type of charges
that the Servicer has designated as "Finance Charge Receivables" with respect to
Accounts that are not Charged-Off Accounts; provided, however, that in the event
any Account that is included in the Accounts as of the Cut-Off Date is not
selected before the beginning of the Due Period preceding the Due Period related
to the first Trust Distribution Date, the Servicer may utilize a reasonable
method of estimation to determine the amount of the Finance Charge Receivables
with respect to such Account for the period beginning on the first day of such
preceding Due Period and ending on the date on which such Account is selected.
"Fixed Principal Allocation Event" will be as specified in the related
Prospectus Supplement.
"Fractional Undivided Interest" will mean the fractional undivided interest
in the Trust evidenced by an investor certificate and expressed as a portion of
the Aggregate Invested Amount.
"Governmental Authority" will mean the United States of America, any state
or other political subdivision thereof.
"Greenwood" will mean Greenwood Trust Company, a Delaware banking
corporation, and its successors and assigns.
"Group" will mean, collectively, at any time, the one or more series of
investor certificates designated as part of the same Group at that time, whether
by the Series Supplements establishing such series or as a result of the
movement of a series from one Group to another pursuant to the provisions of the
Pooling and Servicing Agreement.
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"Group Collections Account" will mean the non-interest bearing segregated
trust account for Collections allocated to each Group established and maintained
by the Trustee with an office or branch of the Trustee or a Qualified
Institution for the benefit of the investor certificateholders of each series
that is a member of such Group.
"Holder of the Seller Certificate" will mean, at any specified time, the
holder or holders of the Seller Certificate, each of which, if there is more
than one holder, will be a party to the Seller Certificate Ownership Agreement,
with the respective interests granted to each of such parties pursuant to the
Seller Certificate Ownership Agreement. The initial Holder of the Seller
Certificate will be Greenwood.
"Ineligible Receivable" will mean any Receivable that was not, at the time
of its transfer, an Eligible Receivable and the transfer of which to the Trust
had a material adverse effect on the certificateholders' interest in the
Receivables as a whole that was not cured within 60 days of the earlier of (i)
actual knowledge of such event by the relevant Seller and (ii) receipt by such
Seller of written notice of any such event given by the Trustee.
"Initial Closing Date" will mean October 27, 1993.
"Interest Payment Dates" will be as specified in the related Prospectus
Supplement.
"Internal Revenue Code" will mean the United States Internal Revenue Code
of 1986, as amended from time to time.
"Investor Accounts" will mean, in addition to Investor Accounts established
pursuant to the Pooling and Servicing Agreement, any other segregated trust
accounts specified as Investor Accounts in any Series Supplement. See
"Description of the Investor Certificates -- Other Investor Accounts" in the
related Prospectus Supplement.
"Investor Certificateholder" will mean the Person in whose name an investor
certificate is registered in the Certificate Register.
"Investor Certificates" will mean the investor certificates offered in
connection with the related Prospectus Supplement.
"Investor Servicing Fee" will mean, with respect to each series and any
Distribution Date, an amount equal to the product of the Investor Servicing Fee
Percentage and the Series Investor Interest on the first day of the Due Period
related to such Distribution Date (or in the case of the first Distribution Date
for the series, the Series Initial Investor Interest).
"Investor Servicing Fee Percentage" will be as specified in the related
Prospectus Supplement.
"Lien" will mean any mortgage, deed of trust, pledge, hypothecation,
encumbrance, lien or other security agreement, including, without limitation,
any conditional sale or other title retention agreement, and any financing lease
having substantially the same economic effect as any of the foregoing.
"Master Servicer" will mean initially Greenwood and thereafter any Person
appointed as the successor Master Servicer as herein provided.
"Master Servicing Agreement," if applicable, will mean the agreement
entered into by Greenwood as Master Servicer and Servicer and any additional or
successor Servicer or Servicers, as such agreement may be amended or
supplemented from time to time.
"Minimum Principal Receivables Balance" will mean, on any date of
determination, an amount equal to the sum of the Series Minimum Principal
Receivables Balance for each series then outstanding.
"Moody's" will mean Moody's Investors Service Inc.
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"New Issuance" will mean the issuance of an additional series of investor
certificates from the Trust.
"Obligor" will mean with respect to any Account, the Person or Persons
obligated to make payments with respect to such Account, including any guarantor
thereof.
"Opinion of Counsel" will mean a written opinion of counsel, who may be
counsel for or an employee of any Seller or Greenwood or any of their
affiliates.
"Participation Interests" will mean participations representing undivided
interests in a pool of assets primarily consisting of receivables in revolving
credit card accounts and collections thereon.
"Payment Date" will mean any Interest Payment Date, any Principal Payment
Date, if applicable, and any Special Payment Date.
"Permitted Investments" will mean:
(i) negotiable instruments or securities represented by instruments in
bearer or registered form which evidence: (a) obligations issued or fully
guaranteed, as to timely payment, by the United States of America or any
instrumentality or agency thereof when such obligations are backed by the
full faith and credit of the United States of America; (b) time deposits
in, or bankers' acceptances issued by, any depository institution or trust
company incorporated under the laws of the United States of America or any
state thereof (or any domestic branch of a foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term
deposits or commercial paper or, in the absence of a rating on the
short-term deposits or commercial paper of such depository institution or
trust company, the long-term unsecured debt obligations of such depository
institution or trust company will have the Highest Rating; (c) commercial
paper or other short-term obligations having, at the time of the Trust's
investment or contractual commitment to invest therein, the Highest Rating;
or (d) investments in money market funds having the Highest Rating;
(ii) demand deposits in the name of the Trust or the Trustee in any
depository institution or trust company referred to in clause (i) (b)
above;
(iii) securities not represented by an instrument, which are
registered in the name of the Trustee upon books maintained for that
purpose by or on behalf of the issuer thereof and identified on books
maintained for that purpose by the Trustee as held for the benefit of the
Trust or the Certificateholders, and consisting of shares of an open end
diversified investment company which is registered under the Investment
Company Act of 1940, as amended, and which (a) invests its assets
exclusively in obligations of or guaranteed by the United States of America
or any instrumentality or agency thereof having in each instance a final
maturity date of less than one year from their date of purchase or other
Permitted Investments, (b) seeks to maintain a constant net asset value per
share and (c) has aggregate net assets of not less than $100,000,000 on the
date of purchase of such shares, and which will not result in a reduction
or withdrawal of the rating of any class of any series then outstanding as
confirmed in writing by the Rating Agencies;
(iv) a guaranteed investment contract (guaranteed as to timely
payment), the terms of which meet the criteria of the Rating Agencies and
with an entity whose credit standards meet the criteria of the Rating
Agencies necessary to preserve the rating of each class of each series then
outstanding; and
(v) repurchase agreements transacted with either
(a) an entity subject to the United States federal bankruptcy code,
provided that (1) the term of the repurchase agreement is consistent
with the requirements set forth in
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Section 4.02(c) of the Pooling and Servicing Agreement with regard to
the maturity of Permitted Investments or is due on demand, (2) the
Trustee or a third party acting solely as agent for the Trustee has
possession of the collateral, (3) as evidenced by a certificate of a
Servicing Officer of the Master Servicer delivered to the Trustee, the
Trustee on behalf of the Trust has a perfected first priority security
interest in the collateral, (4) the market value of the collateral is
maintained at the requisite collateral percentage of the obligation in
accordance with the standards of the Rating Agencies, (5) the failure to
maintain the requisite collateral level will obligate the Trustee to
liquidate the collateral immediately, (6) the securities subject to the
repurchase agreement are either obligations of, or fully guaranteed as
to principal and interest by, the United States of America or an agency
thereof, certificates of deposit or bankers acceptances and (7) as
evidenced by a certificate of a Servicing Officer of the Master Servicer
delivered to the Trustee, the securities subject to the repurchase
agreement are free and clear of any third party lien or claim; or
(b) a financial institution insured by the FDIC, or any
broker-dealer with "retail customers" that is under the jurisdiction of
the Securities Investors Protection Corp. ("SIPC"), provided that (1)
the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with the standards
of the Rating Agencies, (2) the Trustee or a third party acting solely
as agent for the Trustee has possession of the collateral, (3) as
evidenced by a certificate of a Servicing Officer of the Master Servicer
delivered to the Trustee, the Trustee on behalf of the Trust has a
perfected first priority security interest in the collateral, (4) as
evidenced by a certificate of a Servicing Officer of the Master Servicer
delivered to the Trustee, the collateral is free and clear of third
party liens; and, in the case of an SIPC broker, was not acquired
pursuant to a repurchase or reverse repurchase agreement and (5) failure
to maintain the requisite collateral percentage will obligate the
Trustee to liquidate the collateral;
provided, however, that at the time of the Trust's investment or
contractual commitment to invest in any such repurchase agreement, the
short-term deposits or commercial paper rating or, in the absence of a
rating on the short-term deposits or commercial paper of such entity or
institution, the long-term unsecured debt obligations of such entity or
institution will have a credit rating not lower than the Highest Rating.
Permitted Investments will include, without limitation, securities of
Greenwood or any of its affiliates which otherwise qualify as a Permitted
Investment under clause (i), (ii), (iii), (iv) or (v) above. For purposes
of this definition of Permitted Investments, "Highest Rating" will mean,
with respect to Moody's, P-1 or Aaa, and, with respect to Standard &
Poor's, A-1+ or AAA, or with respect to either Standard & Poor's or
Moody's, any rating category which will not cause a reduction in or
withdrawal of the rating of any class of any series then outstanding, as
confirmed in writing by the applicable Rating Agency.
"Person" will mean an individual, a partnership or a Corporation. The term
"Corporation" for the purposes of the preceding sentence only will mean a
corporation, joint stock company, business trust or other similar association.
"Pooling and Servicing Agreement" will mean that certain Pooling and
Servicing Agreement dated as of October 1, 1993, by and between Greenwood Trust
Company, as Master Servicer, Servicer and Seller, and First Bank National
Association (successor trustee to Bank of America Illinois, formerly Continental
Bank, National Association), as Trustee, as such agreement may be amended or
supplemented from time to time.
"Principal Collections" will mean, with respect to any Due Period, all
Collections other than Finance Charge Collections.
"Principal Commencement Date" will be as specified in the related
Prospectus Supplement.
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"Principal Receivable" will mean each Receivable other than Finance Charge
Receivables.
"Qualified Institution" will mean a depository institution organized under
the laws of the United States of America or any one of the states thereof that
at all times has a short-term certificate of deposit rating of A-1 or better by
Standard & Poor's and P-1 or better by Moody's and whose deposits are insured by
the FDIC.
"Rating Agency" will mean Moody's or Standard & Poor's, and "Rating
Agencies" will mean Moody's and Standard & Poor's.
"Receivable" will mean any amounts owing by the Obligor under an Account
from time to time, including, without limitation, amounts owing for the payment
of goods and services, cash advances, finance charges and other charges, if any.
A Receivable will be deemed to have been created at the end of the day on the
Date of Processing of such Receivable. A Receivable will not include any amount
owing under a Charged-Off Account or an Account the Receivables in which have
been repurchased pursuant to the Pooling and Servicing Agreement.
"Record Date" will mean, for any Distribution Date, the last day of the
preceding calendar month.
"Recovered Amounts" will mean all amounts received with respect to
Receivables that have previously been charged-off as uncollectible.
"Removed Accounts" will mean Accounts, the Receivables in which have been
designated for deletion and removal from the Trust.
"Required Daily Deposit" will be as specified in the related Prospectus
Supplement.
"Requirements of Law" for any Person will mean the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any requirement of any law, rule or regulation or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including, without
limitation, usury laws, the Federal Truth in Lending Act and Regulation Z and
Regulation B of the Board of Governors of the Federal Reserve System); provided,
however, that any such requirement will not be deemed a Requirement of Law if
the enforcement of such requirement would not have a material adverse effect
upon the collectibility of the Receivables taken as a whole.
"Revolving Period" will mean, with respect to each series, the period from,
and including, the Series Cut-Off Date to, but not including, the earlier to
occur of (i) the Principal Commencement Date and (ii) the Amortization
Commencement Date with respect to such series.
"Seller," when used with reference to specific Receivables, will mean the
Person or Persons conveying such Receivables to the Trust.
"Seller Certificate" will mean the certificate executed by Greenwood and
authenticated by the Trustee representing a residual interest in the assets of
the Trust not represented by the investor certificates of any series.
"Seller Certificate Ownership Agreement" will mean, if applicable, the
agreement entered into by Greenwood, as Seller, and any Additional Seller, as
such agreement may be amended or supplemented from time to time.
"Seller Interest" will mean, with respect to any Trust Distribution Date or
Distribution Date, the aggregate amount of Principal Receivables in the Trust at
the end of the related Due Period minus the Aggregate Investor Interest at the
end of such day; provided, however, that the Seller Interest will in no event be
less than zero.
"Seller Percentage" will mean, on any date of determination, with respect
to any specified category, an amount equal to 100% of such category minus the
applicable Aggregate Investor Percentage.
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"Seller Servicing Fee" will mean, for any Trust Distribution Date, an
amount equal to the product of (i) the product of 2.0% per annum calculated on
the basis of a 360-day year of twelve 30-day months and the amount of Principal
Receivables in the Trust as of the first day of the Due Period related to such
Trust Distribution Date (or in the case of the first Trust Distribution Date,
the amount of Principal Receivables in the Trust on the Cut-Off Date) and (ii) a
fraction the numerator of which is the amount of the Seller Interest and the
denominator of which is the greater of the amount of Principal Receivables in
the Trust or the Aggregate Investor Interest.
"Sellers" will mean Greenwood and any Additional Sellers.
"Series" will mean the series of investor certificates offered in
connection with the related Prospectus Supplement.
"Series Closing Date" will mean the day the investor certificates of the
series are initially issued.
"Series Collections Account" will be as specified in the related Prospectus
Supplement.
"Series Cut-Off Date" will be as specified in the related Prospectus
Supplement.
"Series Distribution Account" will be as specified in the related
Prospectus Supplement.
"Series Finance Charge Collections" will be as specified in the related
Prospectus Supplement.
"Series Initial Investor Interest" will be as specified in the related
Prospectus Supplement.
"Series Interest Funding Account" will be as specified in the related
Prospectus Supplement.
"Series Invested Amount" will be as specified in the related Prospectus
Supplement.
"Series Investor Interest" will be as specified in the related Prospectus
Supplement.
"Series Minimum Principal Receivables Balance" will be as specified in the
related Prospectus Supplement.
"Series Percentage" will be as specified in the related Prospectus
Supplement.
"Series Principal Collections" will be as specified in the related
Prospectus Supplement.
"Series Supplement" will mean the applicable supplement to the Pooling and
Servicing Agreement that establishes each series of investor certificates.
"Series Termination Date" will be as specified in the related Prospectus
Supplement.
"Series Yield Collections" will be as specified in the related Prospectus
Supplement.
"Servicer" will mean initially (i) with respect to Greenwood Discover Card
Accounts, Greenwood and (ii) with respect to any other Accounts, the Person who
is designated as the Servicer with respect to such Accounts in the Assignment of
Additional Accounts relating to such Accounts; and thereafter any Person
appointed as a successor Servicer to any such Servicer. The term "Servicer,"
when used to refer to actions to be taken with respect to any Accounts, will
refer to one or more Servicers, as applicable, and to any particular Servicer
only with respect to Accounts serviced by such Servicer.
"Servicing Officer" will mean any employee of the Master Servicer or of any
Servicer, as applicable, involved in, or responsible for, the administration and
servicing of the Receivables whose name appears on a list of servicing officers
furnished to the Trustee by the Master Servicer and each Servicer, as such lists
may from time to time be amended.
"Standard & Poor's" will mean Standard & Poor's Ratings Services.
"Subordinate Series" will mean any series that is subordinated in right of
payment, in whole or in part, pursuant to the Series Supplement with respect to
such series, to one or more series.
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"Trust" will mean the trust created by the Pooling and Servicing Agreement,
the corpus of which consists of the Receivables existing as of the Cut-Off Date
or thereafter created and all monies due or to become due with respect thereto,
all proceeds (as defined in Section 9-306 of the UCC as in effect in the
Applicable State with respect to each such Receivable) of the Receivables, such
funds as from time to time are deposited in the Investor Accounts and the
benefits of any Credit Enhancement with respect to any series then outstanding.
"Trust Distribution Date" will mean November 10, 1993 and the tenth day of
each calendar month thereafter, or, if such tenth day is not a Business Day, the
next succeeding Business Day.
"Trustee" will mean First Bank National Association (successor trustee to
Bank of America Illinois, formerly Continental Bank, National Association), the
institution executing the Pooling and Servicing Agreement and Series Supplement
as Trustee, or its successor in interest, or any successor trustee appointed as
provided in the Pooling and Servicing Agreement.
"UCC" will mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered investor
certificates (collectively, the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice.
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 Cedel or Euroclear and DTC
Participants holding investor certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global 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, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior Discover Card Trust issues.
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 Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds using the procedures applicable
to prior Discover Card Trust issues.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel
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Participant or Euroclear Participant at least one business day prior to
settlement. Cedel or Euroclear will instruct the respective Depositary, as the
case may be, to receive the Global Securities against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of actual
days elapsed and a 360 day year. Payment will then be made by the respective
Depositary 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 Cedel Participant's or Euroclear
Participant's account. The Global Securities credit 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 (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon to finance the settlement.
Under this procedure, Cedel Participants 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 such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date on the basis of actual days elapsed and a
360 day year. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
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Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Holders (Form W-8). Beneficial owners of investor
certificates that are non-U.S. Holders can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the beneficial owner becomes a United States citizen or resident during the
period to which the statement relates, or certain other changes in circumstances
occur, such change must be communicated to the appropriate party within 30 days
thereof. Form W-8 is generally effective for three calendar years, but a new
certificate may be required to be filed by the recipient each time a payment it
made.
Exemption for non-U.S. Holders with effectively connected income (Form
4224). A non-U.S. Holder, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected With the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Holders resident in treaty countries
(Form 1001). Non-U.S. Holders that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption, or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Holders (Form W-9). U.S. Holders can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, its agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency) an investor certificate. Certain proposed (nonbinding)
regulations
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which would be applicable to payments made after 1997, provide for the
unification and simplification of certain current certification procedures.
The term "U.S. Holder" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any state, (iii) an estate the income of which is includible in
gross income for United States tax purposes, regardless of its source, or (iv)
for tax years beginning on or before December 31, 1996, a trust the income of
which is subject to United States federal income taxation regardless of its
source; and for tax years beginning after December 31, 1996, (and, if a trustee
so elects, for tax years ending after August 20, 1996), a trust if a court
within the Unites States is able to exercise primary supervision over the
administration of the trust, and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to non-U.S. Holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee............................................ $1,515,151.52
Printing and Engraving*..................................... 600,000.00
Trustee's Fees*............................................. 140,000.00
Legal Fees and Expenses*.................................... 900,000.00
Blue Sky Fees and Expenses*................................. 65,000.00
Accountants' Fees and Expenses*............................. 500,000.00
Rating Agency Fees*......................................... 2,700,000.00
Miscellaneous Fees*......................................... 179,848.48
-------------
Total*................................................. $6,600,000.00
=============
</TABLE>
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Greenwood is a Delaware banking corporation and its affiliate, Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD") is a Delaware corporation.
Section 145 of the General Corporation Law of the State of Delaware ("GCL")
provides that a Delaware corporation has the power to indemnify its officers and
directors in certain circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no reasonable cause to believe his or
her conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses actually and reasonably incurred in connection with the
defense or settlement of such action or suit provided that such director or
officer acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such director
or officer shall have been adjudged to be liable for negligence or misconduct in
the performance of his or her duty to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action was brought
shall determine that despite the adjudication of liability such director or
officer is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he or she shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him or her or incurred by him or her in any such capacity or arising out of his
or her status as
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such whether or not the corporation would have the power to indemnify him or her
against such liabilities under Section 145.
Article IV of Greenwood's by-laws provides that Greenwood shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil or
criminal, and whether judicial, legislative, or administrative (other than an
action by or in the right of Greenwood) by reason of the fact that such person
is or was a director, officer or employee (or is or was serving at the request
of Greenwood as a director, officer, and/or employee of or in a similar capacity
in another corporation, partnership, joint venture, trust or other enterprise)
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such proceeding if such person acted in good faith and in a manner not clearly
opposed to any written policy of Greenwood, or which such person reasonably
believed to be in the best interests of Greenwood, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. Indemnification in connection with an action or proceeding
by or in the right of Greenwood to procure a judgment in its favor is limited to
payment of amounts paid in settlement and expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action or proceeding. No indemnification in connection with an action or
proceeding by or in the right of Greenwood to procure a judgment in Greenwood's
favor may be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in the
performance of such person's duty to Greenwood unless and only to the extent
that the court in which such action or suit is brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Article VIII of the Amended and Restated Certificate of Incorporation of
MSDWD (the "Certificate of Incorporation") and Section 6.07 of the Amended and
Restated By-Laws of MSDWD (the "By-Laws"), each as amended to date, provide for
the indemnification of directors and officers. Under these provisions, any
person who is a director or officer of MSDWD or a director or an elected officer
of a corporation a majority of the capital stock (other than directors'
qualifying shares) of which is owned directly or indirectly by MSDWD (a
"Subsidiary") shall be indemnified by MSDWD to the fullest extent permitted by
applicable law. Greenwood is a Subsidiary of MSDWD (within the meaning of the
Certificate of Incorporation and By-Laws). The Certificate of Incorporation and
By-Laws also provide that MSDWD may, by action of the Board of Directors,
provide indemnification to any person who is or was an employee or agent (other
than a director or officer) of MSDWD or a Subsidiary and to any person serving
as a director, officer, partner, member, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other enterprise at the request of MSDWD or a Subsidiary, to the same scope and
effect as the foregoing indemnification of directors and officers of MSDWD.
The right to indemnification under the By-Laws includes the right to be
paid the expenses incurred in connection with any proceeding in advance of its
final disposition upon receipt (unless MSDWD upon authorization of the Board of
Directors waives said requirement to the extent permitted by applicable law) of
an undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
MSDWD.
Under the By-Laws, MSDWD has the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, member, employee or
agent of MSDWD or a Subsidiary, or of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise, against any
expense, liability or loss whether or not MSDWD or a Subsidiary would have the
power to indemnify him or her against such expense, liability or loss under the
provisions of applicable law.
MSDWD has in effect insurance policies in the amount of $75 million for
general officers' and directors' liability insurance and $25 million for
fiduciary liability insurance covering all of MSDWD's directors and officers in
certain instances where by law they may not be indemnified by MSDWD.
II-2
<PAGE> 69
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
</TABLE>
1.1 Form of Underwriting Agreement, incorporated by reference to
Registrant's Registration Statement on Form S-3
(Registration No. 333-16103).
4.1 Pooling and Servicing Agreement between Greenwood Trust
Company as Master Servicer, Servicer and Seller and
Continental Bank, National Association, as Trustee, dated as
of October 1, 1993, incorporated by reference to
Registrant's Registration Statement on Form S-1
(Registration No. 33-71502).
4.2 First Amendment to Pooling and Servicing Agreement, dated as
of August 15, 1994, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and Bank of America
Illinois (formerly, Continental Bank, National Association)
as Trustee, incorporated by reference to Registrant's
Current Report on Form 8-K, dated August 1, 1995.
4.3 Second Amendment to Pooling and Servicing Agreement, dated
as of February 29, 1996, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and First Bank National
Association (successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association) as Trustee,
incorporated by reference to Registrant's Current Report on
Form 8-K, dated April 30, 1996.
4.4 Form of Series Supplement between Greenwood Trust Company as
Master Servicer, Servicer and Seller and First Bank National
Association (successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association), as
Trustee, including form of Class A Certificate and form of
Class B Certificate, incorporated by reference to
Registrant's Registration Statement on Form S-3
(Registration No. 333-16103).
4.5 Form of Agreement among Greenwood Trust Company, Bank of
America Illinois (formerly, Continental Bank, National
Association), as Trustee and The Depository Trust Company,
with respect to Discover Card Master Trust I.
5.1 Opinion of Latham & Watkins, incorporated by reference to
Registrant's Registration Statement on Form S-3
(Registration No. 333-16103).
5.2 Form of opinion of Latham & Watkins as to certain creditors'
rights matters relating to Greenwood Trust Company,
incorporated by reference to Registrant's Registration
Statement on Form S-3 (Registration No. 333-16103).
5.3 Form of opinion of Young, Conaway, Stargatt & Taylor as to
certain creditors' rights matters relating to Greenwood
Trust Company, incorporated by reference to Registrant's
Registration Statement on Form S-3 (Registration No.
333-16103).
8.1 Opinion of Latham & Watkins as to certain federal tax
matters concerning the Investor Certificates, incorporated
by reference to Registrant's Registration Statement on Form
S-3 (Registration No. 333-16103).
23.1 Consent of Latham & Watkins (included in Exhibit 5.1),
incorporated by reference to Registrant's Registration
Statement on Form S-3 (Registration No. 333-16103).
23.2 Consent of Young, Conaway, Stargatt & Taylor, incorporated
by reference to Registrant's Registration Statement on Form
S-3 (Registration No. 333-16103).
24.1 Powers of Attorney of the directors and officers of the
Registrant, incorporated by reference to Registrant's
Registration Statement on Form S-3 (Registration No.
333-16103).
II-3
<PAGE> 70
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(a) The undersigned registrant hereby undertakes 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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication on such issue.
(c) 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 Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be a part
of this Registration Statement as of the time it was declared effective.
(d) 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.
(e) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (e)(1)(i) and (e)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in
II-4
<PAGE> 71
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Castle, County of New
Castle, State of Delaware, on July 7, 1997.
GREENWOOD TRUST COMPANY,
as originator of the Trust
(Registrant)
By JOHN J. COANE*
------------------------------------
Vice President, Director of Accounting,
Treasurer and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C> <C>
THOMAS R. BUTLER* Chairman of the Board,
Investment Officer and Loan Officer
and Director
(Principal Executive Officer)
JOHN J. COANE* Vice President, Director of
Accounting, Treasurer and Assistant
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
J. NATHAN HILL* President, Chief Operating Officer, July 7, 1997
Loan Officer, Assistant Secretary
and Director
CHRISTINE A. EDWARDS* Director
RAYMOND A. KENNEDY* Director
BIRENDRA KUMAR* Director
FRANK K. REILLY* Director
JOSEPH A. YOB* Director
*By /s/ BIRENDRA KUMAR , individually and as
- ----------------------------------------- Attorney-in-fact
Birendra Kumar
</TABLE>
II-6
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
1.1 Form of Underwriting Agreement, incorporated by reference to
Registrant's Registration Statement on Form S-3
(Registration No. 333-16103). ..............................
4.1 Pooling and Servicing Agreement between Greenwood Trust
Company as Master Servicer, Servicer and Seller and
Continental Bank, National Association, as Trustee, dated as
of October 1, 1993, incorporated by reference to
Registrant's Registration Statement on Form S-1
(Registration No. 33-71502). ...............................
4.2 First Amendment to Pooling and Servicing Agreement, dated as
of August 15, 1994, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and Bank of America
Illinois (formerly, Continental Bank, National Association)
as Trustee, incorporated by reference to Registrant's
Current Report on Form 8-K, dated August 1, 1995. ..........
4.3 Second Amendment to Pooling and Servicing Agreement, dated
as of February 29, 1996, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and First Bank National
Association (successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association) as Trustee,
incorporated by reference to Registrant's Current Report on
Form 8-K, dated April 30, 1996. ............................
4.4 Form of Series Supplement between Greenwood Trust Company as
Master Servicer, Servicer and Seller and First Bank National
Association (successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association), as
Trustee, including form of Class A Certificate and form of
Class B Certificate, incorporated by reference to
Registrant's Registration Statement on Form S-3
(Registration No. 333-16103). ..............................
4.5 Form of Agreement among Greenwood Trust Company, Bank of
America Illinois (formerly, Continental Bank, National
Association), as Trustee and The Depository Trust Company,
with respect to Discover Card Master Trust I. ..............
5.1 Opinion of Latham & Watkins, incorporated by reference to
Registrant's Registration Statement on Form S-3
(Registration No. 333-16103). ..............................
5.2 Form of opinion of Latham & Watkins as to certain creditors'
rights matters relating to Greenwood Trust Company,
incorporated by reference to Registrant's Registration
Statement on Form S-3 (Registration No. 333-16103). ........
5.3 Form of opinion of Young, Conaway, Stargatt & Taylor as to
certain creditors' rights matters relating to Greenwood
Trust Company, incorporated by reference to Registrant's
Registration Statement on Form S-3 (Registration No.
333-16103). ................................................
8.1 Opinion of Latham & Watkins as to certain federal tax
matters concerning the Investor Certificates, incorporated
by reference to Registrant's Registration Statement on Form
S-3 (Registration No. 333-16103). ..........................
23.1 Consent of Latham & Watkins (included in Exhibit 5.1),
incorporated by reference to Registrant's Registration
Statement on Form S-3 (Registration No. 333-16103). ........
23.2 Consent of Young, Conaway, Stargatt & Taylor, incorporated
by reference to Registrant's Registration Statement on Form
S-3 (Registration No. 333-16103). ..........................
24.1 Powers of Attorney of the directors and officers of the
Registrant, incorporated by reference to Registrant's
Registration Statement on Form S-3 (Registration No.
333-16103). ................................................
</TABLE>
