<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 20, 1997
DISCOVER CARD MASTER TRUST I
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-23108 51-0020270
-------- ------- ----------
(STATE OF (COMMISSION (IRS EMPLOYER
ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
C/O GREENWOOD TRUST COMPANY
12 READ'S WAY
NEW CASTLE, DELAWARE 19720
- ------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 323-7184
--------------
FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT: NOT APPLICABLE
<PAGE> 2
ITEM 5. OTHER EVENTS
SERIES 1997-1. ON AUGUST 20, 1997, THE REGISTRANT MADE AVAILABLE
TO INVESTORS A PROSPECTUS SUPPLEMENT, DATED AUGUST 19, 1997, AND PROSPECTUS,
DATED APRIL 19, 1997, WITH RESPECT TO THE ISSUANCE OF $750,000,000 AGGREGATE
PRINCIPAL AMOUNT OF SERIES 1997-1 FLOATING RATE CLASS A CREDIT CARD
PASS-THROUGH CERTIFICATES AND $39,474,000 AGGREGATE PRINCIPAL AMOUNT OF SERIES
1997-1 FLOATING RATE CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES OF DISCOVER
CARD MASTER TRUST I, PURSUANT TO THE POOLING AND SERVICING AGREEMENT, DATED AS
OF OCTOBER 1, 1993, BETWEEN GREENWOOD TRUST COMPANY AS MASTER SERVICER,
SERVICER AND SELLER AND U.S. BANK NATIONAL ASSOCIATION D/B/A FIRST BANK
NATIONAL ASSOCIATION (SUCCESSOR TRUSTEE TO BANK OF AMERICA ILLINOIS, FORMERLY
CONTINENTAL BANK, NATIONAL ASSOCIATION) AS TRUSTEE, AS AMENDED, AND THE SERIES
SUPPLEMENT, TO BE DATED AS OF AUGUST 26, 1997, FOR SERIES 1997-1 BETWEEN
GREENWOOD TRUST COMPANY AS MASTER SERVICER, SERVICER AND SELLER AND FIRST BANK
NATIONAL ASSOCIATION AS TRUSTEE. A COPY OF THE PROSPECTUS SUPPLEMENT IS
ATTACHED AS EXHIBIT 99.1.
ITEM 7. EXHIBITS
--------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EXHIBIT 99.1 PROSPECTUS SUPPLEMENT DATED AUGUST 19, 1996 WITH RESPECT TO THE
FLOATING RATE CLASS A CREDIT CARD PASS-THROUGH CERTIFICATES AND
THE FLOATING RATE CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES
OF DISCOVER CARD MASTER TRUST I, SERIES 1997-1.
Page 2
<PAGE> 3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
DISCOVER CARD MASTER TRUST I
(REGISTRANT)
BY: GREENWOOD TRUST COMPANY
(ORIGINATOR OF THE TRUST)
DATE: AUGUST 21, 1997 BY: /S/ JOHN J. COANE
------------------------------------
JOHN J. COANE
VICE PRESIDENT, DIRECTOR OF ACCOUNTING AND
TREASURER
<PAGE> 4
INDEX TO EXHIBITS
-----------------
EXHIBIT DESCRIPTION PAGE Page
- ------- ---------------- ----
99.1 PROSPECTUS SUPPLEMENT DATED AUGUST 19, 1997 WITH RESPECT TO THE 5
FLOATING RATE CLASS A CREDIT CARD PASS-THROUGH CERTIFICATES AND
THE FLOATING RATE CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES
OF DISCOVER CARD MASTER TRUST I, SERIES 1997-1.
Page 4
<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 19, 1997)
Discover(R) Card Master Trust I, Series 1997-1
$750,000,000 FLOATING RATE CLASS A CREDIT CARD
PASS-THROUGH CERTIFICATES
$39,474,000 FLOATING RATE CLASS B CREDIT CARD
PASS-THROUGH CERTIFICATES
Greenwood Trust Company
Master Servicer, Servicer and Seller
------------------------
Each of the Floating Rate Class A Credit Card Pass-Through Certificates
(the "Class A Certificates") and each of the Floating Rate Class B Credit Card
Pass-Through Certificates (the "Class B Certificates," and together with the
Class A Certificates, the "Investor Certificates") will represent an undivided
interest in the Discover Card Master Trust I (the "Trust "), formed pursuant to
a Pooling and Servicing Agreement, as amended, between Greenwood Trust Company
("Greenwood") as Master Servicer, Servicer and Seller and U.S. Bank National
Association d/b/a First Bank National Association (successor trustee to Bank of
America Illinois, formerly Continental Bank, National Association) as Trustee,
dated as of
(Continued on next page)
There currently is no secondary market for the Investor Certificates and
there is no assurance that one will develop.
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE INVESTOR CERTIFICATES, SEE "RISK FACTORS" ON PAGE 7 OF THE
PROSPECTUS.
------------------------
THE INVESTOR CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO 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.
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) GREENWOOD(1)(3)
------------------ -------------- ---------------
<S> <C> <C> <C>
Per Class A Certificate................... 100.000% 0.275% 99.725%
Total................................ $750,000,000 $2,062,500 $747,937,500
Per Class B Certificate................... 100.000% 0.300% 99.700%
Total................................ $39,474,000 $118,422 $39,355,578
</TABLE>
- ------------
(1) Plus accrued interest, if any, at the applicable Certificate Rate from
August 26, 1997.
(2) Greenwood has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by Greenwood estimated at $750,000.
------------------------
The Investor Certificates are offered by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that the Investor
Certificates will be delivered in book-entry form through the facilities of The
Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System
on or about August 26, 1997.
------------------------
Underwriters of the Class A Certificates
MORGAN STANLEY DEAN WITTER
BANCAMERICA SECURITIES, INC.
CHASE SECURITIES INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
Underwriter of the Class B Certificates
MORGAN STANLEY DEAN WITTER
August 19, 1997
<PAGE> 2
(Continued from previous page)
October 1, 1993. 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. The Investor Certificates will be issued
pursuant to the Pooling and Servicing Agreement and the Series 1997-1
Supplement, dated as of August 26, 1997. Collections of Receivables allocable to
the Class B Certificates will be reallocated to the extent necessary to fund
certain payments with respect to the Class A Certificates. The holders of the
Class B Certificates will have the exclusive direct benefit of all monies on
deposit in a cash collateral account as described herein. The cash collateral
account initially will be funded with $59,210,550. The closing of the sale of
each Class of Investor Certificates is conditioned upon the simultaneous closing
of the sale of the other Class of Investor Certificates.
Interest will accrue on the Class A Certificates at the rate of 0.09% per
annum above the London interbank offered rate for one-month United States dollar
deposits (determined as described herein). Interest will accrue on the Class B
Certificates at the rate of 0.27% per annum above the London interbank offered
rate for one-month United States dollar deposits (determined as described
herein). Interest on the Class A Certificates and the Class B Certificates will
be distributed on the 15th day of each month (or, if such day is not a Business
Day, the next succeeding Business Day) commencing in September 1997. The
principal of the Class A Certificates is scheduled to be paid on August 15, 2002
(or, if such day is not a Business Day, the next succeeding Business Day), but
may be paid earlier or later, or monthly, under certain circumstances. The
principal of the Class B Certificates, which will not be paid until after the
final principal payment has been made with respect to the Class A Certificates,
is scheduled to be paid on September 15, 2002 (or, if such day is not a Business
Day, the next succeeding Business Day), but may be paid earlier or later, or
monthly, under certain circumstances. See "Description of the Investor
Certificates -- Principal Payments" and "Final Payment of Principal; Termination
of Series" herein and in the Prospectus.
The Trust previously has issued other series of investor certificates that
evidence undivided interests in the Trust and expects to issue additional series
from time to time in the future.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus in connection with the offering described herein,
and, if given or made, such information or representation must not be relied
upon as having been authorized by Greenwood or the Underwriters. Neither this
Prospectus Supplement nor the Prospectus constitutes an offer to sell or a
solicitation of an offer to buy any securities other than those specifically
offered hereby, nor does either constitute an offer to sell or a solicitation of
an offer to buy any securities offered hereby in any jurisdiction to any person
to whom it is unlawful to make an offer or solicitation in such jurisdiction.
Neither the delivery of this Prospectus Supplement or the Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
the information herein is correct as of any time subsequent to the date of this
Prospectus Supplement.
Application will be made to list the Investor Certificates on the
Luxembourg Stock Exchange.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION WITH
RESPECT TO THE OFFERING OF THE SERIES 1997-1 INVESTOR CERTIFICATES. ADDITIONAL
INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SERIES
1997-1 INVESTOR CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
S-2
<PAGE> 3
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Series Summary....................................... S-4
The Discover Card Business........................... S-7
General............................................ S-7
Credit-Granting Procedures......................... S-8
Collection Efforts................................. S-8
The Accounts......................................... S-9
General............................................ S-9
Billing and Payments............................... S-10
Effects of the Selection Process................... S-10
Composition of the Accounts........................ S-11
Composition and Historical Performance of the
Discover Card Portfolio............................. S-12
General............................................ S-12
Composition of the Discover Card Portfolio......... S-12
Payment of the Investor Certificates............... S-15
Description of the Investor Certificates............. S-16
General............................................ S-16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Interest Payments.................................. S-16
Determination of LIBOR............................. S-17
Principal Payments................................. S-17
Investor Accounts.................................. S-18
Allocations, Reallocations and Subordination of
Collections...................................... S-19
Reimbursement of Charged-Off Amounts; Investor
Losses........................................... S-21
Distributions of Collections and Application of
Collections and Certain Other Amounts............ S-22
Series Yield Factor................................ S-26
Amortization Events................................ S-27
Final Payment of Principal; Termination of
Series........................................... S-28
Description of the Credit Enhancement.............. S-28
Reports to Investor Certificateholders............... S-30
Underwriting......................................... S-30
Legal Matters........................................ S-32
Glossary of Terms.................................... S-33
ANNEX A -- Other Series.............................. S-44
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
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............................... 14
Removal of Accounts................................ 16
Termination of the Trust........................... 16
Description of the Investor Certificates............. 16
General............................................ 16
Interest Payments.................................. 17
Principal Payments................................. 17
Issuance of Additional Series...................... 18
Collections Account and Group Collections
Accounts......................................... 18
Class Percentages and Seller Percentage............ 19
Allocations, Reallocations and Subordination of
Collections...................................... 19
Adjustments to Receivables......................... 20
Distributions of Collections and Application of
Collections and Certain Other Amounts............ 21
Additional Funds................................... 21
Final Payment of Principal; Termination of
Series........................................... 21
Credit Enhancement................................. 22
Repurchase of Trust Portfolio...................... 22
Repurchase of Specified Receivables................ 23
Repurchase of a Series............................. 24
Repurchase of Investor Certificates................ 24
Sale of Seller Interest............................ 24
Reallocation of Series Among Groups................ 25
Amendments......................................... 25
List of Investor Certificateholders................ 26
Meetings........................................... 26
Book-Entry Registration............................ 26
Definitive Certificates............................ 29
Servicing............................................ 29
Master Servicer and Servicer....................... 29
Servicing Compensation and Payment of Expenses..... 30
Certain Matters Regarding the Master Servicer and
the Servicers.................................... 31
Master Servicer Termination Events................. 31
Servicer Termination Events........................ 32
Evidence as to Compliance.......................... 33
The Seller........................................... 33
Greenwood.......................................... 33
Insolvency-Related Matters......................... 34
Certain Legal Matters Relating to the Receivables.... 35
Transfer of Receivables............................ 35
Certain UCC Matters................................ 35
Consumer Protection Laws and Debtor Relief Laws
Applicable to the Receivables.................... 36
Claims and Defenses of Cardmembers Against the
Trust............................................ 36
Use of Proceeds...................................... 37
Certain Federal Income Tax Consequences.............. 37
General............................................ 37
Tax Treatment of the Investor Certificates as
Indebtedness..................................... 37
United States Investor Certificateholders.......... 38
Foreign Investor Certificateholders................ 40
Backup Withholding and Information Reporting....... 40
Possible Characterization of the Investor
Certificates..................................... 41
Certain State Income Tax Consequences................ 43
ERISA Considerations................................. 43
Plan of Distribution................................. 45
Legal Matters........................................ 46
Available Information................................ 47
Glossary of Terms.................................... 48
ANNEX I -- Global Clearance, Settlement and Tax
Documentation Procedures........................... 58
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE INVESTOR
CERTIFICATES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
THE UNDERWRITERS AND THE COMPANY HAVE AGREED THAT THE CLOSING OF THE SALE
OF THE INVESTOR CERTIFICATES TO THE UNDERWRITERS WILL OCCUR FIVE BUSINESS DAYS
AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AT SUCH LATER DATE AS THEY MAY
MUTUALLY AGREE.
S-3
<PAGE> 4
SERIES SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement, the Prospectus
and the Series Supplement. Reference is made to the Glossary of Terms herein and
the Glossary of Terms in the Prospectus for the definitions of certain
capitalized terms.
TITLE OF SECURITIES........... Discover Card Master Trust I, Series 1997-1
Floating Rate Class A Credit Card Pass-Through
Certificates and Series 1997-1 Floating Rate
Class B Credit Card Pass-Through Certificates.
CLASS INITIAL INVESTOR
INTERESTS..................... Class A Certificates: $750,000,000.
Class B Certificates: $39,474,000.
INTEREST ON INVESTOR
CERTIFICATES.................. Class A Certificates: LIBOR plus 0.09% per
annum, calculated on the basis of the actual
number of days elapsed and a 360-day year;
payable on the 15th day of each month (or, if
such day is not a Business Day, the next
succeeding Business Day), commencing in
September 1997.
Class B Certificates: LIBOR plus 0.27% per
annum, calculated on the basis of the actual
number of days elapsed and a 360-day year;
payable on the 15th day of each month (or, if
such day is not a Business Day, the next
succeeding Business Day), commencing in
September 1997.
See "Description of the Investor Certificates
-- Interest Payments" herein and in the
Prospectus.
PRINCIPAL ON INVESTOR
CERTIFICATES.................. Class A Certificates: Payable on August 15,
2002 (or, if such day is not a Business Day,
the next succeeding Business Day) (the "Class A
Expected Final Payment Date"), unless an
Amortization Event occurs, in which case
principal will be distributed monthly and the
final payment of principal may be made either
before or after such date.
Class B Certificates: Payable on September 15,
2002 (or, if such day is not a Business Day,
the next succeeding Business Day) (the "Class B
Expected Final Payment Date"), unless an
Amortization Event occurs, in which case
principal will be distributed monthly and the
final payment of principal may be made either
before or after such date. No principal will be
paid to holders of Class B Certificates until
the final principal payment with respect to the
Class A Certificates has been made.
See "Description of the Investor Certificates
-- Principal Payments" herein and in the
Prospectus.
SERIES CUT-OFF DATE........... August 1, 1997.
SERIES CLOSING DATE........... August 26, 1997.
PRINCIPAL COMMENCEMENT DATE... The first day of the Due Period related to the
September 2001 Distribution Date (or, such
later Distribution Date as the Master Servicer
shall elect in accordance with the Series
Supplement). See "Description of the Investor
Certificates -- Principal Payments -- Variable
Accumulation Period."
REVOLVING PERIOD.............. From and including the Series Cut-Off Date to
but excluding the earlier of (i) the Principal
Commencement Date and (ii) the Amortization
Commencement Date.
ACCUMULATION PERIOD........... Unless an Amortization Event has occurred
during the Revolving Period, from and including
the Principal Commencement Date until the
earliest of (i) the payment in full of the
Series Invested
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<PAGE> 5
Amount, (ii) the Amortization Commencement Date
and (iii) the Series Termination Date.
AMORTIZATION PERIOD........... The Amortization Period, 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.
CLASS A EXPECTED FINAL PAYMENT
DATE........................ The Distribution Date in August 2002.
CLASS B EXPECTED FINAL PAYMENT
DATE........................ The Distribution Date in September 2002.
SERIES TERMINATION DATE....... The first Business Day following the
Distribution Date in February 2005.
SUBORDINATION OF CLASS B
CERTIFICATES................ The Class B Certificates are subordinated in
right of payment to the Class A Certificates,
to the extent of the Available Subordinated
Amount at the time any such subordinated
payment is made. The Available Subordinated
Amount initially will be $98,684,250, which
amount may be reduced, reinstated or increased
from time to time. The Available Subordinated
Amount will be increased following an Effective
Alternative Credit Support Election by
$39,473,700.
CREDIT ENHANCEMENT............ Credit Enhancement initially will consist
solely of a cash collateral account for the
exclusive direct benefit of the Class B
Certificateholders.
The initial amount of the Credit Enhancement is
$59,210,550. The Credit Enhancement Account may
be drawn upon from time to time to reimburse
the Class B Certificateholders under certain
circumstances as described herein for amounts
that otherwise would reduce the Class B
Investor Interest. The maximum amount of Credit
Enhancement as of any Distribution Date will be
the greater of (i) $7,894,740 and (ii) an
amount equal to 7.5% of the Series Investor
Interest as of the last day of the related Due
Period (or, following an Effective Alternative
Credit Support Election, the greater of
$7,894,740 and an amount equal to 12.5% of the
Series Investor Interest as of the last day of
the related Due Period); provided, however,
that if an Amortization Event occurs, the
maximum amount of Credit Enhancement for each
Distribution Date thereafter will be the
maximum amount of Credit Enhancement
immediately prior to the occurrence of the
Amortization Event; and provided, further, that
if any drawing has been made on the Credit
Enhancement then, until the Credit Enhancement
has been reinstated in an amount at least equal
to the amount of the drawing, the maximum
amount of Credit Enhancement will be the
maximum amount of Credit Enhancement at the
time the drawing was made.
See "Risk Factors -- Credit Enhancement" in the
Prospectus and "Description of the Investor
Certificates -- Credit Enhancement" herein and
in the Prospectus.
PREVIOUSLY ISSUED SERIES...... Thirteen series of investor certificates in
Group One and one series of investor
certificates in Group Two have previously been
issued by the Trust and are currently
outstanding. See "Annex A -- Other Series" for
a summary of the terms of the other series of
investor certificates issued by the Trust and
currently outstanding.
S-5
<PAGE> 6
PARTICIPATION WITH OTHER
SERIES........................ The Investor Certificates initially will be
included in the "Group One" group of series. In
addition to the series already outstanding,
additional series in Group One or in other
Groups are expected to be issued by the Trust
from time to time in the future. The Series
offered hereby will be eligible to receive
reallocated Collections from any other Group
One series issued by the Trust that provides
for such reallocations. The Master Servicer may
from time to time, subject to certain
conditions, move the Series offered hereby, and
any other series, from one Group to another
Group. See "Description of the Investor
Certificates -- Reallocation of Series Among
Groups" in the Prospectus.
SUBORDINATION OF SERIES....... The Investor Certificates of the Series offered
hereby will not be subordinated in right of
payment to any other series that may be issued
by the Trust.
THE RECEIVABLES............... The Receivables in the Accounts as of August 1,
1997 totaled $17,830,375,466.48.
RATING OF THE INVESTOR
CERTIFICATES................ It is a condition of issuance that the Class A
Certificates be rated in the highest rating
category and that the Class B Certificates be
rated at least "A" or the equivalent by the
Rating Agencies.
ERISA CONSIDERATIONS.......... It is expected that the assets of an ERISA plan
that invests in the Class A Certificates would
not be deemed to include an interest in the
assets of the Trust. The Class B Certificates
may not be acquired by any employee benefit
plan that is subject to ERISA. See "ERISA
Considerations" in the Prospectus for
additional information concerning this and
other ERISA issues.
LISTING....................... Application will be made to list the Investor
Certificates on the Luxembourg Stock Exchange.
S-6
<PAGE> 7
THE DISCOVER CARD BUSINESS
GENERAL
The Receivables that Greenwood has conveyed to the Trust pursuant to the
Pooling and Servicing Agreement were generated from transactions made by holders
of the Discover(R) Card, a general purpose credit and financial services card.
The Receivables conveyed to the Trust on the Initial Closing Date and thereafter
included only receivables arising under accounts in the Discover Card Portfolio,
although receivables arising under accounts not included in the Discover Card
Portfolio may be added to the Trust at a later date. See "The Trust -- Addition
of Accounts" in the Prospectus. All references to the Discover Card in this
section entitled "The Discover Card Business" relate exclusively to the Discover
Card issued by Greenwood. With the exception of the small number of Discover
Card Corporate Cards issued by an affiliate of Greenwood, Greenwood is the sole
issuer of credit cards bearing the DISCOVER service mark. Greenwood also issues,
and intends from time to time to introduce, additional general purpose credit,
charge and financial transaction cards.
The Discover Card was first issued in regional pilot markets in September
1985, and national distribution began in March 1986. The Discover Card issued by
Greenwood affords cardmembers access to a revolving line of credit. The card can
be used to purchase merchandise and services from participating service
establishments. The number of service establishments that accept the Discover
Card has continued to increase. In 1996, approximately 425,000 new service
establishments were enrolled. The Discover Card can also be used to obtain cash
advances at automated teller machines and at certain other locations throughout
the United States. Cash advances can also be obtained by means of checks written
by cardmembers and drawn against their accounts. As of May 31, 1997, there were
34.5 million Discover Card accounts with 44.0 million cardmembers. The Discover
Card issued by Greenwood may only be used for personal, family or household
purposes due to banking statutes applicable to Greenwood. See "The Seller --
Greenwood" in the Prospectus.
Each Discover Cardmember is subject to account terms and conditions that
are uniform from state to state. See "The Accounts -- Billing and Payments." In
all cases, the agreement governing the terms and conditions of the account (the
"Cardmember Agreement") permits Greenwood to change the credit terms, including
the rate of the periodic finance charge and the fees imposed on accounts, upon
prior notice to cardmembers. Each Discover Card account is assigned a credit
limit when the account is opened. Thereafter, individual credit limits may be
increased or decreased, at Greenwood's discretion, from time to time. The credit
limits on Discover Card accounts generally range from $1,000 to $6,000, although
on occasion higher or lower limits may be authorized.
There are additional features and services offered with the Discover Card
accounts. One is the Cashback Bonus(R), in which Greenwood annually pays
cardmembers a percentage of their purchase amounts, ranging up to one percent,
based on their annual purchases. This amount is remitted to cardmembers in the
form of a check or a credit to the cardmember's account. No such amounts will be
paid from the property of the Trust. Another feature offered with the Discover
Card accounts is a variable rate of periodic finance charges applied to a
cardmember's account balance (except in certain limited circumstances) based on
the prevailing prime rate plus a margin, the amount of such cardmember's
purchases and the cardmember's payment history. See "The Accounts -- Billing and
Payments." Greenwood also offers cardmembers money market deposit accounts,
called Discover Saver's Accounts, and time deposits, called Discover Card CDs.
These deposit products offer competitive rates of interest and are insured by
the FDIC. To differentiate the Discover Card in the marketplace, Greenwood from
time to time tests and implements new offers, promotions and features of the
Discover Card.
Greenwood, either directly, through its processing arrangements with its
affiliate, NOVUS Services, Inc. ("NSI"), or through processing agreements with
credit card processing facilities of unaffiliated third parties, performs all
the functions required to service and operate the Discover Card accounts. These
functions include new account solicitation, application processing, new account
fulfillment, transaction authorization and processing, cardmember billing,
payment processing, cardmember service and collection of delinquent accounts.
There are currently multiple geographically dispersed operations centers
maintained by Greenwood or NSI for
S-7
<PAGE> 8
servicing cardmembers. An additional operations center is maintained for
processing accounts that have been charged-off as uncollectible.
NSI has established arrangements with service establishments to accept the
Discover Card and other credit, charge and financial transaction cards that
carry the NOVUS(R) logo for cash advances and as the means of payment for
merchandise and services. Greenwood contracts with NSI to have cards issued by
Greenwood (including the Discover Card) accepted at those establishments. The
ability to generate new receivables requires locations where the Discover Card
can be used. NSI employs a national sales and service force to maintain and
increase the size of its service establishment base. Additional operations
centers that currently are maintained by NSI are devoted primarily to providing
customer service to service establishments. The service establishments that
accept the Discover Card encompass a wide variety of businesses, including local
and national retail establishments and specialty stores of all types, quick
service food establishments, governments, restaurants, medical providers and
warehouse clubs, and many leading airlines, car rental companies, hotels,
petroleum companies and mail order companies.
CREDIT-GRANTING PROCEDURES
Accounts in the Discover Card Portfolio have been solicited by various
techniques and have undergone credit review to establish that the cardmembers
meet standards of ability and willingness to pay. Principally, the accounts have
been solicited (i) via "pre-approved" direct mail or telemarketing, (ii) by
"take-one" applications distributed in many service establishments that accept
the Discover Card and (iii) with various other programs targeting specific
segments of the population. Solicitations have been supported by general
broadcast and print media advertising. Potential applicants who are sent
pre-approved solicitations have met certain credit criteria relating to their
previous payment patterns and longevity of account relationships with other
credit grantors. Since September 1987, all lists have been pre-screened through
credit bureaus before mailing. Pre-screening is a process by which an
independent credit reporting agency evaluates the list of names supplied by
Greenwood against credit-worthiness criteria supplied by Greenwood that are
intended to provide a general indication, based on available information, of the
willingness and ability of such persons to repay their obligations; the credit
bureaus return to Greenwood only the names of those persons meeting these
criteria. Applications that are not pre-approved are evaluated by using
credit-scoring systems (statistical evaluation models that assign point values
to credit information regarding applications). The credit-scoring systems used
by Greenwood are based on the credit-scoring systems developed by scoring model
vendors. Certain applications not approved under the credit-scoring systems are
reviewed by credit analysts. Any such application as to which a credit analyst
recommends approval is processed in Greenwood's main office in New Castle,
Delaware by senior bank review analysts and may be approved by them.
As owner of the Greenwood Discover Card Accounts, Greenwood has the right
to change its credit-scoring criteria and credit-worthiness criteria.
Greenwood's application procedures and credit-scoring systems are regularly
reviewed and modified to reflect Greenwood's actual credit experience with
Discover Card account applicants and cardmembers as such historical information
becomes available. Greenwood believes that refinements of these procedures and
systems since the inception of the Discover Card program have helped it to
manage and predict its credit losses, although there can be no assurance that
these refinements will not cause increases in credit losses in the future.
Relaxation of credit standards typically results in increases in charged-off
amounts, which, under certain circumstances, may 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 Additional
Accounts or Participation Interests are not available to be added to the Trust
or are not added, an Amortization Event could result, causing the commencement
of the Amortization Period. In addition, an increase in Charged-Off Amounts
without an offsetting increase in Finance Charge Receivables could result in an
Amortization Event, causing the commencement of the Amortization Period.
COLLECTION EFFORTS
Efforts to collect past-due Discover Card accounts receivable currently are
made primarily by collections personnel of NSI or Greenwood. Under current
practice, Greenwood includes a request for payment of past-due amounts on the
monthly billing statement of all accounts with such amounts. Accounts with
past-due
S-8
<PAGE> 9
amounts also receive a written notice of late fee charges, as well as an
additional request for payment, 15 days after any monthly statement that
includes a past-due amount. Collection personnel generally initiate telephone
contact with cardmembers within 30 days after any portion of their balance
becomes past due. In the event that initial telephone contacts fail to elicit a
payment, Greenwood continues to contact the cardmember by telephone and by mail.
Greenwood also may enter into arrangements with cardmembers to waive finance
charges, late fees and principal due, or extend or otherwise change payment
schedules. The current policy of Greenwood is to recognize losses and to charge
off an account at the end of the sixth full calendar month after a payment
amount is first due if payment of any portion of that amount has not been
received by such time, except in cases of bankruptcy, where an uncollectible
balance may be charged off earlier. In general, after an account has been
charged off, collections personnel of NSI or Greenwood make attempts to collect
all or a portion of the charged-off account for a period of approximately four
months. If those attempts are unsuccessful, the charged-off account is generally
placed with one or more collection agencies for a period of approximately a year
or, alternatively, Greenwood may commence legal action against the cardmember,
including legal action for the attachment of property or bank accounts of the
cardmember or the garnishment of the cardmember's wages. Under certain
circumstances, Greenwood may also sell charged-off accounts to third parties,
either before or after collection efforts have been attempted. To facilitate
such sales, a limited number of Charged-Off Accounts may, subject to Rating
Agency consent, be removed from the Trust prior to such sales.
Under the terms of the Pooling and Servicing Agreement, any recoveries
received on Charged-Off Accounts (other than the proceeds of sales of
Charged-Off Accounts that have been removed from the Trust) are included in the
assets of the Trust and are treated as Finance Charge Collections. Recoveries on
Charged-Off Accounts initially are lower than the level of recoveries for the
Discover Card Portfolio because charged-off accounts were not included as
Accounts as of the Account Selection Date. Greenwood believes that, over time,
the level of recoveries as a percentage of the Receivables in the Trust will
increase to more closely approximate the level of recoveries in the Discover
Card Portfolio, although the extent of such increase cannot be predicted and may
be limited by removals of Charged-Off Accounts from the Trust. There can be no
assurance that the level of recoveries for the Trust will ever equal the level
of recoveries for the Discover Card Portfolio. Similarly, any addition of
Additional Accounts to the Trust will cause a temporary reduction in the level
of recoveries as a percentage of the Receivables in the Trust because no
Additional Accounts will be charged-off accounts at the time of their addition
to the Trust. The credit granting, servicing and charge-off policies and
collection practices of Greenwood may change over time in accordance with
Greenwood's business judgment and applicable law. See "Description of the
Investor Certificates -- Adjustments to Receivables" in the Prospectus and "The
Accounts -- Composition of the Accounts" and "-- Summary Current Delinquency
Information" and "Composition and Historical Performance of the Discover Card
Portfolio -- Composition of the Discover Card Portfolio" herein.
THE ACCOUNTS
GENERAL
The Accounts were selected in a random manner intended to produce a
representative sample of all Discover Card accounts not previously segregated
from the Discover Card Portfolio as of the Account Selection Date (except that a
limited number of accounts that were opened pursuant to credit scoring criteria
materially different from the credit scoring criteria generally used for
Discover Card accounts were not included in the Discover Card Portfolio on which
the random selection was performed). See "-- Effects of the Selection Process."
The Receivables in the Accounts as of August 1, 1997 totaled
$17,830,375,466.48. The Accounts had an average balance of $852 and an average
credit limit of $4,552 as of August 1, 1997. For additional information on the
composition of the Accounts, see "-- Composition of the Accounts."
S-9
<PAGE> 10
BILLING AND PAYMENTS
All Discover Card accounts have the same billing and payment structure.
Monthly billing statements are sent by Greenwood to each cardmember with an
outstanding debit balance. Discover Card accounts are grouped into multiple
billing cycles for operational purposes. Each billing cycle has a separate
monthly billing date at which time the activity in the related accounts during
the period of approximately 28 to 34 days ending on such billing date is
processed and billed to cardmembers. The Accounts include accounts in all
billing cycles.
Each Discover Cardmember with an outstanding debit balance in his or her
Discover Card account must generally make a minimum payment equal to 1/48th of
the new balance on the account at the end of the billing cycle for the account
(prior to February 1996, 1/36th), rounded to the next higher whole dollar
amount, but not less than $10 or the entire balance, whichever is less, plus any
amount that is past due. Under certain circumstances, the minimum payment is
reduced by amounts paid in excess of the minimum payment due during the previous
three months and not already so applied. From time to time, Greenwood has
offered and may continue to offer cardmembers with accounts in good standing the
opportunity to skip the minimum monthly payment, while continuing to accrue
periodic finance charges, without being considered to be past due. Although
these practices are not expected to have a material adverse effect on the
Investor Certificateholders, Collections may be reduced during any period in
which Greenwood offers cardmembers the opportunity to skip the minimum monthly
payment. A cardmember may pay the total amount due at any time. Greenwood also
may enter into arrangements with delinquent cardmembers to extend or otherwise
change payment schedules, and to waive finance charges, late fees and principal
due.
Greenwood imposes periodic finance charges on Discover Card account
balances at fixed and variable annual percentage rates. Periodic finance charges
on purchases, cash advances and balance transfers are calculated on a daily
basis, subject to a grace period that essentially provides that periodic finance
charges are not imposed if the cardmember pays his or her entire balance each
month. In general, periodic finance charges on purchases, cash advances and
balance transfers are based on a prime rate plus a margin (currently 8.9% to
13.9%), subject to certain minimum rates currently ranging from 12.9% to 19.8%.
The rates imposed on individual Discover Card accounts are based on purchase
activity and payment status. In addition, in connection with programs for new
cardmembers, for balance transfers, and for other promotional purposes, certain
Discover Card account balances may accrue periodic finance charges at lower
fixed rates for a specified period of time. Balances remaining from transactions
posted to accounts in billing cycles beginning prior to February 1993 also
accrue periodic finance charges at fixed rates.
In addition to periodic finance charges, Greenwood may impose certain other
charges and fees on Discover Card accounts. Greenwood currently charges a cash
advance transaction fee equal to 2.5% of each cash advance, with a minimum fee
of $2.00 per transaction. Greenwood also currently charges a $20 late fee on
Discover Card accounts, a $20 fee for balances exceeding a cardmember's credit
limit as of the close of such cardmember's monthly billing cycle and a $15 fee
for any payment check returned due to insufficient funds. See "Risk Factors --
Consumer Protection Laws and Regulations," "-- Payments and Maturity" and "--
Ability of the Seller to Change Terms of the Accounts" in the Prospectus.
The yield on the Accounts depends on changes in the prime rate over time
and in cardmember account usage and payment performance, none of which can be
predicted, as well as the extent to which balance transfer offers and special
promotion offers are made and accepted, and the extent to which Greenwood
changes the terms of the Cardmember Agreement. Reductions in the yield could, if
sufficiently large, cause the commencement of the Amortization Period or result
in either shortfalls of Certificate Interest or losses to the Investor
Certificateholders as the result of charged-off Receivables, and there can be no
assurance regarding any of these effects. See "Risk Factors -- Basis Risk" in
the Prospectus.
EFFECTS OF THE SELECTION PROCESS
The Accounts have been selected from accounts serviced at all Greenwood and
NSI operations centers and from accounts of residents of the 50 states, the
District of Columbia and the United States' territories and possessions (except
that a limited number of accounts that were opened pursuant to credit scoring
criteria
S-10
<PAGE> 11
materially different from the credit scoring criteria generally used for
Discover Card accounts were not included in the accounts from which the Accounts
were selected), 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 use and payment
performance of the Obligors on the Accounts will be representative of the
Discover Card Portfolio in all material respects.
COMPOSITION OF THE ACCOUNTS
Information concerning the composition of the Accounts is set forth below.
Information concerning the composition and historical performance of the
accounts in the Discover Card Portfolio is set forth under "Composition and
Historical Performance of the Discover Card Portfolio."
Geographic Distribution. As of August 1, 1997, the five states with the
largest Receivables balances were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL RECEIVABLES
STATE BALANCE IN THE ACCOUNTS
----- -------------------------------
<S> <C>
California......................................... 11.8%
Texas.............................................. 9.3%
New York........................................... 6.8%
Florida............................................ 5.7%
Illinois........................................... 4.9%
</TABLE>
Credit Limit Information. Credit limit information as of August 1, 1997
with respect to the Accounts is summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
RECEIVABLES OF TOTAL
OUTSTANDING RECEIVABLES
CREDIT LIMIT (000'S) OUTSTANDING
------------ ----------- -----------
<S> <C> <C>
Less than or equal to $1,000.00............................. $ 319,722 1.8%
$1,000.01 to $2,000.00...................................... $ 2,831,327 15.9%
$2,000.01 to $3,000.00...................................... $ 2,976,928 16.7%
Over $3,000.00.............................................. $11,702,398 65.6%
----------- ------
Total.................................................. $17,830,375 100.0%
=========== ======
</TABLE>
Seasoning. As of August 1, 1997, 77.9% of the Accounts were at least 24
months old. The distribution of the age of Accounts as of August 1, 1997 was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
AGE OF ACCOUNTS OF ACCOUNTS OF BALANCES
--------------- ----------- -----------
<S> <C> <C>
Less than 12 Months.................. 4.1% 4.2%
12 to 23 Months...................... 18.0% 18.8%
24 to 35 Months...................... 9.7% 10.0%
36 Months and Greater................ 68.2% 67.0%
------ ------
100.0% 100.0%
====== ======
</TABLE>
For a discussion of the potential effects of seasoning on the performance
of the Accounts, see "Risk Factors -- Effects of the Selection Process,
Seasoning and Performance Characteristics" in the Prospectus.
S-11
<PAGE> 12
Summary Current Delinquency Information. Current delinquency information as
of August 1, 1997 with respect to the Accounts is summarized as follows:
<TABLE>
<CAPTION>
AGGREGATE
BALANCES PERCENTAGE
PAYMENT STATUS (000'S) OF BALANCES
-------------- ----------- -----------
<S> <C> <C>
Current...................................... $15,118,165 84.7%
1 to 29 Days................................. $ 1,393,527 7.8%
30 to 59 Days................................ $ 515,458 2.9%
60 to 89 Days................................ $ 295,633 1.7%
90 to 119 Days............................... $ 213,346 1.2%
120 to 149 Days.............................. $ 178,229 1.0%
150 to 179 Days.............................. $ 116,017 0.7%
----------- ------
$17,830,375 100.0%
=========== ======
</TABLE>
COMPOSITION AND HISTORICAL PERFORMANCE
OF THE DISCOVER CARD PORTFOLIO
GENERAL
Except to the extent specifically identified as relating to the Accounts,
all of the information describing the composition and historical performance of
Discover Card accounts in this Prospectus Supplement reflects the composition
and historical performance of the Discover Card Portfolio, and not that of the
Accounts. A limited number of Discover Card accounts were opened pursuant to
credit scoring criteria materially different from the credit scoring criteria
generally used for Discover Card Accounts. These accounts have been segregated
from the rest of the Discover Card Portfolio and are not reflected in the
information contained herein. None of these accounts is included in the Trust.
Greenwood has no statistical or other basis for determining the effects, if any,
of the selection process, although Greenwood has no reason to believe that the
Accounts will not be representative of the Discover Card Portfolio in any
material respect. There can be no assurance, however, that the Accounts have
performed or will perform similarly to the Discover Card Portfolio. There also
can be no assurance that the historical performance of the Discover Card
Portfolio will be representative of its performance in the future. See "The
Accounts -- Billing and Payments" herein and "Risk Factors -- Basis Risk" and
"-- Effects of the Selection Process, Seasoning and Performance Characteristics"
in the Prospectus. For additional discussion of economic factors affecting the
performance of the Discover Card Portfolio, see "Risk Factors -- Social, Legal
and Economic Factors" in the Prospectus.
COMPOSITION OF THE DISCOVER CARD PORTFOLIO
Geographic Distribution. The Discover Card Portfolio is not concentrated
geographically. As of May 31, 1997 , the five states with the largest
receivables balances were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL RECEIVABLES BALANCE
OF DISCOVER CARD PORTFOLIO
STATE AS OF MAY 31, 1997
- ----- ---------------------------------------
<S> <C>
California............................ 11.4%
Texas................................. 9.3%
New York.............................. 6.7%
Florida............................... 5.7%
Illinois.............................. 5.0%
</TABLE>
No other state accounted for more than 5% of the total receivables balance
of the Discover Card Portfolio as of May 31, 1997.
S-12
<PAGE> 13
Credit Limit Information. Credit limit information as of May 31, 1997 with
respect to the Discover Card Portfolio is summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
RECEIVABLES OF TOTAL
OUTSTANDING RECEIVABLES
CREDIT LIMIT (000'S) OUTSTANDING
------------ ----------- -----------
<S> <C> <C>
Less than or equal to $1,000.00............................. $ 514,266 1.8%
$1,000.01 to $2,000.00...................................... $ 4,416,364 15.8%
$2,000.01 to $3,000.00...................................... $ 3,961,649 14.1%
Over $3,000.00.............................................. $19,131,578 68.3%
----------- ------
Total.................................................. $28,023,857 100.0%
=========== ======
</TABLE>
Seasoning. As of May 31, 1997, 80.8% of the accounts in the Discover Card
Portfolio were at least 24 months old. The distribution of the age of accounts
in the Discover Card Portfolio as of May 31, 1997 was as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
AGE OF ACCOUNTS OF ACCOUNTS OF BALANCES
--------------- ----------- -----------
<S> <C> <C>
Less than 12 Months............................ 7.5% 6.7%
12 to 23 Months................................ 11.7% 12.9%
24 to 35 Months................................ 11.2% 11.7%
36 Months and Greater.......................... 69.6% 68.7%
------ ------
100.0% 100.0%
====== ======
</TABLE>
Summary Yield Information. The annualized aggregate monthly yield for the
Discover Card Portfolio is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
FIVE MONTHS ENDED --------------------------
MAY 31, 1997 1996 1995 1994
----------------- ------ ------ ------
<S> <C> <C> <C> <C>
Aggregate Monthly Yields(1)
Excluding Recoveries(2)..................... 18.18% 17.72% 16.95% 16.65%
Including Recoveries(3)..................... 18.78% 18.20% 17.39% 17.07%
</TABLE>
- ------------
(1) Monthly Yield is calculated by dividing Monthly Finance Charges billed by
beginning monthly balance. Monthly Finance Charges include periodic finance
charges, cash advance item charges, late fees, and as of March 1, 1996,
overlimit fees, but exclude certain other items, such as annual membership
fees, if any, which are included in Finance Charge Receivables. Aggregate
Monthly Yield is the average of Monthly Yields annualized for each period
shown.
(2) Monthly Yield excluding any recoveries received with respect to charged-off
accounts.
(3) Monthly Yield including recoveries received with respect to charged-off
accounts. Recoveries received with respect to Charged-Off Accounts (other
than the proceeds of sales of Charged-Off Accounts that have been removed
from the Trust) are included in the Trust and are treated as Finance Charge
Collections. However, the level of recoveries for the Trust will initially
be lower than the level of recoveries for the Discover Card Portfolio
because charged-off accounts were not included in the Accounts selected for
inclusion in the Trust. The level of recoveries on Additional Accounts will
also initially be lower than the level of recoveries for the Discover Card
Portfolio because charged-off accounts will not be included in Additional
Accounts selected for inclusion in the Trust. Greenwood believes that, over
time, the level of recoveries on the Accounts (including on any Additional
Accounts), as a percentage of the Receivables in the Trust will increase to
more closely approximate the level of recoveries in the Discover Card
Portfolio, although the extent of such increase cannot be predicted and
there can be no assurance that the level of recoveries for the Trust will
ever equal the level of recoveries for the Discover Card Portfolio.
S-13
<PAGE> 14
Summary Current Delinquency Information. Current delinquency information as
of May 31, 1997 with respect to the Discover Card Portfolio is summarized as
follows:
<TABLE>
<CAPTION>
AGGREGATE
BALANCES PERCENTAGE
PAYMENT STATUS (000'S) OF BALANCES
-------------- ----------- -----------
<S> <C> <C>
Current........................................... $23,994,533 85.6%
1 to 29 Days...................................... $ 2,176,420 7.8%
30 to 59 Days..................................... $ 726,440 2.6%
60 to 89 Days..................................... $ 417,047 1.5%
90 to 119 Days.................................... $ 246,113 0.9%
120 to 149 Days................................... $ 248,553 0.9%
150 to 179 Days................................... $ 214,751 0.7%
----------- ------
$28,023,857 100.0%
=========== ======
</TABLE>
Summary Historical Delinquency Information. Historical delinquency
information with respect to the Discover Card Portfolio is summarized as
follows:
<TABLE>
<CAPTION>
AVERAGE OF
FIVE MONTHS ENDED
MAY 31, 1997
--------------------------------------------------------
DELINQUENT
AMOUNT
(000'S) PERCENTAGE(1)
---------------------------------------- -------------
<S> <C> <C>
30-59 Days........... $ 718,617 2.6%
60-89 Days........... $ 409,274 1.5%
90-179 Days.......... $ 787,768 2.8%
----------- ----
Total............ $1,915,659 6.9%
=========== ====
<CAPTION>
AVERAGE OF TWELVE MONTHS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1996 1995 1994
-------------------------- -------------------------- --------------------------
DELINQUENT DELINQUENT DELINQUENT
AMOUNT AMOUNT AMOUNT
(000'S) PERCENTAGE(1) (000'S) PERCENTAGE(1) (000'S) PERCENTAGE(1)
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
30-59 Days........... $ 680,645 2.7% $ 568,382 2.6% $405,942 2.2%
60-89 Days........... $ 361,992 1.4% $ 276,821 1.3% $193,582 1.1%
90-179 Days.......... $ 593,661 2.3% $ 403,134 1.8% $282,080 1.5%
---------- ---- ---------- ---- -------- ----
Total............ $1,636,298 6.4% $1,248,337 5.7% $881,604 4.8%
========== ==== ========== ==== ======== ====
</TABLE>
For a discussion of economic factors affecting the performance of the
Discover Card Portfolio, including delinquencies, see "Risk Factors -- Social,
Legal and Economic Factors" in the Prospectus.
- ------------
(1) The percentages are the result of dividing Delinquent Amount by Average
Receivables Outstanding for the applicable period. Delinquent Amount is the
average of the monthly ending balances of delinquent accounts during the
periods indicated. Average Receivables Outstanding is the average of the
monthly average amount of receivables outstanding during the periods
indicated.
Summary Charge-Off Information. Charge-off information with respect to the
Discover Card Portfolio is summarized as follows:
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------
MAY 31, 1997 1996 1995 1994
----------------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)........ $27,927,002 $25,542,718 $22,031,829 $18,464,611
Gross Charge-Offs......................... $ 843,844 $ 1,458,450 $ 923,836 $ 680,487
Gross Charge-Offs as a Percentage of
Average Receivables Outstanding(2)...... 7.25% 5.71% 4.19% 3.69%
</TABLE>
For a discussion of economic factors affecting the performance of the
Discover Card Portfolio, including charge-offs, see "Risk Factors -- Social,
Legal and Economic Factors" in the Prospectus.
- ------------
(1) Average Receivables Outstanding is the average of the monthly average amount
of receivables outstanding during the periods indicated.
(2) Recoveries with respect to charged-off Receivables (other than the proceeds
of sales of Charged-Off Accounts that have been removed from the Trust) are
property of the Trust and are treated as Finance Charge Collections.
S-14
<PAGE> 15
Summary Payment Rate Information(1). The monthly rate of payments in the
Discover Card Portfolio is summarized as follows:
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
MAY 31, 1997 1996 1995 1994
----------------- ------ ------ ------
<S> <C> <C> <C> <C>
Average Monthly Payment Rate(2)................ 14.58% 15.24% 16.20% 16.65%
High Monthly Payment Rate...................... 16.31% 18.08% 18.97% 17.89%
Low Monthly Payment Rate....................... 13.59% 13.33% 13.67% 15.16%
</TABLE>
- ------------
(1) Monthly Payment Rate is calculated by dividing monthly cardmember
remittances by the cardmember receivable balance outstanding as of the
beginning of the month.
(2) Average Monthly Payment Rate for a period is equal to the sum of individual
monthly payment rates for the period divided by the number of months in the
period.
PAYMENT OF THE INVESTOR CERTIFICATES
Assuming a yield of 18.78% per annum, a charge-off rate of 7.25% per annum,
a constant amount of outstanding Principal Receivables in the Trust and the
occurrence of no Amortization Event, and assuming that the Series offered hereby
is not receiving any Collections that were originally allocated to another
series of investor certificates and that the Master Servicer does not elect to
defer the commencement of the Accumulation Period, the minimum monthly payment
rate needed for the Class A Certificateholders to receive repayment of principal
in full on the Class A Expected Final Payment Date is 9.28% and the minimum
monthly payment rate needed in August 2002 for the Class B Certificateholders to
receive their payment of principal on the Class B Expected Final Payment Date
(after the final payment to the Class A Certificateholders) is 6.46%. The actual
rate of payment of principal on the Investor Certificates will depend on, among
other factors, the rate of payments by cardmembers, the timing of the receipt of
such payments and the rate of default by cardmembers. See "Description of the
Investor Certificates -- Principal Payments -- Variable Accumulation Period"
herein and "Description of the Investor Certificates -- Final Payment of
Principal; Termination of Series" herein and in the Prospectus, and for a more
complete discussion of the Discover Card Portfolio payment information, see "--
Summary Payment Rate Information."
The Accounts' actual yield, charge-off rate and monthly payment rate, and
the amount of outstanding Principal Receivables in the Trust, will depend on a
variety of factors, including, without limitation, seasonal variations,
extensions and other modifications of payment terms, availability of other
sources of credit, general economic conditions and consumer spending and
borrowing patterns. Accordingly, there can be no assurance that the payment of
principal will be sufficient to reduce the Class Invested Amount for each of the
Class A Certificates and the Class B Certificates to zero on the Class A
Expected Final Payment Date and the Class B Expected Final Payment Date,
respectively. In addition, there can be no assurance that an Amortization Event,
which may result in payments of principal earlier or later than the Class A
Expected Final Payment Date and the Class B Expected Final Payment Date, will
not occur. Also, in the event that the Master Servicer elects to delay the
commencement of the Accumulation Period in accordance with the provisions of the
Series Supplement and an Amortization Event subsequently occurs or the monthly
payment rate decreases, payments of principal may be made earlier or later than
the Class A Expected Final Payment Date and the Class B Expected Final Payment
Date. Finally, there can be no assurance that unreimbursed Investor Losses will
not result in Investor Certificateholders receiving principal payments in an
aggregate amount that is less than the Series Initial Investor Interest. See
"Description of the Investor Certificates -- Principal Payments -- Variable
Accumulation Period."
S-15
<PAGE> 16
DESCRIPTION OF THE INVESTOR CERTIFICATES
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 Series Supplement.
GENERAL
Generally, the Class Investor Interest for each Class will equal the Class
Initial Investor Interest less the sum of the amount of Certificate Principal
previously paid to the Investor Certificateholders of the Class, the amount of
unreimbursed Investor Losses for the Class and the aggregate amount on deposit
in the Series Principal Funding Account for the benefit of such Class.
During the Revolving Period, the amount of the Class Investor Interest for
each Class will remain constant except in certain limited circumstances. See
"Description of the Investor Certificates -- Adjustments to Receivables" in the
Prospectus. The amount of Principal Receivables in the Trust, however, will vary
each day as new Principal Receivables are created and others are paid. During
the Accumulation Period and the Amortization Period, if any, the Class A
Investor Interest will decline as Principal Collections are deposited in the
Series Principal Funding Account or distributed monthly to the Class A
Certificateholders. After the final principal payment is made to the Class A
Certificateholders, Principal Collections will be paid to the Class B
Certificateholders and the Class B Investor Interest will decline accordingly.
See "Description of the Investor Certificates -- Principal Payments" herein and
in the Prospectus.
INTEREST PAYMENTS
Interest on the Investor Certificates will be paid to the Investor
Certificateholders on each Distribution Date, commencing in September 1997 (each
such Distribution Date, an "Interest Payment Date"), at a per annum rate equal
to the Certificate Rate for the relevant Class of Investor Certificates for the
preceding Interest Accrual Period. Interest for the September 1997 Interest
Payment Date will include accrued interest from the Series Closing Date to but
excluding the September 1997 Interest Payment Date. Interest for each other
Interest Payment Date will accrue from and including the previous Interest
Payment Date to but excluding the current Interest Payment Date.
Interest on the Investor Certificates will be calculated on the basis of
the actual number of days elapsed and a 360-day year.
The amount of interest to be paid to the Investor Certificateholders of
each Class on each Interest Payment Date will be calculated by multiplying the
Class Invested Amount for the Class by a fraction the numerator of which is the
Certificate Rate for the Class for the preceding Interest Accrual Period and the
denominator of which is 360 divided by the actual number of days from and
including the immediately preceding Interest Payment Date (or, in the case of
the first Interest Payment Date, from and including the Series Closing Date) to
but excluding the current Interest Payment Date. Certificate Interest (which may
include additional amounts to adjust for shortfalls in payments with respect to
Certificate Interest for previous months) will be funded from (A) in the case of
the Class A Certificates, Class A Finance Charge Collections received during the
related Due Period, Class A Investment Income, Class A Yield Collections, if
any, and Class A Additional Funds, if any, for that Interest Payment Date and,
subject to the Available Subordinated Amount, certain Class B Available
Collections and Series Excess Servicing and (B) in the case of the Class B
Certificates, the Class B Available Finance Charge Collections and, after
payment of certain amounts with respect to the Class A Certificates, Series
Excess Servicing and funds drawn from the Credit Enhancement Account, up to the
Available Class B Credit Enhancement Amount. See "Description of the Investor
Certificates -- Credit Enhancement" herein and in the Prospectus.
Certificate Interest on any Distribution Date also may be funded from
Finance Charge Collections allocated for the benefit of investor certificates of
other series included in Group One, pursuant to the terms of the Series
Supplements with respect to those series. Thirteen other series currently are
outstanding in Group One. Funds from such series may, under limited
circumstances, be available to be reallocated for the benefit of the Investor
Certificates. Although Greenwood, through the Trust, anticipates issuing other
series in addition
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to those described above, it is under no obligation to do so, and there can be
no assurance that any such additional series, if issued, will provide for the
reallocation of Finance Charge Collections for the benefit of the Investor
Certificates. There can also be no assurance that any funds from any other
outstanding series will actually be available to be reallocated for the benefit
of the Investor Certificates. See "Description of the Investor Certificates --
Allocations, Reallocations and Subordination of Collections" and "--
Distributions of Collections and Application of Collections and Certain Other
Amounts."
DETERMINATION OF LIBOR
LIBOR for each Interest Accrual Period will be determined on the LIBOR
Determination Date for that Interest Accrual Period in the manner set forth in
the definition of "LIBOR" in the Glossary of Terms herein.
PRINCIPAL PAYMENTS
Certificate Principal is payable to the Class A Certificateholders in one
payment on the Class A Expected Final Payment Date, and to the Class B
Certificateholders in one payment on the Class B Expected Final Payment Date,
subject to the conditions and exceptions set forth below. No principal will be
paid to the Class B Certificateholders until the final principal payment to the
Class A Certificateholders has been made. In no event will the amount of
Certificate Principal paid with respect to either Class exceed the Class
Invested Amount for the Class.
During the Revolving Period, no distributions of Principal Collections will
be made to the Investor Certificateholders. During the Accumulation Period
(which is scheduled to begin on the Principal Commencement Date), Principal
Collections allocated to the Class Investor Interest of each Class, less any
Class Yield Collections for that Class, will be deposited into the Series
Principal Funding Account to the extent set forth below. On each Distribution
Date related to a Due Period during the Accumulation Period, an amount equal to
the Controlled Accumulation Amount will be deposited into the Series Principal
Funding Account. Such deposits of Principal Collections (which may include
additional amounts to adjust for shortfalls in payments with respect to
Certificate Principal in previous months) will be funded from (i) all Class A
Principal Collections and all Class B Principal Collections (less any Class B
Principal Collections used to make Class B Subordinated Payments and less Class
A Yield Collections and Class B Yield Collections, if any) received during the
related Due Period, (ii) all amounts allocated on the Distribution Date to
reimburse the Investor Certificateholders for the Class Cumulative Investor
Charged-Off Amount for each Class and (iii) Principal Collections, if any,
retained in the Collections Account from the prior Distribution Date due to an
insufficient Seller Interest. If, on any such Distribution Date, the amount
described in the preceding sentence exceeds the Controlled Accumulation Amount,
the excess will first be made available, under certain circumstances, to fund
Certificate Principal with respect to other series in Group One then outstanding
that are eligible for such reallocation. Any remaining Principal Collections
generally will be paid to the Holder of the Seller Certificate, up to the amount
of the Seller Interest. If, however, on any Distribution Date the amount
described in the third preceding sentence is less than the Controlled
Accumulation Amount, part or all of the deficiency may be funded from Principal
Collections reallocated for the benefit of the Investor Certificates pursuant to
the terms of other Series Supplements for other series included in Group One,
although there can be no assurance that any funds will actually be available to
be reallocated for the benefit of the Investor Certificates. See "Description of
the Investor Certificates -- Allocations, Reallocations and Subordination of
Collections" and "-- Distributions of Collections and Application of Collections
and Certain Other Amounts."
During the Amortization Period, if any, Principal Collections allocated to
the Series Investor Interest (including all amounts paid in respect of the Class
Cumulative Investor Charged-Off Amount for each Class) less Series Yield
Collections, if any, for the related Due Period will be paid to the Class A
Certificateholders until the Class A Invested Amount is reduced to zero and then
to the Class B Certificateholders until the Class B Invested Amount is reduced
to zero (unless the Series Termination Date occurs first); provided, however, in
the case of the first Special Payment Date of the Amortization Period, the
amount of such Principal Collections will be limited to the amount of Principal
Collections actually deposited into the Series Principal Funding Account on such
Special Payment Date. No Principal Collections will be paid to the
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Class B Certificateholders until the Class A Invested Amount is reduced to zero.
The Series Supplement does not provide for any possible reallocation for the
benefit of the Investor Certificates of Principal Collections originally
allocated to any other series during the Amortization Period. See "--
Distributions of Collections and Application of Collections and Certain Other
Amounts."
Variable Accumulation Period. Upon written notice to the Trustee, Greenwood
on behalf of the Holder of the Seller Certificate and the Credit Enhancement
Provider, the Master Servicer may elect to delay the commencement of the
Accumulation Period, and extend the length of the Revolving Period, subject to
the conditions set forth below; provided, however, that the Accumulation Period
will commence no later than the first day of the Due Period related to the Class
A Expected Final Payment Date. Any such election by the Master Servicer will be
made no later than the first day of the last Due Period of the Revolving Period
(including extensions thereof).
The Master Servicer may make such election only if the following conditions
are satisfied: (i) the Master Servicer shall have delivered to the Trustee a
certificate to the effect that the Master Servicer reasonably believes that the
delay in the commencement of the Accumulation Period will not result in the
Class A Invested Amount or the Class B Invested Amount not being paid in full on
the Class A Expected Final Payment Date or the Class B Expected Final Payment
Date, respectively; (ii) the Rating Agencies shall have advised the Master
Servicer and Greenwood on behalf of the Holder of the Seller Certificate that
such election to delay the commencement of the Accumulation Period will not
cause the rating of any class of any series then outstanding to be lowered or
withdrawn; and (iii) the amount to be deposited in the Series Principal Funding
Account in respect of the Accumulation Amount shall have been adjusted.
If the commencement of the Accumulation Period is delayed as described
above in accordance with the Series Supplement, and if an Amortization Event
occurs after the date originally scheduled as the commencement of the
Accumulation Period, then it is probable that holders of Investor Certificates
will receive some of their principal later than if the commencement of the
Accumulation Period had not been delayed.
INVESTOR ACCOUNTS
The Trustee, pursuant to the Pooling and Servicing Agreement, has
established, or will establish, and maintain in the name of the Trust a "Series
Collections Account," a "Series Principal Collections Account," a "Series
Distribution Account," a "Series Interest Funding Account" and a "Series
Principal Funding Account" (collectively, and together with the Collections
Accounts, each Group Collections Account and any similar accounts established
for any other series then outstanding, the "Investor Accounts"). Each such
account will be a segregated trust account established with the Trustee or a
Qualified Institution. The Master Servicer has the revocable power to instruct
the Trustee to make withdrawals from any Investor Account (with the exception of
the Series Principal Funding Account, which will be under the sole dominion and
control of the Trustee for the benefit of the Investor Certificateholders) for
the purpose of carrying out its duties under the Pooling and Servicing Agreement
and the Series Supplement. The Paying Agent will have the revocable power to
withdraw funds from the Series Distribution Account, Series Interest Funding
Account and Series Principal Funding Account for the purpose of making
distributions to the Investor Certificateholders. On each Distribution Date,
interest on the Investor Certificates will be paid from the Series Interest
Funding Account to the Investor Certificateholders. On the Class A Expected
Final Payment Date and the Class B Expected Final Payment Date, and on each
Special Payment Date, if any, Certificate Principal will be paid from the Series
Principal Funding Account to the applicable Investor Certificateholders. The
Paying Agent initially will be the Trustee. A successor Paying Agent may be
appointed in the future.
Greenwood currently uses for its own benefit 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 and intends to continue to do so for so long as 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. See
"Description of the Investor Certificates -- Collections Account and Group
Collections Accounts" in the Prospectus.
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Any funds on deposit in any Investor Account, if invested, will be invested
in Permitted Investments pursuant to the Pooling and Servicing Agreement.
ALLOCATIONS, REALLOCATIONS AND SUBORDINATION OF COLLECTIONS
Allocations Among Series. Pursuant to the Series Supplement, on each
Distribution Date, the Master Servicer will direct the Trustee to withdraw from
the Group One Collections Account and deposit into the Series Collections
Account the sum of the Series Finance Charge Collections and the Series
Principal Collections for the related Due Period. On or before each Distribution
Date, the Class A Additional Funds and the Class B Additional Funds, if any, for
such Distribution Date will also be deposited into the Series Collections
Account.
Reallocation of Series Investor Percentage of Collections Among Series in
Group One. The Series Supplements relating to the other outstanding series in
Group One provide that, under certain circumstances, Collections originally
allocated to one series in Group One may be reallocated to other series in Group
One. There can be no assurance, however, that any funds will be available to be
reallocated. There also can be no assurance that any series will not be moved
from its original Group to another Group. See "Description of the Investor
Certificates -- Reallocation of Series Among Groups" in the Prospectus.
The reallocation provisions included in the Series Supplement provide for
the possible reallocation of both Finance Charge Collections and Principal
Collections among series in Group One that permit such reallocations. After
Finance Charge Collections allocated to each series in Group One that provides
for reallocations have been allocated to fund the Class Required Amount and the
Class Cumulative Investor Charged-Off Amount for each class of that series, the
Credit Enhancement Fee with respect to that series and any reinstatement of the
Available Shared Credit Enhancement Amount and Available Class B Credit
Enhancement Amount, as applicable, with respect to that series, any excess
Finance Charge Collections for that series will be deposited into the Group One
Finance Charge Collections Reallocation Account. The amount deposited into the
Group One Finance Charge Collections Reallocation Account will be allocated
(until reduced to zero) in the following order of priority:
(i) to fund, first, any shortfalls in the Class Required Amount and,
second, the Class Cumulative Investor Charged-Off Amount for each class
of investor certificates of each such series that has such a class,
beginning with Class A, pro rata, according to the amount of such Class
Required Amount shortfall or the amount of such Class Cumulative
Investor Charged-Off Amount, as applicable, for each such class of each
such series (e.g., to fund any shortfalls in the Class Required Amount
for Class A with respect to each series, then the Class Cumulative
Investor Charged-Off Amount with respect to Class A with respect to
each series, then any shortfalls in the Class Required Amount for Class
B with respect to each series, then the Class Cumulative Investor
Charged-Off Amount with respect to Class B with respect to each series,
etc.);
(ii) to increase the Available Shared Credit Enhancement Amount if
applicable (up to a limit of the Maximum Shared Credit Enhancement
Amount), with respect to each series, pro rata, according to the
amount by which the Available Shared Credit Enhancement Amount is less
than the Maximum Shared Credit Enhancement Amount with respect to each
such series;
(iii) to increase the Available Class B Credit Enhancement Amount, if
applicable (up to a limit of the Maximum Class B Credit Enhancement
Amount), with respect to each series, pro rata, according to the
amount by which the Available Class B Credit Enhancement Amount is
less than the Maximum Class B Credit Enhancement Amount with respect
to each such series;
(iv) with respect to Series 1993-1, Series 1993-2 or Series 1993-3, to fund
any shortfalls in the CCA Required Amount of each such series, pro
rata, according to the amount of such shortfall with respect to each
such series; and
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(v) with respect to Series 1993-1, Series 1993-2 or Series 1993-3, to fund
the CCA Cumulative Charged-Off Amount of each such series, pro rata,
according to the amount of such CCA Cumulative Charged-Off Amount with
respect to each such series.
Any amount remaining on deposit in the Group One Finance Charge Collections
Reallocation Account after the reallocations described above have been made will
be withdrawn from that account and allocated in accordance with the provisions
of the Series Supplement for each series in Group One (including the Series
offered hereby). Under no circumstances however, will Finance Charge Collections
originally allocated to Investor Certificates on any Distribution Date be
reallocated for the benefit of any other series, or paid to Greenwood, unless,
with respect to such Distribution Date, the Class Required Amount and the Class
Cumulative Investor Charged-Off Amount for each Class have been funded in full,
the Credit Enhancement Fee has been paid and the Available Class B Credit
Enhancement Amount equals the Maximum Class B Credit Enhancement Amount. See "--
Distributions of Collections and Application of Collections and Certain Other
Amounts."
The Series Supplement also provides for the reallocation, subject to
certain limitations, of Principal Collections among the series in Group One that
permit such reallocations. On each Distribution Date, for each series that
permits reallocations of Principal Collections that is in its Revolving Period,
Accumulation Period or Controlled Liquidation Period, as applicable, the amount
of Series Principal Collections, after application of any subordinated Principal
Collections with respect to such series, and, with respect to each such series
that is in its Accumulation Period or Controlled Liquidation Period, as
applicable, after the Principal Distribution Amount for such series has been
funded, shall constitute excess Series Principal Collections and shall be
deposited into the Group One Principal Collections Reallocation Account. The
amounts, if any, deposited into the Group One Principal Collections Reallocation
Account will be allocated to fund, first, any shortfalls in the portion of the
Principal Distribution Amount allocable to Class A of any such series that is in
its Accumulation Period or Controlled Liquidation Period, as applicable, pro
rata, according to the amount of such shortfall with respect to each such
series. Any amounts remaining on deposit in the Group One Principal Collections
Reallocation Account will then be allocated to fund any shortfalls in the
portion of the Principal Distribution Amount allocable to each other class of
any such series that is in its Accumulation Period or its Controlled Liquidation
Period, as applicable, beginning with Class B, and, in each case, pro rata,
according to the amount of such shortfall with respect to each such series.
Series that are in their Amortization Periods will not be entitled to receive
any reallocated Principal Collections from other series. Any amounts remaining
on deposit in the Group One Principal Collections Reallocation Account after
such reallocations have been made will be paid to Greenwood, up to the amount of
the Seller Interest. Any amounts remaining on deposit in the Group One Principal
Collections Reallocation Account after such payment to Greenwood will be
deposited into the Collections Account to be allocated as Principal Collections
on the next Trust Distribution Date. Under no circumstances will Principal
Collections originally allocated to the Investor Certificates on any
Distribution Date be reallocated for the benefit of any other series, or paid to
Greenwood, unless, with respect to such Distribution Date, if applicable, the
Principal Distribution Amount has been funded. See "-- Distributions of
Collections and Application of Collections and Certain Other Amounts."
Subordination of Class B Certificates. The Class B Certificates are
subordinated in right of payment to the Class A Certificates to the extent
described below. First, if on any Distribution Date the Class A Required Amount
exceeds the sum of the amount of Class A Finance Charge Collections, Class A
Investment Income, Class A Yield Collections, Class A Additional Funds and the
amount of funds available to pay the Class A Required Amount from a Subordinate
Series, then Class B Available Collections will be used to fund the difference.
Second, Class B Available Collections (after giving effect to the payments
described above) will be used to reimburse the Class A Cumulative Investor
Charged-Off Amount. Third, if on any Distribution Date the Class A Cumulative
Investor Charged-Off Amount exceeds the Class B Available Collections, Class B
Investor Interest will be reallocated to the Class A Certificates in the amount
of such excess. Notwithstanding the foregoing, the sum of any payments or
reallocations described in this paragraph will not exceed the Available
Subordinated Amount at the time of such payment or reallocation.
The Class B Cumulative Investor Charged-Off Amount will be increased by (i)
the positive difference, if any, between the Class B Subordinated Payment and
the amount of Class B Available Finance Charge
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Collections and (ii) the amount by which the Class B Investor Interest is
reallocated for the reimbursement of the Class A Cumulative Investor Charged-Off
Amount, as described in the preceding paragraph.
The Available Subordinated Amount initially will be $98,684,250 (the
"Initial Subordinated Amount"), which amount may be reduced, reinstated or
increased from time to time, as set forth in the definition of "Available
Subordinated Amount" in the Glossary of Terms.
Class B Subordinated Payments will be deemed to be made first from Class B
Available Finance Charge Collections and then from Class B Principal
Collections.
Alternative Credit Support Election. At any time during the Revolving
Period, Greenwood may elect to make an Alternative Credit Support Election
whereupon, if an Amortization Event occurs, the percentage of Finance Charge
Collections allocated to the Class Investor Interest for each Class will no
longer be calculated based on the Class Investor Interest on the last day of the
Due Period prior to the occurrence of an Amortization Event, but instead will be
calculated based on the Class Investor Interest on the first day of the related
Due Period, which will have the effect of reducing the amount of Finance Charge
Collections allocated to each Class on each subsequent Distribution Date. Prior
to the effectiveness of an Alternative Credit Support Election, the Available
Class B Credit Enhancement Amount shall be increased by the lesser of (x)
$39,473,700 and (y) the difference between the Maximum Class B Credit
Enhancement Amount (after giving effect to the Alternative Credit Support
Election) and the Available Class B Credit Enhancement Amount (immediately
before giving effect to the Alternative Credit Support Election) (the
"Additional Credit Support Amount"). Upon the effectiveness of an Alternative
Credit Support Election, the Available Subordinated Amount will be increased by
$39,473,700 (the "Additional Subordinated Amount").
REIMBURSEMENT OF CHARGED-OFF AMOUNTS; INVESTOR LOSSES
As of each Distribution Date, the Master Servicer will calculate the Class
Investor Charged-Off Amount for each Class. The "Class A Investor Charged-Off
Amount" means the product of the Class A Percentage with respect to the
Charged-Off Amount and the Charged-Off Amount for the related Due Period. The
"Class B Investor Charged-Off Amount" means the product of the Class B
Percentage with respect to the Charged-Off Amount and the Charged-Off Amount for
the related Due Period plus the sum of (i) the amount, if any, by which the
Class B Subordinated Payment on such Distribution Date exceeds the amount of
Class B Available Finance Charge Collections and (ii) the amount of the Class B
Investor Interest applied to reimburse the Class A Cumulative Investor
Charged-Off Amount on such Distribution Date. On each Distribution Date, the
Class Cumulative Investor Charged-Off Amount for each Class will be increased by
the Class Investor Charged-Off Amount for such Class for such Distribution Date
and will be reduced by the Class Charge-Off Reimbursement Amount for such Class
for such Distribution Date. The "Charged-Off Amount" for each Distribution Date
means the amount of the Receivables charged off by the Servicers as
uncollectible during the related Due Period less the sum of (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, if any, and late payment
charges and (ii) the amount of such Receivables repurchased by Greenwood during
the Due Period because they were in Accounts that contained Ineligible
Receivables.
If on any Distribution Date the Class Investor Charged-Off Amount for
either Class exceeds the Class Charge-Off Reimbursement Amount for such Class,
then each of the Class Investor Interest and the Class Invested Amount for such
Class will be reduced by the amount of the excess (an "Investor Loss"). If on
any Distribution Date the Class Charge-Off Reimbursement Amount for a Class
exceeds the Class Investor Charged-Off Amount for such Class, then each of the
Class Investor Interest and the Class Invested Amount for such class will be
increased by the amount of the excess. In no event, however, will the Class
Investor Interest or the Class Invested Amount for a Class be increased so as to
exceed the Class Initial Investor Interest minus the sum of (x) the aggregate
amount of payments of Certificate Principal made to Investor Certificateholders
of such Class prior to such Distribution Date, (y) in the case of the Class
Investor Interest, the amount on deposit in the Series Principal Funding Account
for the benefit of such Class in respect of Collections of Principal Receivables
and (z) the aggregate amount of losses on investments of principal funds
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on deposit in the Series Principal Funding Account. On the Distribution Date
immediately following any Distribution Date on which the aggregate amount of
unreimbursed Investor Losses for a Class is reduced to zero, interest on the
Investor Losses will be paid to the Investor Certificateholders of such Class
for the Due Periods during which there were Investor Losses to the extent of
available Finance Charge Collections, Class Investment Income, if any, Class
Yield Collections and Class Additional Funds for such Class. The Class Investor
Interest for each Class will be zero on each Distribution Date following the
Distribution Date on which the Class Investor Interest for the Class is first
reduced to zero.
Under the Pooling and Servicing Agreement, any recoveries received on
Charged-Off Accounts are included in the assets of the Trust and are treated as
Finance Charge Collections.
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 deposit into the Series
Collections Account an amount equal to the sum of the Series Finance Charge
Collections and the Series Principal Collections for the related Due Period. On
or before each Distribution Date, the Class A Additional Funds and Class B
Additional Funds, if any, for that Distribution Date will be deposited into the
Series Collections Account. Such funds will be allocated as described below.
Distributions and Application of Funds. On or before each Distribution Date
during the Revolving Period, the Accumulation Period and the Amortization
Period, if any, the Master Servicer will direct the Trustee to make the
following allocations in the order set forth and to the extent funds are
available:
(1) During the Accumulation Period or on the first Distribution Date
of the Amortization Period, if applicable, Class A Investment Income, if
any, for the related Due Period will be withdrawn from the Series Principal
Funding Account and deposited into the Series Collections Account.
(2) The Class A Required Amount, up to the sum of the amount of Class
A Finance Charge Collections, Class A Investment Income, Class A Yield
Collections and Class A Additional Funds, will be withdrawn from the Series
Collections Account and deposited into the Series Distribution Account.
(3) Any shortfall in the Class A Required Amount will be funded from
funds available to pay such shortfall from a Subordinate Series, if any,
and deposited into the Series Distribution Account.
(4) The Class A Cumulative Investor Charged-Off Amount, up to the
amount of Class A Excess Servicing, will be funded from the remaining
amount of Class A Finance Charge Collections, Class A Investment Income,
Class A Yield Collections and Class A Additional Funds. Such amount will be
withdrawn from the Series Collections Account and deposited into the Series
Principal Collections Account.
(5) The remaining Class A Cumulative Investor Charged-Off Amount will
be funded from funds available to pay such amount from a Subordinate
Series, if any, and deposited into the Series Principal Collections
Account.
(6) Any remaining shortfall in the Class A Required Amount, up to the
lesser of the amount of the Available Subordinated Amount and the amount of
Class B Available Collections, will be funded from Class B Available
Collections. Such amount will be withdrawn from the Series Collections
Account and deposited into the Series Distribution Account.
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(7) Any remaining Class A Cumulative Investor Charged-Off Amount, up
to the lesser of the amount of the Available Subordinated Amount and the
remaining amount of Class B Available Collections, will be funded from
remaining Class B Available Collections. Such amount will be withdrawn from
the Series Collections Account and deposited into the Series Principal
Collections Account.
(8) The Class B Required Amount, up to the amount of the positive
difference between (i) the amount of Class B Available Finance Charge
Collections and (ii) the amount of the Class B Subordinated Payment, will
be withdrawn from the Series Collections Account and deposited into the
Series Distribution Account.
(9) Any shortfall in the Class B Required Amount will be funded from
funds available to pay the shortfall from a Subordinated Series, if any,
and deposited into the Series Distribution Account.
(10) The Class B Cumulative Investor Charged-Off Amount will be funded
from funds available to pay this amount from a Subordinated Series, if any,
and deposited into the Series Principal Collections Account.
(11) Any remaining shortfall in the Class A Required Amount, up to the
lesser of the Available Subordinated Amount and the remaining amount of
Series Excess Servicing, will be withdrawn from the Series Collections
Account and deposited into the Series Distribution Account.
(12) Any remaining Class A Cumulative Investor Charged-Off Amount, up
to the lesser of the Available Subordinated Amount and the remaining amount
of Series Excess Servicing, will be withdrawn from the Series Collections
Account and deposited into the Series Principal Collections Account.
(13) Any remaining Class A Cumulative Investor Charged-Off Amount, up
to the lesser of the amount of the Available Subordinated Amount and the
Class B Investor Interest, will be reduced by an equivalent reduction in
the Class B Investor Interest.
(14) Any remaining shortfall in the Class B Required Amount, up to the
remaining amount of Series Excess Servicing, will be withdrawn from the
Series Collections Account and deposited into the Series Distribution
Account.
(15) Any remaining Class B Cumulative Investor Charged-Off Amount, up
to the remaining amount of Series Excess Servicing, will be withdrawn from
the Series Collections Account and deposited into the Series Principal
Collections Account.
(16) Any remaining Series Excess Servicing, up to the amount by which
the Available Class B Credit Enhancement Amount is less than the Maximum
Class B Credit Enhancement Amount, will be withdrawn from the Series
Collections Account and paid to the Trustee as administrator of the Credit
Enhancement for deposit into the Credit Enhancement Account. This amount
will increase the Available Class B Credit Enhancement Amount.
(17) Any remaining shortfall in the Class B Required Amount will be
funded, up to the Available Class B Credit Enhancement Amount, by a Credit
Enhancement Drawing and this amount will be deposited into the Series
Distribution Account.
(18) Any remaining Class B Cumulative Investor Charged-Off Amount will
be funded, up to the remaining Available Class B Credit Enhancement Amount,
by a Credit Enhancement Drawing and this amount will be deposited into the
Series Principal Collections Account.
(19) The Credit Enhancement Fee, up to the remaining amount of Series
Excess Servicing, will be withdrawn from the Series Collections Account and
paid to the Trustee as administrator of the Credit Enhancement for
application in accordance with the provisions of the Credit Enhancement
Agreement.
(20) Any remaining Series Excess Servicing will be withdrawn from the
Series Collections Account and deposited into the Group One Finance Charge
Collections Reallocation Account.
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(21) If there are one or more other outstanding series included in
Group One that provide for the reallocation of excess Collections, excess
Finance Charge Collections with respect to each such series will also be
deposited into the Group One Finance Charge Collections Reallocation
Account. Any remaining shortfall in the Class A Required Amount, up to an
amount equal to the product of (i) a fraction the numerator of which is the
amount of the remaining shortfall and the denominator of which is the sum
of such shortfalls for each class designated by the letter A of each series
included in Group One that provides for such reallocation and (ii) the
amount on deposit in the Group One Finance Charge Collections Reallocation
Account, will be withdrawn from that account and deposited into the Series
Distribution Account.
(22) Any remaining Class A Cumulative Investor Charged-Off Amount will
be funded, up to an amount equal to the product of (i) a fraction the
numerator of which is the amount of the remaining Class A Cumulative
Investor Charged-Off Amount and the denominator of which is the sum of such
amounts for each class designated by the letter A of each series included
in Group One that provides for such reallocation and (ii) the amount
remaining on deposit in the Group One Finance Charge Collections
Reallocation Account (after withdrawals therefrom on behalf of each
applicable series in Group One with respect to shortfalls in the series'
Class A Required Amount) from the Group One Finance Charge Collections
Reallocation Account. This amount will be withdrawn from the account and
deposited into the Series Principal Collections Account.
(23) Any remaining shortfall in the Class B Required Amount, up to an
amount equal to the product of (i) a fraction the numerator of which is the
amount of the remaining shortfall and the denominator of which is the sum
of such shortfalls for each class designated by the letter B of each series
included in Group One that provides for such reallocation and (ii) the
amount remaining on deposit in the Group One Finance Charge Collections
Reallocation Account (after withdrawals therefrom on behalf of each
applicable series in Group One with respect to shortfalls in the series'
Class A Required Amount and with respect to reimbursement of the series'
Class A Cumulative Investor Charged-Off Amount), will be withdrawn from
that account and deposited into the Series Distribution Account.
(24) Any remaining Class B Cumulative Investor Charged-Off Amount will
be funded, up to an amount equal to the product of (i) a fraction the
numerator of which is the amount of the remaining Class B Cumulative
Investor Charged-Off Amount and the denominator of which is the sum of such
amounts for each class designated by the letter B of each series included
in Group One that provides for such reallocation and (ii) the amount
remaining on deposit in the Group One Finance Charge Collections
Reallocation Account (after withdrawals therefrom on behalf of each
applicable series in Group One with respect to shortfalls in the series'
Class A Required Amount, with respect to reimbursement of the series' Class
A Cumulative Investor Charged-Off Amount and with respect to shortfalls in
the series' Class B Required Amount), from the Group One Finance Charge
Collections Reallocation Account. This amount will be withdrawn from the
account and deposited into the Series Principal Collections Account.
(25) If there are one or more other outstanding series included in
Group One that provide for the reallocation of excess Collections, any
amounts remaining on deposit in the Group One Finance Charge Collections
Reallocation Account will be used to fund first any shortfalls in Class
Required Amounts and then the Class Cumulative Investor Charged-Off Amounts
for each class, other than classes A and B, of each such series in a manner
similar to that described in (23) and (24) above.
(26) The difference between the Available Class B Credit Enhancement
Amount and the Maximum Class B Credit Enhancement Amount, up to an amount
equal to the product of (i) a fraction the numerator which is the amount of
the difference between the Available Class B Credit Enhancement Amount and
the Maximum Class B Credit Enhancement Amount and the denominator of which
is the sum of the amount by which the Available Class B Credit Enhancement
Amount is less than the Maximum Class B Credit Enhancement Amount for each
series in Group One that provides for reallocations and (ii) the amount
remaining on deposit in the Group One Finance Charge Collections
Reallocation Account (after all reallocations described above have been
made), will be withdrawn from
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<PAGE> 25
the Group One Finance Charge Collections Reallocation Account and paid to
the Trustee as administrator of the Credit Enhancement for deposit into the
Credit Enhancement Account. This amount will increase the Available Class B
Credit Enhancement Amount.
(27) After all payments are made from the Group One Finance Charge
Collections Reallocation Account with respect to each series in Group One
eligible for such reallocations, 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 sum of the Series Investor Interests
for each series that is in Group One and (ii) the amount remaining on
deposit in the Group One Finance Charge Collections Reallocation Account
will be withdrawn from such account and paid to the Trustee as
administrator of the Credit Enhancement for application in accordance with
the provisions of the Credit Enhancement Agreement. Amounts remaining on
deposit in the Group One Finance Charge Collections Reallocation Account
will be withdrawn from that account and allocated pursuant to the
provisions of the Series Supplements for each other series in Group One.
(28) Any amount remaining on deposit in the Series Collections Account
will be withdrawn from the Series Collections Account and deposited into
the Series Principal Collections Account.
(29) Unless the Distribution Date is a Distribution Date in the
Revolving Period, the Principal Distribution Amount, up to the amount on
deposit in the Series Principal Collections Account, will be withdrawn from
such account and deposited into the Series Principal Funding Account.
(30) Unless the Distribution Date is a Distribution Date in the
Revolving Period, any shortfall in funding the Principal Distribution
Amount will be funded from funds available to pay the shortfall from a
Subordinated Series, if any, and deposited into the Series Principal
Funding Account.
(31) Any amounts remaining on deposit in the Series Principal
Collections Account will be withdrawn from that account and deposited into
the Group One Principal Collections Reallocation Account.
(32) If there are one or more other outstanding series included in
Group One that provide for the reallocation of excess Collections, excess
Principal Collections with respect to each such series (i.e., all Principal
Collections during such series' Revolving Period and all Principal
Collections in excess of the amount required to fund or pay Certificate
Principal with respect to such series during such series' Accumulation
Period, Controlled Liquidation Period or Amortization Period, as
applicable) also will be deposited into the Group One Principal Collections
Reallocation Account. During the Accumulation Period only, any remaining
shortfall in funding the portion of the Principal Distribution Amount that
is allocable to Class A, up to an amount equal to the product of (i) a
fraction the numerator of which is the amount of the remaining shortfall
and the denominator of which is the sum of the portion of such shortfalls
allocated to the class designated by the letter A of all series included in
Group One that provide for such reallocation and that are in their
Accumulation Period or Controlled Liquidation Period, as applicable and
(ii) the amount on deposit in the Group One Principal Collections
Reallocation Account, will be withdrawn from such account and deposited
into the Series Principal Funding Account.
(33) During the Accumulation Period only, any remaining shortfall in
funding the portion of the Principal Distribution Amount that is allocable
to Class B, up to an amount equal to the product of (i) a fraction the
numerator of which is the amount of the remaining shortfall and the
denominator of which is the sum of the portion of such shortfalls allocated
to the class designated by the letter B of all series included in Group One
that provide for such reallocation and that are in their Accumulation
Period or Controlled Liquidation Period, as applicable and (ii) the amount
remaining on deposit in the Group One Principal Collections Reallocation
Account, will be withdrawn from that account and deposited into the Series
Principal Funding Account.
(34) If there are one or more other outstanding series included in
Group One that provide for the reallocation of excess Collections and that
are in their Accumulation Periods or Controlled Liquidation Periods, as
applicable, any amounts remaining on deposit in the Group One Principal
Collections Reallocation Account will be used to fund shortfalls in the
portion of any Principal Distribution Amount
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<PAGE> 26
shortfall allocable to each class, other than classes A and B, of each such
series in the manner described in (33) above.
(35) After all withdrawals from the Group One Principal Collections
Reallocation Account have been made with respect to shortfalls in the
funding of the Principal Distribution Amount for each applicable series in
Group One, as described in (32) through (34) above, any amounts remaining
on deposit in the Group One Principal Collections Reallocation Account will
be withdrawn from that account and deposited into the Collections Account.
(36) After all allocations have been provided for with respect to each
series then outstanding (whether or not such series is included in Group
One), the lesser of the amount on deposit in the Collections Account and
the amount of the Seller Interest will be withdrawn from the Collections
Account and paid to the Holder of the Seller Certificate. If, after such
payment to the Holder of the Seller Certificate, any amounts remain on
deposit in the Collections Account, these amounts will remain in the
Collections Account for allocation as Principal Collections on the next
Trust Distribution Date.
Payments of Interest on Investor Certificates and Class Monthly Servicing
Fees. On or before each Distribution Date, after giving effect to the payments
and allocations described above, the Master Servicer will direct the Trustee to
make the following deposits and payments in the order set forth and to the
extent funds are available:
(1) The lesser of the Class A Modified Required Amount and the amount
on deposit in the Series Distribution Account with respect to Class A will
be withdrawn from such account and deposited into the Series Interest
Funding Account.
(2) The lesser of the amount of all accrued but unpaid Class A Monthly
Servicing Fees through and including such Distribution Date and the amount
remaining on deposit in the Series Distribution Account with respect to
Class A will be withdrawn from that account and paid to the Master
Servicer.
(3) The lesser of the Class B Modified Required Amount and the amount
on deposit in the Series Distribution Account with respect to Class B will
be withdrawn from such account and deposited into the Series Interest
Funding Account.
(4) The lesser of the amount of all accrued but unpaid Class B Monthly
Servicing Fees through and including such Distribution Date and the amount
remaining on deposit in the Series Distribution Account with respect to
Class B will be withdrawn from that account and paid to the Master
Servicer.
(5) All amounts on deposit in the Series Interest Funding Account will
be withdrawn from such account and paid to the Class A Certificateholders
and the Class B Certificateholders in accordance with the amounts deposited
into that account with respect to each Class on the Distribution Date.
Payments of Principal. On the Class A Expected Final Payment Date, all
amounts on deposit in the Series Principal Funding Account will be withdrawn, up
to the Class A Invested Amount, for payment to the Class A Certificateholders.
On the Class B Expected Final Payment Date, all remaining amounts on deposit in
the Series Principal Funding Account will be withdrawn, up to the Class B
Invested Amount, for payment to the Class B Certificateholders. On each
Distribution Date during the Amortization Period, if any, after giving effect to
the payments and allocations described above, all amounts on deposit in the
Series Principal Funding Account will be withdrawn and paid to the Class A
Certificateholders until the Class A Invested Amount is reduced to zero, and
thereafter to the Class B Certificateholders until the Class B Invested Amount
is reduced to zero. In no event will any such amounts be paid to Investor
Certificateholders of any Class in excess of the Class Invested Amount for such
Class.
SERIES YIELD FACTOR
The Series Supplement provides that a certain portion of the Series
Principal Collections may be recharacterized as Series Yield Collections.
"Series Yield Collections" will mean, for any day or any Distribution Date, as
applicable, an amount equal to the product of the Series Yield Factor and the
amount of Series Principal Collections for that day or the related Due Period,
as applicable. The Series Yield Factor will
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<PAGE> 27
initially be zero. The Series Supplement provides that the Master Servicer may
change the Series Yield Factor, subject to the following conditions: (i) the
Series Yield Factor may not be reduced below zero, nor increased to more than a
total of 0.05; (ii) the Master Servicer shall have delivered to the Trustee a
certificate to the effect that the Master Servicer reasonably believes that the
change in the Series Yield Factor will 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) Standard & Poor's shall have advised the
Master Servicer and Greenwood that the change in the Series Yield Factor will
not cause the rating of any class of any series of investor certificates then
outstanding to be lowered or withdrawn. The effect of recharacterizing a portion
of Series Principal Collections as Series Yield Collections is to increase the
yield on the Receivables with respect to a series and lower the effective
payment rate.
AMORTIZATION EVENTS
The occurrence of an Amortization Event is the only circumstance under
which an Amortization Period will commence. An "Amortization Event" is any of
the following events:
(a) failure on the part of any Seller (i) to make any payment or
deposit on the date required under the Pooling and Servicing Agreement or
the Series Supplement (or within five Business Days thereafter); or (ii) to
observe or perform in any material respect any other material covenant or
agreement of that Seller pursuant to the Pooling and Servicing Agreement or
the Series Supplement, which continues unremedied for a period of 60 days
after written notice of that failure requiring the same to be remedied has
been given to that Seller by the Trustee, or to that Seller and the Trustee
by holders of Investor Certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Class Invested Amount of any
Class materially adversely affected thereby;
(b) any representation or warranty made by any Seller in the Pooling
and Servicing Agreement or the Series Supplement, or any information
required to be given by any Seller to the Trustee to identify the Accounts,
proves to have been incorrect in any material respect when made and
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 Seller by the Trustee or to that Seller and the Trustee
by holders of Investor Certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Class Invested Amount of any
Class materially adversely affected thereby;
(c) certain events of bankruptcy, insolvency or receivership relating
to any Seller;
(d) Greenwood as Seller becomes unable to transfer Receivables to the
Trust in accordance with the provisions of the Pooling and Servicing
Agreement and that inability continues for five Business Days;
(e) any Seller other than Greenwood becomes unable to transfer
Receivables to the Trust in accordance with the provisions of the Pooling
and Servicing Agreement and that inability continues for five Business
Days;
(f) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(g) any Master Servicer Termination Event or any Servicer Termination
Event occurs;
(h) the amount of Principal Receivables in the Trust at the end of any
Due Period or on any Distribution Date shall be less than the Minimum
Principal Receivables Balance and Greenwood shall have failed to assign
Receivables in Additional Accounts or Participation Interests to the Trust
in at least the amount of the deficiency by the tenth day of the calendar
month of the following Due Period;
(i) on any Distribution Date, the three-month rolling average Series
Excess Spread is less than zero and the three-month rolling average Group
Excess Spread is less than zero;
(j) if, on the Class A Expected Final Payment Date or the Class B
Expected Final Payment Date, the Class Invested Amount for Class A or Class
B, respectively, is not reduced to zero; or
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<PAGE> 28
(k) if a Supplemental Credit Enhancement Event shall have occurred and
Greenwood shall have failed to arrange for the Supplemental Credit
Enhancement in accordance with the requirements of the Series Supplement
(see "-- Description of the Credit Enhancement").
In the case of any event described in clauses (a), (b), (e) or (g), an
Amortization Event will be deemed to have occurred only if the event has a
material adverse effect on the Investor Certificateholders and if, after the
applicable grace period described in those clauses, either the Trustee declares
or Investor Certificateholders evidencing Fractional Undivided Interests
aggregating not less than 51% of the Class Invested Amount for either Class
declare by written notice to Greenwood and the Master Servicer (and to the
Trustee if given by the Investor Certificateholders) that an Amortization Event
has occurred as of the date of the notice. In the case of any event described in
clauses (c), (d), (f), (h), (i), (j) or (k), an Amortization Event will be
deemed to have occurred immediately upon the occurrence of the event without any
notice or other action on the part of the Trustee or the Investor
Certificateholders. On the date on which an Amortization Event is deemed to have
occurred, the Amortization Period will commence.
On each Distribution Date of an Amortization Period, beginning with the
Distribution Date in the calendar month following the occurrence of an
Amortization Event, distributions of Certificate Principal will be made to the
Class A Certificateholders (unless and until the Class A Invested Amount has
been reduced to zero) and distributions of Certificate Principal will be made to
the Class B Certificateholders only after the Class A Invested Amount has been
reduced to zero. See "-- Distributions of Collections and Application of
Collections and Certain Other Amounts."
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF SERIES
Generally, the Class A Invested Amount and the Class B Invested Amount are
payable in full on the Class A Expected Final Payment Date and the Class B
Expected Final Payment Date, respectively. On each Distribution Date during the
Amortization Period, if any, an amount equal to the lesser of the Series
Invested Amount or the amount of Series Principal Collections for the
Distribution Date will be paid to the Investor Certificateholders. Although it
is anticipated that sufficient funds will be available to pay these amounts on
these dates, no assurance can be given in that regard. See "Description of the
Investor Certificates -- Distributions of Collections and Application of
Collections and Certain Other Amounts" in the Prospectus.
Notwithstanding the above, the Series Supplement provides that if, as of
any Distribution Date during the Accumulation Period or the Amortization Period,
if any, after giving effect to any payments and allocations to occur on the
Distribution Date, the Series Investor Interest is less than or equal to 5% of
the Series Initial Investor Interest, Greenwood will have the option to purchase
from the Trust the remaining Series Investor Interest. If Greenwood so elects,
it will deposit into the Series Principal Funding Account (during the
Accumulation Period) or the Series Distribution Account (during the Amortization
Period), on the immediately succeeding Distribution Date, an amount equal to the
Series Investor Interest as of the last day of the Due Period related to the
immediately succeeding Distribution Date. In any event, the final payment of
principal will be made no later than the first Business Day following the
Distribution Date in February 2005.
DESCRIPTION OF THE CREDIT ENHANCEMENT
The Credit Enhancement initially will consist solely of funds on deposit in
a cash collateral account (the "Credit Enhancement Account"), which will be held
with the Trustee or a Qualified Institution in the name of the Trustee for the
benefit of the Investor Certificateholders of the Series offered hereby and the
Credit Enhancement Provider, as their interests appear in the Series Supplement
and the Credit Enhancement Agreement (the "Credit Enhancement Agreement") to be
entered into among Greenwood, the Trustee and one or more lenders (collectively
referred to herein as the "Credit Enhancement Provider"). The Trustee will act
as administrator of the Credit Enhancement and the Credit Enhancement Account
and will release funds for deposit into the Investor Accounts pursuant to
instructions from the Master Servicer. The Credit Enhancement Provider will have
only those duties, liabilities and obligations expressly imposed on it by the
Credit Enhancement Agreement.
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<PAGE> 29
The Credit Enhancement Account will be funded by an initial deposit on the
Series Closing Date by the Credit Enhancement Provider of $59,210,550 (which
will be the "Stated Class B Credit Enhancement Amount"). Thereafter, on each
Distribution Date, an amount equal to Series Excess Servicing after payment of
the Class Required Amount for each Class, reimbursement of the Class Cumulative
Investor Charged-Off Amount for each Class and payment of the Credit Enhancement
Fee, but before any reallocation of Finance Charge Collections among series,
will be paid to the Trustee as administrator of the Credit Enhancement for
deposit into the Credit Enhancement Account, but only to the extent that the
Available Class B Credit Enhancement Amount is less than the Maximum Class B
Credit Enhancement Amount. On the first Distribution Date, the Available Class B
Credit Enhancement Amount will equal the Stated Class B Credit Enhancement
Amount. For each Distribution Date after the first Distribution Date, the
Available Class B Credit Enhancement Amount will equal the amount available to
be drawn under the Credit Enhancement from time to time for the benefit of the
holders of the Class B Certificates, which on any date of determination will
equal the lesser of (a) the Maximum Class B Credit Enhancement Amount and (b)
the Available Class B Credit Enhancement Amount for the immediately preceding
Distribution Date minus the amount of all drawings made on the Credit
Enhancement Account on or since the preceding Distribution Date with respect to
the Available Class B Credit Enhancement Amount plus the amount of all deposits
into the Credit Enhancement Account on or since the preceding Distribution Date
with respect to the Available Class B Credit Enhancement Amount. The Series
offered hereby will not have an Available Shared Credit Enhancement Amount.
In the event of an Alternative Credit Support Election, the Maximum Class B
Credit Enhancement Amount will be increased to the greater of (i) $7,894,740 and
(ii) an amount equal to 12.5% of the Series Investor Interest as of the last day
of the related Due Period and the Available Class B Credit Enhancement Amount
will be increased by the Additional Credit Support Amount. In the event that the
Alternative Credit Support Election does not become effective in accordance with
the requirements of the Series Supplement, some or all of the Additional Credit
Support Amount paid to the Trustee as administrator of the Credit Enhancement
will be returned to the Holder of the Seller Certificate or the Credit
Enhancement Provider, depending on the source of the Additional Credit Support
Amount.
Amounts on deposit in the Credit Enhancement Account will be invested in
Permitted Investments selected by Greenwood that mature on or before the
immediately following Distribution Date. All earnings on such investments (less
investment losses and expenses) will be paid in accordance with the Credit
Enhancement Agreement.
All payments under the Credit Enhancement will be made as set forth in "--
Distributions of Collections and Application of Collections and Certain Other
Amounts" and will be made solely from amounts on deposit in the Credit
Enhancement Account and in no event from the assets of the Credit Enhancement
Provider.
The Trustee may terminate the Credit Enhancement without penalty if the
Master Servicer elects to obtain a successor Credit Enhancement. The Series
Supplement, however, provides that, unless otherwise agreed to by the Rating
Agencies, the initial Credit Enhancement and the Credit Enhancement Agreement
will not be terminated and a successor Credit Enhancement will not be
established if any such action would cause the ratings of the Investor
Certificates to be withdrawn or lowered by either of the Rating Agencies. If the
Master Servicer elects to obtain a replacement Credit Enhancement consistent
with the foregoing conditions, the replacement Credit Enhancement may consist of
any type of credit enhancement, including without limitation an irrevocable
standby letter of credit, a cash collateral account, a reserve account, a
combination of a letter of credit and a reserve account or a surety bond,
provided, in any case, that such replacement Credit Enhancement will not cause
the ratings of the Investor Certificates to be lowered or withdrawn by the
Rating Agencies; and provided, further, that if such replacement Credit
Enhancement is not Funded Credit Enhancement, then no amounts (other than any
Credit Enhancement Fees or any amounts paid to the Trustee as administrator of
the Credit Enhancement in respect of the Available Class B Credit Enhancement
Amount) that are measured or determined by reference to Class Excess Servicing
for any Class, Series Excess Servicing or the amount on deposit at any time in
the Group Finance Charge Collections Reallocation Account shall be paid or
deposited by the Trustee if, on the related Drawing Date, the Credit Enhancement
Provider is unable to pay its debts as they become due.
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REPORTS TO INVESTOR CERTIFICATEHOLDERS
For each Distribution Date, the Master Servicer will prepare a statement
for the Investor Certificateholders setting forth: (a) the amount of interest
and principal paid to holders of each Class of the Series offered hereby for the
related Due Period per $1,000 of Class Initial Investor Interest; (b) the Series
Investor Interest and the Class Investor Interest for each Class of the Series
offered hereby as of the end of the related Due Period; (c) the Aggregate
Investor Interest, the Seller Interest and the sum of the Series Investor
Interests for each series in the same Group as the Series offered hereby as of
the end of the related Due Period; (d) the amount of Finance Charge Collections,
Principal Collections, Additional Funds, if any, and Yield Collections, if any,
allocated to the Series offered hereby and each Class of the Series offered
hereby, to the Group of which the Series offered hereby is a member and to the
Seller, in each case for the related Due Period; (e) Class Investment Income,
the amount deposited into the Series Principal Funding Account for the related
Due Period, the Deficit Accumulation Amount and the total amount on deposit in
the Series Principal Funding Account; (f) the pool factor for each Class of the
Series offered hereby for the related Due Period; (g) the Class Investor
Charged-Off Amount and the Class Cumulative Investor Charged-Off Amount for each
Class of the Series offered hereby and the sum of those amounts for the Series
offered hereby and for the Group of which the Series offered hereby is a member
for the related Due Period; (h) the amount of Investor Losses for the related
Due Period (total and per $1,000 of Class Initial Investor Interest), the amount
of reimbursements of Investor Losses for the related Due Period and the
aggregate amount of unreimbursed Investor Losses as of the end of the related
Due Period (total and per $1,000 of Class Initial Investor Interest), in each
case for each Class of the Series offered hereby and the sum of those amounts
for the Series offered hereby and for the Group of which the Series offered
hereby is a member; (i) the Class Monthly Servicing Fee for each Class of the
Series offered hereby and the sum of those amounts for the Series offered hereby
and for the Group of which the Series offered hereby is a member for the related
Due Period; (j) the Available Subordinated Amount as of the end of the related
Due Period (total and as a percentage of the Class A Invested Amount); (k) the
amounts of any Credit Enhancement Drawings for the related Due Period and the
Maximum Class B Credit Enhancement Amount and Available Class B Credit
Enhancement Amount, in each case as of the end of the related Due Period; and
(l) delinquency information with respect to the Receivables (total and as a
percentage of outstanding Receivables). The statement will be made available to
Certificate Owners free of charge upon request by calling 813-288-3418. On or
about January 31 of each calendar year, a statement prepared by the Master
Servicer containing the information set forth in clause (a) above, aggregated
for the preceding calendar year or the applicable portion thereof, together with
such other customary information as the Trustee or the Master Servicer deems
necessary or desirable to enable the Investor Certificateholders to prepare
their tax returns, will be made available in the same manner as the monthly
statement described above.
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions of the Underwriting Agreement, dated August 19, 1997, and the
Terms Agreement, dated August 19, 1997, to purchase from Greenwood the
respective principal amounts of Investor Certificates set forth opposite their
name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
OF CLASS A OF CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
------------ ------------ ------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated................... $187,500,000 $39,474,000
BancAmerica Securities, Inc. ....................... 187,500,000 --
Chase Securities Inc. .............................. 187,500,000 --
First Chicago Capital Markets, Inc. ................ 187,500,000 --
------------ -----------
Total.......................................... $750,000,000 $39,474,000
============ ===========
</TABLE>
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<PAGE> 31
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligation is such that they must purchase all of the Investor Certificates if
any are purchased.
The Underwriters and the Company have agreed that the closing of the sale
of the Investor Certificates to the Underwriters will occur five business days
after the date of this Prospectus Supplement or such later date as they may
mutually agree.
The Underwriters of the Class A Certificates have advised Greenwood that
they propose to offer the Class A Certificates to the public initially at the
offering price and on the terms set forth on the cover page of this Prospectus
Supplement and to certain dealers at that price, less a concession not in excess
of 0.165% of the denomination of the Class A Certificates. The Underwriters of
the Class A Certificates may allow, and such dealers may reallow, a concession
not in excess of 0.080% of the denomination of the Class A Certificates to
certain other dealers. The Underwriter of the Class B Certificates has advised
Greenwood that it proposes to offer the Class B Certificates to the public
initially at the offering price and on the terms set forth on the cover page of
this Prospectus Supplement and to certain dealers at that price, less a
concession not in excess of 0.180% of the denomination of the Class B
Certificates. The Underwriter of the Class B Certificates may allow, and such
dealers may reallow, a concession not in excess of 0.090% of the denomination of
the Class B Certificates to certain other dealers. After the initial offering to
the public, the offering price and other selling terms may be varied by the
Underwriters.
There currently is no market for the Investor Certificates, and although
Morgan Stanley & Co. Incorporated, BancAmerica Securities, Inc., Chase
Securities Inc. and First Chicago Capital Markets, Inc. intend to make a market
in the Investor Certificates, there can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will continue until
the termination of the Series.
The Underwriters have represented and agreed that (a) they have complied
and will comply with all applicable provisions of the Financial Services Act
1986 with respect to anything done by them in relation to the Certificates in,
from or otherwise involving the United Kingdom; (b) they have only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by them in connection with the issue of the Certificates to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or who is a person to whom
the document may otherwise lawfully be issued or passed on; (c) if those
Underwriters are authorized persons under Chapter III of the Financial Services
Act 1986, they have only promoted and will only promote (as that term is defined
in Regulation 1.02 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1995) to any person in the United Kingdom the scheme described in
this Prospectus Supplement if that person is of a kind described either in
Section 76(2) of the Financial Services Act 1986 or in Regulation 1.04 of the
Financial Services (Promotion of Unregulated Schemes) Regulation 1995; and (d)
they are persons of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995.
Morgan Stanley & Co. Incorporated is an affiliate of Greenwood. Birendra
Kumar and Christine A. Edwards are directors of Greenwood and officers of Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD").
Greenwood has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
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In order to facilitate the offering of the Investor Certificates, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Investor Certificates. Specifically, the Underwriters
may overallot in connection with any offering of Investor Certificates, creating
a short position in the Investor Certificates for their own accounts. In
addition, to cover overallotments or to stabilize the price of the Investor
Certificates or of any such other securities, the Underwriters may bid for, and
purchase, the Investor Certificates or any such other securities in the open
market. Finally, in any offering of the Investor Certificates through a
syndicate of underwriters, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Investor
Certificates in the offering if the syndicate repurchases previously distributed
Investor Certificates in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Investor Certificates above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
LEGAL MATTERS
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. The legality of the Investor
Certificates will be passed upon for the Underwriters by Cadwalader, Wickersham
& Taft.
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GLOSSARY OF TERMS
The Investor Certificates offered hereby will be issued pursuant to the
Pooling and Servicing Agreement and the Series Supplement. The following
Glossary of Terms does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Prospectus, the Pooling and
Servicing Agreement and the Series Supplement. Unless the context requires
otherwise, the definitions contained in this Glossary of Terms are applicable
only to the Series of Investor Certificates offered hereby and are not
necessarily applicable to any 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
the Series Supplement (without exhibits).
"Accumulation Amount" will mean, (a) through the Class A Expected Final
Payment Date, the greater of (i) $62,500,000 and (ii) if the Master Servicer
elects to delay the commencement of the Accumulation Period in accordance with
the Series Supplement, the Class A Initial Investor Interest divided by the
number of Distribution Dates from the commencement of the Accumulation Period
through and including the Class A Expected Final Payment Date, and (b)
thereafter, $39,474,000.
"Additional Credit Support Amount" will mean the amount by which the
Available Class B Credit Enhancement Amount will be increased as the result of
an Effective Alternative Credit Support Election, which amount will equal the
lesser of (x) $39,473,700 and (y) the difference between the Maximum Class B
Credit Enhancement Amount (after giving effect to the Alternative Credit Support
Election) and the Available Class B Credit Enhancement Amount (immediately
before giving effect to the Alternative Credit Support Election).
"Additional Funds" will have the meaning set forth in "Description of the
Investor Certificates -- Additional Funds" in the Prospectus. The initial amount
of Additional Funds will be zero.
"Additional Subordinated Amount" will mean $39,473,700.
"Alternative Credit Support Election" will mean an election made by
Greenwood that will become effective after Greenwood has notified the Rating
Agencies, the Trustee and the Credit Enhancement Provider of such election, upon
the payment of the Additional Credit Support Amount to the Trustee as
administrator of the Credit Enhancement and upon satisfaction of certain other
requirements.
"Available Class B Credit Enhancement Amount" will mean, with respect to
the first Distribution Date, the Stated Class B Credit Enhancement Amount, and,
thereafter, will mean the amount available to be drawn under the Credit
Enhancement for the benefit of the Class B Certificateholders from time to time,
which on any date of determination will be equal to the Available Class B Credit
Enhancement Amount for the immediately preceding Distribution Date minus the
amount of all Credit Enhancement Drawings with respect to the Available Class B
Credit Enhancement Amount on or since such immediately preceding Distribution
Date, and plus the amount of all payments made to the Trustee as administrator
of the Credit Enhancement with respect to the Available Class B Credit
Enhancement Amount pursuant to the Series Supplement, plus, following an
Effective Alternative Credit Support Election, the Additional Credit Support
Amount.
"Available Shared Credit Enhancement Amount" will be zero with respect to
the Series offered hereby. With respect to other series issued from the Trust,
the Available Shared Credit Enhancement Amount, if applicable, will have the
meaning set forth in the applicable Series Supplement.
"Available Subordinated Amount" will mean, on a Distribution Date, the sum
of:
(i) (a) with respect to the first Distribution Date, the Initial
Subordinated Amount or (b) with respect to any other Distribution Date, the
Available Subordinated Amount after giving effect to all adjustments on the
prior Distribution Date; and
(ii) the amount of Series Excess Servicing,
as such amount may be reduced pursuant to the provisions of the Series
Supplement to take into account (a) the amount of Class A and Class B
Excess Servicing used to reimburse the Class A Cumulative
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Investor Charged-Off Amount, (b) the amount of the Class B Excess Servicing
used to reduce the Class A Required Amount Shortfall, (c) the amount of the
Class B Subordinated Payment and (d) the amount of any reduction in the
Class B Investor Interest resulting from reimbursement of the Class A
Cumulative Investor Charged-Off Amount, in each case on that Distribution
Date.
On the first Distribution Date following an Effective Alternative Credit
Support Election, the Available Subordinated Amount will be increased by the
Additional Subordinated Amount. In no event, however, will the Available
Subordinated Amount exceed (i) through the last Distribution Date preceding an
Effective Alternative Credit Support Election, the Initial Subordinated Amount
and (ii) thereafter, the sum of the Initial Subordinated Amount and the
Additional Subordinated Amount.
"CCA Cumulative Charged-Off Amount" will be zero with respect to the Series
offered hereby. With respect to other series issued from the Trust, the CCA
Cumulative Charged-Off Amount, if applicable, will have the meaning set forth in
the applicable Series Supplement.
"CCA Required Amount" will be zero with respect to the Series offered
hereby. With respect to other series issued from the Trust, the CCA Required
Amount, if applicable, will have the meaning set forth in the applicable Series
Supplement.
"Certificate Interest" for any Class will mean, for any Distribution Date,
the product of (a) the Class Invested Amount for such Class for such
Distribution Date and (b) a fraction the numerator of which is the Certificate
Rate for that Class, and the denominator of which is 360 divided by the actual
number of days from and including the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, from and including the Series
Closing Date) to but excluding the current Distribution Date.
"Certificate Rate," with respect to any Class, will mean the certificate
rate set forth in "Series Summary" with respect to such Class, as the rate may
be adjusted as of the beginning of each Interest Accrual Period.
"Class A Expected Final Payment Date" will mean the Distribution Date in
August 2002.
"Class A Initial Investor Interest" will mean $750,000,000.
"Class Additional Funds," if applicable, will mean, for any Distribution
Date, an amount equal to the product of (i) a fraction the numerator of which
will be the Class Investor Interest and the denominator of which will be the sum
of the Class Investor Interests for each Class of the Series offered hereby and
(ii) the amount of Series Additional Investor Funds, in each case for such
Distribution Date.
"Class Alternative Deficiency Amount" will mean, on any Payment Date, the
Class Deficiency Amount that would have been calculated for such Class on such
Payment Date if the aggregate unreimbursed Investor Losses on such Payment Date
equalled zero.
"Class B Available Collections," will mean, with respect to any
Distribution Date, an amount equal to the sum of (i) Class B Available Finance
Charge Collections for such Distribution Date and (ii) Class B Principal
Collections for such Distribution Date.
"Class B Available Finance Charge Collections" will mean, with respect to
any Distribution Date, an amount equal to the sum of Class B Finance Charge
Collections, Class B Investment Income, Class B Yield Collections and Class B
Additional Funds for such Distribution Date (less Class B Excess Servicing).
"Class B Expected Final Payment Date" will mean the Distribution Date in
September 2002.
"Class B Initial Investor Interest" will mean $39,474,000.
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"Class B Subordinated Payment" will mean, with respect to any Distribution
Date, the amount, if any, withheld from Class B Available Collections and paid
to or for the benefit of the Class A Certificateholders on such Distribution
Date.
"Class Charge-Off Reimbursement Amount" will mean, with respect to any
Distribution Date, the total amount by which the Class Cumulative Investor
Charged-Off Amount for the Class is reduced on that Distribution Date pursuant
to the provisions of the Series Supplement.
"Class Cumulative Investor Charged-Off Amount" will mean, for any
Distribution Date, the sum of the Class Investor Charged-Off Amounts for the
Class for all preceding Due Periods that have not been reimbursed prior to such
Distribution Date, plus the Class Investor Charged-Off Amount for the Class for
the Due Period related to such Distribution Date. The Class Cumulative Investor
Charged-Off Amount with respect to each Class initially will be zero.
"Class Deficiency Amount" will mean, on any Payment Date, the amount, if
any, by which (i) the sum of (a) Certificate Interest for the Class accrued
since the immediately preceding Payment Date, (b) if, since the immediately
preceding Payment Date and prior to the current Payment Date, a Reimbursed Loss
Event has occurred, the sum of (1) the Reimbursed Loss Interest for each
previous Distribution Date since the last Distribution Date on which Investor
Losses for the Class equalled zero and (2) the Reimbursed Loss Interest Gross-up
Amount for each previous Distribution Date since the last Distribution Date on
which the aggregate amount of unreimbursed Investor Losses for the Class
equalled zero, (c) the Class Deficiency Amount on the immediately preceding
Payment Date and (d) the Class Deficiency Amount on the immediately preceding
Payment Date multiplied by the product of (1) a fraction the numerator of which
is the Certificate Rate for the Class for the relevant Due Periods and the
denominator of which is 360 divided by the actual number of days from and
including the immediately preceding Distribution Date to but excluding the
current Distribution Date and (2) the number of Distribution Dates from and
including the preceding Payment Date to but excluding the current Payment Date
exceeds (ii) the amount deposited since the immediately preceding Payment Date
into the Series Interest Funding Account. The Class Deficiency Amount for each
Class initially will be zero.
"Class Excess Servicing" will mean, on any Distribution Date, the positive
difference, if any, between (i) the sum of Class Finance Charge Collections for
the related Due Period, Class Investment Income earned since the preceding
Distribution Date, Class Yield Collections for the related Due Period and Class
Additional Funds for that Distribution Date and (ii) the Class Required Amount.
"Class Finance Charge Collections" will mean, with respect to any day or
any Distribution Date or Trust Distribution Date, as applicable, an amount equal
to the product of (x) the Class Percentage with respect to Finance Charge
Collections for the related Distribution Date and (y) the amount of Finance
Charge Collections for such day or for the related Due Period, as applicable;
provided, however, that Class Finance Charge Collections for each Class will be
increased by the lesser of (i) the amount of Class Investment Shortfall for such
Class and (ii) an amount equal to the product of the total amount of Finance
Charge Collections otherwise allocable to Greenwood for the related Due Period
and a fraction the numerator of which is the Class Invested Amount for such
Class and the denominator of which is the Aggregate Invested Amount; and
provided, further, that notwithstanding the foregoing, Class Finance Charge
Collections for each Class will not, with respect to any such day, Distribution
Date or Trust Distribution Date during the Accumulation Period, as applicable,
exceed the amount that would be available if the Class Percentage with respect
thereto were the percentage equivalent of a fraction the numerator of which is
the amount of the Class Investor Interest on the last day of the Due Period
prior to the commencement of the Accumulation Period, and the denominator of
which is the greater of (i) the amount of Principal Receivables in the Trust on
the first day of the related Due Period and (ii) the sum of the numerators used
in calculating the components of the Series Percentage with respect to Finance
Charge Collections for each series then outstanding (including the Series
established hereby) as of such day, Distribution Date or Trust Distribution
Date, as applicable.
"Class Invested Amount" will mean, for any Distribution Date, an amount
equal to the Class Initial Investor Interest minus the sum of (i) the aggregate
amount of payments of Certificate Principal paid to the Investor
Certificateholders of such Class prior to such Distribution Date, (ii) the
aggregate amount of
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Investor Losses of such Class not reimbursed prior to such Distribution Date and
(iii) the aggregate amount of losses of principal on investments of funds on
deposit for the benefit of such Class in the Series Principal Funding Account,
if applicable.
"Class Investment Income" will mean, with respect to any Class, income from
the investment of funds on deposit in the Series Principal Funding Account for
the benefit of such Class less Excess Income.
"Class Investment Shortfall" with respect to each Class with respect to any
Distribution Date during the Accumulation Period will mean an amount equal to
the positive difference, if any, between (i) one-twelfth of the product of (a)
the Certificate Rate and (b) the amount on deposit in the Series Principal
Funding Account for the benefit of such Class as of the end of the previous
Distribution Date and (ii) Class Investment Income for the related Due Period.
"Class Investor Charged-Off Amount" will mean, for any Distribution Date,
an amount equal to the sum of (i) the product of (a) the Charged-Off Amount for
such Distribution Date and (b) the Class Percentage with respect to the Class
Investor Charged-Off Amount and (ii) in the case of Class B, the sum of (a) the
positive difference, if any, between (x) the Class B Subordinated Payment and
(y) the amount of Class B Available Finance Charge Collections and (b) the
amount by which the Class A Cumulative Investor Charged-Off Amount is reduced by
way of a reallocation of Class B Investor Interest.
"Class Investor Interest" will mean, on any Distribution Date, an amount
equal to the Class Invested Amount for such Class, minus the aggregate amount on
deposit in the Series Principal Funding Account for the benefit of such Class in
respect of Principal Collections.
"Class Modified Required Amount" will mean, on any Distribution Date, the
Class Required Amount for such Distribution Date minus the sum of all accrued
but unpaid Class Monthly Servicing Fees.
"Class Monthly Deficiency Amount" will mean, for any Distribution Date, the
amount by which the Class Modified Required Amount exceeds the amounts available
to pay the Class Modified Required Amount on such Distribution Date. The Class
Monthly Deficiency Amount for each Class initially will be zero.
"Class Percentage" will mean, with respect to any Distribution Date or any
Trust Distribution Date, as applicable:
(i) when used with respect to the Charged-Off Amount, the percentage
equivalent of a fraction the numerator of which will be the amount of the
Class Investor Interest and the denominator of which will be the greater of
(a) the amount of Principal Receivables in the Trust and (b) the Aggregate
Investor Interest, in each case on the first day of the related Due Period;
or
(ii) when used with respect to Principal Collections prior to the
occurrence of a Fixed Principal Allocation Event, the percentage equivalent
of a fraction the numerator of which will be the amount of the Class
Investor Interest on the first day of the related Due Period and the
denominator of which will be the greater of (a) the amount of Principal
Receivables in the Trust on the first day of the related Due Period and (b)
the sum of the numerators used in calculating the components of the Series
Percentage with respect to Principal Collections for each series then
outstanding as of such Distribution Date or Trust Distribution Date, as
applicable; or
(iii) when used with respect to Principal Collections on and after the
occurrence of a Fixed Principal Allocation Event, the percentage equivalent
of a fraction, the numerator of which will be the amount of the Class
Investor Interest on the last day of the Due Period prior to the occurrence
of a Fixed Principal Allocation Event, and the denominator of which will be
the greater of (a) the amount of Principal Receivables in the Trust on the
first day of the related Due Period and (b) the sum of the numerators used
in calculating the components of the Series Percentage with respect to
Principal Collections for each series then outstanding as of such
Distribution Date or Trust Distribution Date, as applicable; or
(iv) when used with respect to Finance Charge Collections during the
Revolving Period, the Accumulation Period and, provided that an Effective
Alternative Credit Support Election has been made, the Amortization Period,
the percentage equivalent of a fraction the numerator of which will be the
amount of the Class Investor Interest on the first day of the related Due
Period and the denominator of which will be the greater of (a) the amount
of Principal Receivables in the Trust on the first day of the
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related Due Period and (b) the sum of the numerators used in calculating
the components of the Series Percentage with respect to Finance Charge
Collections for each series then outstanding as of such Distribution Date
or Trust Distribution Date, as applicable; or
(v) when used with respect to Finance Charge Collections during the
Amortization Period, provided that an Effective Alternative Credit Support
Election has not been made, the percentage equivalent of a fraction the
numerator of which will be the amount of the Class Investor Interest on the
last day of the Due Period prior to the occurrence of an Amortization
Event, and the denominator of which will be the greater of (a) the amount
of Principal Receivables in the Trust on the first day of the related Due
Period and (b) the sum of the numerators used in calculating the components
of the Series Percentage with respect to Finance Charge Collections for
each series then outstanding as of such Distribution Date or Trust
Distribution Date, as applicable.
"Class Principal Collections" will mean, with respect to any day or any
Distribution Date or Trust Distribution Date, as applicable, an amount equal to
the product of (i) the Class Percentage with respect to Principal Collections
for the related Distribution Date and (ii) the amount of Principal Collections
for such day or for the related Due Period, as applicable.
"Class Required Amount" will mean, on any Distribution Date, the sum of (i)
Certificate Interest with respect to the Class for such Distribution Date, (ii)
the Class Monthly Deficiency Amount on the immediately preceding Distribution
Date, (iii) the Class Deficiency Amount on the immediately preceding Payment
Date multiplied by a fraction the numerator of which is the Certificate Rate for
the Class plus 2.00% per annum and the denominator of which is 360 divided by
the actual number of days from and including the immediately preceding
Distribution Date to but excluding the current Distribution Date, (iv) if on the
immediately preceding Distribution Date a Reimbursed Loss Event has occurred,
the sum of (a) the Reimbursed Loss Interest for each previous Distribution Date
since the last Distribution Date on which the aggregate amount of unreimbursed
Investor Losses for the Class equalled zero, (b) the Reimbursed Loss Interest
Gross-up Amount for each previous Distribution Date since the last Distribution
Date on which the aggregate amount of unreimbursed Investor Losses for the Class
equalled zero and (c) for any Distribution Date following the Distribution Date
immediately following the Reimbursed Loss Event to and including the next
Payment Date, the Reimbursed Loss Interest Gross-up Amount for such Distribution
Date and (v) the sum of all accrued but unpaid Class Monthly Servicing Fees.
"Class Yield Collections" will mean, with respect to any day or any
Distribution Date, as applicable, an amount equal to the product of the Class
Yield Percentage and the amount of Series Yield Collections for such day or the
related Due Period, as applicable.
"Class Yield Percentage" will mean, on any Distribution Date (a) during the
Revolving Period, the Accumulation Period and, provided that an Effective
Alternative Credit Support Election has been made, the Amortization Period, the
percentage equivalent of a fraction the numerator of which will be the Class
Investor Interest and the denominator of which will be the Series Investor
Interest, in each case as of the first day of the related Due Period; or (b)
provided that an Effective Alternative Credit Support Election has not been
made, during the Amortization Period, the percentage equivalent of a fraction
the numerator of which will be the amount of the Class Investor Interest on the
last day of the Due Period prior to the occurrence of an Amortization Event and
the denominator of which will be the sum of the numerators used in calculating
the Class Yield Percentages for each Class of the Series offered hereby as of
that Distribution Date.
"Controlled Accumulation Amount" will mean, with respect to any
Distribution Date related to the Accumulation Period, an amount equal to the sum
of the Accumulation Amount and any existing Deficit Accumulation Amount;
provided, however, that the Controlled Accumulation Amount will not be less than
zero and will not exceed an amount equal to the Class A Invested Amount or, on
the Class A Expected Final Payment Date and Class B Expected Final Payment Date,
the Series Invested Amount.
"Controlled Liquidation Amount," if applicable with respect to other series
issued from the Trust, shall have the meaning set forth in the applicable Series
Supplement.
"Credit Enhancement Drawing" will mean any drawing made under the Credit
Enhancement.
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"Credit Enhancement Fee" will mean on any Distribution Date, the sum of all
fees and interest payable to the Credit Enhancement Provider or the Trustee as
administrator of the Credit Enhancement for the related Due Period pursuant to
the Credit Enhancement Agreement.
"Deficit Accumulation Amount" will mean, with respect to the first
Distribution Date of the Accumulation Period, zero, and with respect to any
other Distribution Date of the Accumulation Period, the amount, if any, by which
the amount deposited in the Series Principal Funding Account on the preceding
Distribution Date is less than the Controlled Accumulation Amount for such
preceding Distribution Date.
"Distribution Date" will mean the 15th day of each calendar month, or, if
such 15th day is not a Business Day, the next succeeding Business Day,
commencing in September 1997.
"Drawing Date" will mean the first Business Day preceding each Distribution
Date.
"Effective Alternative Credit Support Election" will mean an Alternative
Credit Support Election that has become effective pursuant to the provisions of
the Series Supplement.
"Estimated Investment Shortfall" will mean, on any date of determination
the positive difference, if any, between (i) the Certificate Rate for the Class
for whose benefit the amounts on deposit in the Series Principal Funding Account
are held as of such date of determination and (ii) the weighted average yield
(expressed as a Money Market Yield) on the investments in the Series Principal
Funding Account as of such date of determination.
"Estimated Yield" will mean on any date of determination the Portfolio
Yield for the immediately preceding Due Period less 2.00%.
"Excess Income" on any Distribution Date will mean the positive difference,
if any, between (a) interest and other income (net of investment expenses) on
such Distribution Date with respect to the funds on deposit in the Series
Principal Funding Account during the related Interest Period and (b) the amount
on deposit in the Series Principal Funding Account in respect of Certificate
Principal during such Interest Period multiplied by a fraction, the numerator of
which is the Certificate Rate for the Class for whose benefit the amounts on
deposit in the Series Principal Funding Account are held during such Interest
Period and the denominator of which is 360 divided by the actual number of days
from and including the immediately preceding Distribution Date to but excluding
the current Distribution Date.
"Fixed Principal Allocation Event" will mean the earliest of (a) the
beginning of the Due Period immediately following the Due Period related to the
first Distribution Date during the Accumulation Period on which the Series
Available Principal Amount is less than zero; (b) the date on which an
Amortization Event occurs; and (c) a date selected by the Master Servicer, if
any. If the Master Servicer establishes a date for a Fixed Principal Allocation
Event pursuant to clause (c) of the preceding sentence, the Master Servicer will
provide notification of such date to Greenwood, the Trustee, the Credit
Enhancement Provider and the Rating Agencies no later than two Business Days
prior to such date.
"Funded Credit Enhancement" will mean any Credit Enhancement that consists
of funds on deposit in one or more segregated trust accounts in the corporate
trust department of an office or branch of the Trustee or a Qualified
Institution for the benefit of the investor certificateholders of a series,
including, without limitation, a reserve account or a cash collateral account.
"Group Available Principal Amount" will mean, with respect to each
Distribution Date, the amount remaining on deposit in the Group One Principal
Collections Reallocation Account on that Distribution Date after all withdrawals
have been made from such account for the benefit of any series in Group One, but
before such amount is withdrawn from the Group One Principal Collections
Reallocation Account and deposited into the Collections Account pursuant to the
provisions of the Series Supplement.
"Group Excess Spread" will mean, for any Distribution Date, the sum of the
Series Excess Spreads for each series that is a member of the same Group as the
Series offered hereby, in each case for such Distribution Date.
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"Group Finance Charge Collections Reallocation Account" will mean the
non-interest bearing segregated trust account for reallocated Finance Charge
Collections for a 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.
"Group Principal Allocation Event" will mean the first Distribution Date,
if any, on which (i) the sum of the amount of Series Principal Collections less
the amount of Series Yield Collections for each series that is a member of Group
One that is not in its Amortization Period is less than (ii) the Group Required
Principal Amount for such Distribution Date.
"Group Principal Collections Reallocation Account" will mean the
non-interest bearing segregated trust account for reallocated Principal
Collections for a 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.
"Group Required Principal Amount" will mean, with respect to Group One, for
any Distribution Date, the sum of the Series Required Principal Amounts for such
Distribution Date for each series that is a member of Group One that is in its
Controlled Liquidation Period or Accumulation Period, as applicable.
"Initial Subordinated Amount" will mean $98,684,250.
"Interest Accrual Period" will mean, with respect to any Interest Payment
Date, the period from and including the Interest Payment Date immediately
preceding such Interest Payment Date (or, in the case of the first Interest
Payment Date, from and including the Series Closing Date) to but excluding such
Interest Payment Date.
"Interest Payment Date" will mean the 15th day of each month (or, if such
day is not a Business Day, the next succeeding Business Day) commencing in
September 1997.
"Interest Period" will mean each period from and including a given
Distribution Date to but excluding the next following Distribution Date
commencing with the first Distribution Date of the Accumulation Period.
"Investor Loss" will mean, with respect to each Class and any Distribution
Date, the excess, if any, of the Class Cumulative Investor Charged-Off Amount
over the Class Charge-Off Reimbursement Amount.
"Investor Servicing Fee Percentage" will mean 2.0% per annum calculated on
the basis of a 360-day year of twelve 30-day months.
"LIBOR" will mean, with respect to any LIBOR Determination Date, the rate
for deposits in United States dollars with a duration comparable to the relevant
Interest Accrual Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on that day. If such rate does not appear on Telerate Page 3750,
the rate will be determined by the Trustee on the basis of the rates at which
deposits in United States dollars are offered by major banks in the London
interbank market, selected by the Trustee, at approximately 11:00 a.m., London
time, on that day to prime banks in the London interbank market with a duration
comparable to the relevant Interest Accrual Period commencing on that day. The
Trustee will request the principal London office of at least four banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that day will be the
arithmetic mean of the rates quoted by four major banks in New York City,
selected by the Trustee, at approximately 11:00 a.m., New York City time, on
that day for loans in United States dollars to leading European banks with a
duration comparable to the relevant Interest Accrual Period commencing on that
day.
"LIBOR Business Day" will mean a day other than a Saturday or a Sunday on
which banking institutions in the City of London, England and in New York, New
York are not required or authorized by law to be closed.
"LIBOR Determination Date" will mean, for any Interest Accrual Period, the
second LIBOR Business Day immediately preceding the commencement of that
Interest Accrual Period.
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"Maximum Class B Credit Enhancement Amount" will mean (A) on any
Distribution Date prior to the making of an Effective Alternative Credit Support
Election, the greater of (i) $7,894,740 and (ii) an amount equal to 7.5% of the
Series Investor Interest as of the last day of the related Due Period or (B) on
any Distribution Date subsequent to the making of an Effective Alternative
Credit Support Election, the greater of (i) $7,894,740 and (ii) an amount equal
to 12.5% of the Series Investor Interest as of the last day of the related Due
Period; provided, however, that if an Amortization Event with respect to the
Series offered hereby occurs, the Maximum Class B Credit Enhancement Amount for
each Distribution Date thereafter will equal the Maximum Class B Credit
Enhancement Amount for the Distribution Date immediately preceding the
occurrence of the Amortization Event; and provided, further, that if a Credit
Enhancement Drawing has been made, until such time as the Available Class B
Credit Enhancement Amount has been reinstated in an amount at least equal to the
amount of such Credit Enhancement Drawing, the Maximum Class B Credit
Enhancement Amount will be the Maximum Class B Credit Enhancement Amount as of
the date of such Credit Enhancement Drawing.
"Maximum Shared Credit Enhancement Amount" will be zero with respect to the
Series offered hereby. With respect to other series issued from the Trust, the
Maximum Shared Credit Enhancement Amount, if applicable, will have the meaning
set forth in the applicable Series Supplement.
"Money Market Yield" shall mean a yield (expressed as a percentage rounded
to the nearest one-hundredth of a percent, with five hundred one-thousandths of
a percent rounded upwards) calculated in accordance with the following formula:
Money Market Yield = D X 360 X 100
-----------------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal and "M" refers to the actual number of
days in the related Interest Accrual Period.
"Paying Agent" will mean any paying agent appointed pursuant to the Pooling
and Servicing Agreement and will initially be the Corporate Trust Office of the
Trustee.
"Portfolio Yield" will mean, with respect to any Due Period, the annualized
percentage equivalent of a fraction, the numerator of which will be the sum of
(i) the amount of Finance Charge Collections received during such Due Period,
(ii) the amount of Series Yield Collections for each series then outstanding
(including the Series offered hereby) for such Due Period and (iii) the amount
of Series Additional Funds for each series then outstanding (including the
Series offered hereby) for such Due Period, and the denominator of which will be
the total amount of Principal Receivables in the Trust as of the first day of
such Due Period.
"Principal Commencement Date" will mean the first day of the Due Period
related to the September 2001 Distribution Date (or such later Distribution Date
as the Master Servicer may elect in accordance with the Series Supplement).
"Principal Distribution Amount" will mean, with respect to any Distribution
Date occurring in (i) the Controlled Liquidation Period, the Controlled
Liquidation Amount, (ii) the Accumulation Period, the Controlled Accumulation
Amount, or (iii) the Amortization Period, the Series Investor Interest.
"Reimbursed Loss Event" will mean, with respect to each Class for any
Distribution Date, the occurrence of the reimbursement of Investor Losses with
respect to such Class on such Distribution Date such that the aggregate amount
of unreimbursed Investor Losses for such Class is reduced to zero.
"Reimbursed Loss Interest" will mean, with respect to each Class for any
Distribution Date, an amount equal to the product of (i) the aggregate amount of
Investor Losses with respect to that Class that have not been reimbursed prior
to the commencement of the related Due Period and (ii) a fraction the numerator
of which is the Certificate Rate for such Class for the related Due Period and
the denominator of which is 360
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<PAGE> 41
divided by the actual number of days from and including the immediately
preceding Distribution Date to but excluding the current Distribution Date.
"Reimbursed Loss Interest Gross-up Amount" will mean, with respect to each
Class for any Distribution Date, an amount equal to the product of (i) the
positive difference, if any, between the Class Alternative Deficiency Amount for
the immediately preceding Payment Date and the actual Class Deficiency Amount
for the immediately preceding Payment Date and (ii) a fraction the numerator of
which is the Certificate Rate for such Class for the related Due Period and the
denominator of which is 360 divided by the actual number of days from and
including the immediately preceding Distribution Date to but excluding the
current Distribution Date.
"Required Daily Deposit," if applicable, will mean, with respect to each
Servicer, an amount equal to:
(a) during the Revolving Period and the Accumulation Period, the sum
of
(x)(1) during the Revolving Period, an amount equal to the sum of
(i) the sum of the Class Finance Charge Collections and the Class Yield
Collections for each Class for such day and (ii) the amount of Class B
Principal Collections for such day minus the sum of the Class B Yield
Collections for such day and all accrued but unfunded Class A Monthly
Servicing Fees; or (2) during the Accumulation Period, an amount equal
to the sum of (i) the amount set forth in clause (1) above and (ii)(A)
until the aggregate amount deposited during such Due Period pursuant to
this clause (ii) equals the Controlled Accumulation Amount, for the
related Distribution Date, the amount of Class A Principal Collections
for such day less the amount of Class A Yield Collections for such day
and (B) thereafter, zero; plus
(y) the positive difference, if any, between (1) the Class A
Percentage for the related Distribution Date with respect to Principal
Collections times the amount of Principal Collections received during
the Due Period through and including such day less the Class A Yield
Percentage times the amount of Series Yield Collections received during
the Due Period through and including such day, and less any amounts
deposited into the Collections Account during the Due Period through and
including such day pursuant to clause (x)(2)(ii)(A) above or previously
deposited during such Due Period pursuant to this clause (y) and (2) the
positive difference, if any, between (i) an amount equal to (A) the
aggregate amount of Principal Receivables in the Trust as of such day
multiplied by a fraction the numerator of which will be the Series
Initial Investor Interest and the denominator of which will be the sum
of the Series Initial Investor Interest for each series then outstanding
minus (B) the Series Investor Interest as of the end of the immediately
preceding Due Period (after giving effect to payments of principal made
or to be made on the related Distribution Date) and (ii) an amount equal
to the positive difference between the Series Minimum Principal
Receivables Balance and the Series Investor Interest; provided, however,
that any calculation under this paragraph (y) that results in a number
less than zero will be treated as zero; or
(b) during the Amortization Period, an amount equal to the sum of the
Series Finance Charge Collections and the Series Principal Collections for
such day minus all accrued but unfunded Class A Monthly Servicing Fees;
multiplied, in each case, by a fraction the numerator of which will be the
aggregate amount or Principal Receivables in the Trust that are serviced by such
Servicer and the denominator of which will be the aggregate amount of Principal
Receivables in the Trust; provided, however, that if any Servicer is unable to
make the calculations set forth above on any day, the Required Daily Deposit for
that Servicer for that day will be equal to all the Collections received by that
Servicer on that day; and provided, further, that, notwithstanding the above, a
Servicer may use Collections received by it for its own account prior to the
applicable Distribution Date if such use will not result in the lowering or
withdrawal of the rating of any class of any series then outstanding by the
Rating Agencies.
"Series Additional Investor Funds," if applicable, will mean, for any
Distribution Date, the Additional Funds deposited into the Series Collections
Account for the series on that Distribution Date.
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<PAGE> 42
"Series Available Principal Amount" will mean, for any Distribution Date,
if a Group Principal Allocation Event has occurred, for each series that is a
member of Group One that is in its Controlled Liquidation Period or Accumulation
Period, as applicable, an amount calculated as follows: for each such series,
seriatim, beginning with the series with the largest Series Investor Interest
for such Distribution Date (and if more than one series has the same Series
Investor Interest on such Distribution Date, beginning with whichever of such
series has the largest time remaining in its Controlled Liquidation Period or
Accumulation Period, as applicable (assuming that no Amortization Event occurs
with respect to such series)), an amount equal to (x) the Group Available
Principal Amount less (y) the Series Required Principal Amount less the amount
of such series' Controlled Liquidation Amount or Controlled Accumulation Amount,
as applicable, that was funded on such Distribution Date (including any portion
of such amount that was funded by amounts withdrawn from the applicable Group
Principal Collections Reallocation Account pursuant to the provisions of the
Series Supplement with respect to such series). For purposes of calculating the
Series Available Principal Amount for each other such series, the Group
Available Principal Amount shall be reduced by the Series Available Principal
Amount for the prior series for which the Series Available Principal Amount was
calculated.
"Series Collections Account" will mean the non-interest bearing segregated
trust account for Collections allocated to the Series offered hereby 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 the
Series offered hereby.
"Series Cut-Off Date" will mean August 1, 1997.
"Series Distribution Account" will mean the non-interest bearing segregated
trust account for Finance Charge Collections allocated to the Series offered
hereby 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 the Series offered hereby.
"Series Excess Servicing" will mean, as of any Distribution Date, the sum
of the amount of Class A Excess Servicing and Class B Excess Servicing for that
Distribution Date.
"Series Excess Spread" will mean, for any Distribution Date, an amount
equal to (a) the sum of Series Finance Charge Collections, Series Yield
Collections, Series Additional Investor Funds and any Class Investment Income
for any Class of the Series offered hereby minus (b) the sum of (i) the sum of
the amount of Certificate Interest for each Class of the Series offered hereby,
(ii) the Investor Servicing Fee, (iii) the product of the Series Percentage with
respect to the Charged-Off Amount and the Charged-Off Amount, and (iv) the
Credit Enhancement Fee, in each case for the Distribution Date.
"Series Finance Charge Collections" will mean, with respect to any day or
any Distribution Date or Trust Distribution Date, as applicable, the sum of the
amount of Class Finance Charge Collections for each Class for such day or for
the related Due Period, as applicable.
"Series Initial Investor Interest" will mean $789,474,000.
"Series Interest Funding Account" will mean the non-interest bearing
segregated trust account for Certificate Interest to be paid to the Investor
Certificateholders of the Series offered hereby 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 the Series offered hereby.
"Series Invested Amount" will mean, with respect to any Distribution Date,
the sum of the Class A Invested Amount and the Class B Invested Amount on such
Distribution Date.
"Series Investor Interest" will mean, with respect to any Distribution
Date, the sum of the Class A Investor Interest and the Class B Investor Interest
on such Distribution Date.
"Series Minimum Principal Receivables Balance" will mean, on any date of
determination the sum of (A) (i) if a Fixed Principal Allocation Event has not
occurred, the Series Investor Interest on such date of determination, divided by
0.93 or (ii) if a Fixed Principal Allocation Event has occurred, the Series
Investor
S-42
<PAGE> 43
Interest as of the date of the occurrence of the Fixed Principal Allocation
Event divided by 0.93 and (B) (x) the product of (i) the sum of (1) the amount
on deposit in the Series Principal Funding Account on such date of determination
and (2) for any date of determination during the Accumulation Period, the
Controlled Accumulation Amount for the next Distribution Date, and (ii) a
fraction the numerator of which is the Estimated Investment Shortfall and the
denominator of which is the Estimated Yield, in each case on such date of
determination, divided by (y) 0.93; provided, however, that Greenwood may, upon
30 days' prior notice to the Trustee, the Rating Agencies and the Credit
Enhancement Provider, reduce the Series Minimum Principal Receivables Balance by
increasing the divisors set forth above, subject to the condition that Greenwood
shall have been notified by the Rating Agencies that such reduction would not
result in the lowering or withdrawal of the rating of any Class of any Series
then outstanding, and provided, further, that the divisors set forth above may
not be increased to more than 0.98.
"Series Percentage" will mean, with respect to any specified category, with
respect to any Distribution Date or Trust Distribution Date, as applicable, the
sum of the Class A Percentage and the Class B Percentage with respect to such
category on such Distribution Date or Trust Distribution Date, as applicable.
"Series Principal Collections" will mean, with respect to any day or any
Distribution Date or Trust Distribution Date, as applicable, the sum of the
amount of Class Principal Collections for each Class for such day or for the
related Due Period, as applicable.
"Series Principal Collections Account" will mean the non-interest bearing
segregated trust account for Principal Collections allocated to the Series
offered hereby 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 the Series offered hereby.
"Series Principal Funding Account" will mean the non-interest bearing
segregated trust account for Principal Collections to be paid to the Investor
Certificateholders of the Series offered hereby 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 the Series offered hereby.
"Series Required Principal Amount" will mean, with respect to each
Distribution Date, with respect to each series that is a member of Group One
that is in its Controlled Liquidation Period or Accumulation Period, as
applicable, (i) if the related Due Period does not occur in February, 125% or
(ii) if the related Due Period occurs in February, 105%, of the Controlled
Liquidation Amount or the Controlled Accumulation Amount, as applicable, for the
series for such Distribution Date.
"Series Termination Date" will mean the first Business Day following the
Distribution Date in February 2005.
"Series Yield Collections" will mean, with respect to any day or any
Distribution Date, as applicable, an amount equal to the product of the Series
Yield Factor and the amount of Series Principal Collections for such day or the
related Due Period, as applicable.
"Series Yield Factor" will initially be zero, but may be increased by the
Master Servicer pursuant to the terms of the Series Supplement for the Series
offered hereby.
"Special Payment Date" will mean each Distribution Date with respect to the
Amortization Period, if any.
"Stated Class B Credit Enhancement Amount" will mean $59,210,550.
"Telerate Page 3750" will mean the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Trustee" will mean U.S. Bank National Association d/b/a First Bank
National Association (successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), its successors and assigns.
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ANNEX A
OTHER SERIES
The table below sets forth the principal characteristics of the Class A and
Class B Credit Card Pass-Through Certificates of Series 1993-1, Series 1993-2,
Series 1993-3, Series 1994-2, Series 1994-3, Series 1994-A, Series 1995-1,
Series 1995-2, Series 1995-3, Series 1996-1, Series 1996-2, Series 1996-3,
Series 1996-4 and Series 1996-5, the only series heretofore issued by the Trust
and currently outstanding. For more specific information with respect to any
series, any prospective investor should contact the Servicer at (813) 288-3418.
The Servicer will provide, without charge, to any prospective purchaser of the
Investor Certificates, a copy of the Prospectus, Prospectus Supplement, if
applicable, and Series Supplement (without exhibits) for any publicly-issued
series.
1. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1993-1
Group........................................................................One
Class A Initial Investor Interest...................................$750,000,000
Class B Initial Investor Interest....................................$47,873,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate.........................................5.30% per annum
Type......................................................Controlled Liquidation
Class A Controlled Liquidation Period....................Commencing May 15, 1998
Class B Controlled Liquidation Payment..............................May 17, 1999
Initial Credit Enhancement...........................................$35,904,285
Series Closing Date.............................................October 27, 1993
Series Termination Date.........................................October 16, 2001
Series 1993-1 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
2. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1993-2
Group........................................................................One
Class A Initial Investor Interest...................................$800,000,000
Class B Initial Investor Interest....................................$33,334,000
Class A Certificate Rate.........................................5.40% per annum
Class B Certificate Rate.........................................5.75% per annum
Type......................................................Controlled Liquidation
Class A Controlled Liquidation Period...................Commencing June 15, 1998
Class B Controlled Liquidation Payment.............................June 15, 1999
Initial Credit Enhancement...........................................$29,166,690
Series Closing Date.............................................December 1, 1993
Series Termination Date........................................November 16, 2001
Series 1993-2 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
3. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1993-3
Group........................................................................One
Class A Initial Investor Interest...................................$350,000,000
Class B Initial Investor Interest....................................$16,493,000
Class A Certificate Rate.........................................6.20% per annum
Class B Certificate Rate.........................................6.45% per annum
Type.............................................................Bullet Maturity
Class A Expected Final Payment.................................November 17, 2003
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Class B Expected Final Payment.................................December 15, 2003
Initial Credit Enhancement...........................................$14,659,720
Series Closing Date............................................November 23, 1993
Series Termination Date.............................................May 16, 2006
Series 1993-3 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
4. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1994-2
Group........................................................................One
Class A Initial Investor Interest...................................$850,000,000
Class B Initial Investor Interest....................................$44,737,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate.........................................8.05% per annum
Type......................................................Controlled Liquidation
Class A Controlled Liquidation Period....................Commencing May 15, 2001
Class B Controlled Liquidation Payment..............................May 15, 2002
Initial Credit Enhancement...........................................$44,736,850
Series Closing Date.............................................October 14, 1994
Series Termination Date.........................................October 16, 2004
Series 1994-2 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
5. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1994-3
Group........................................................................One
Class A Initial Investor Interest...................................$750,000,000
Class B Initial Investor Interest....................................$39,474,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate.........................................7.75% per annum
Type.............................................................Bullet Maturity
Class A Expected Final Payment..................................October 15, 1999
Class B Expected Final Payment..................................October 15, 1999
Initial Credit Enhancement...........................................$39,473,700
Series Closing Date.............................................October 20, 1994
Series Termination Date...........................................April 16, 2002
Series 1994-3 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
6. CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1994-A
Group........................................................................Two
Class Investor Interest...........................................$2,100,000,000
Class Certificate Rate.............................................Floating Rate
Type......................................................Controlled Liquidation
Credit Enhancement..................................................$168,000,000
Series Closing Date............................................December 20, 1994
Series Termination Date.............................................May 16, 2002
Series 1994-A provides for reallocation of Collections to other series in
Group Two to the extent provided in the Series Supplements relating to such
other series.
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<PAGE> 46
7. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1995-1
Group........................................................................One
Class A Initial Investor Interest...................................$600,000,000
Class B Initial Investor Interest....................................$31,579,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate...........................................Floating Rate
Type.............................................................Bullet Maturity
Class A Expected Final Payment...................................August 16, 2004
Class B Expected Final Payment................................September 15, 2004
Initial Credit Enhancement...........................................$37,894,740
Series Closing Date...............................................April 19, 1995
Series Termination Date........................................February 16, 2007
Series 1995-1 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
8. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1995-2
Group........................................................................One
Class A Initial Investor Interest...................................$500,000,000
Class B Initial Investor Interest....................................$26,316,000
Class A Certificate Rate...................................................6.55%
Class B Certificate Rate...................................................6.75%
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date..............................August 15, 2000
Class B Expected Final Payment Date...........................September 15, 2000
Initial Credit Enhancement...........................................$15,789,480
Series Closing Date...............................................August 1, 1995
Series Termination Date........................................February 18, 2003
Series 1995-2 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
9. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1995-3
Group........................................................................One
Class A Initial Investor Interest...................................$500,000,000
Class B Initial Investor Interest....................................$26,316,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate...........................................Floating Rate
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date...........................September 16, 2002
Class B Expected Final Payment Date.............................October 15, 2002
Initial Credit Enhancement...........................................$31,578,960
Series Closing Date...........................................September 28, 1995
Series Termination Date...........................................March 16, 2005
Series 1995-3 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
10. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1996-1
Group........................................................................One
Class A Initial Investor Interest.................................$1,000,000,000
Class B Initial Investor Interest....................................$52,632,000
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<PAGE> 47
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate...........................................Floating Rate
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date.............................January 15, 2001
Class B Expected Final Payment Date............................February 15, 2001
Initial Credit Enhancement...........................................$57,894,760
Series Closing Date.............................................January 18, 1996
Series Termination Date............................................July 16, 2003
Series 1996-1 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
11. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1996-2
Group........................................................................One
Class A Initial Investor Interest...................................$900,000,000
Class B Initial Investor Interest....................................$47,369,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate...........................................Floating Rate
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date.............................January 15, 2003
Class B Expected Final Payment Date............................February 17, 2003
Initial Credit Enhancement...........................................$56,842,140
Series Closing Date.............................................January 29, 1996
Series Termination Date............................................July 18, 2005
Series 1996-2 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
12. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1996-3
Group........................................................................One
Class A Initial Investor Interest...................................$600,000,000
Class B Initial Investor Interest....................................$31,579,000
Class A Certificate Rate...................................................6.05%
Class B Certificate Rate...................................................6.25%
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date............................February 15, 2006
Class B Expected Final Payment Date...............................March 15, 2006
Initial Credit Enhancement...........................................$18,947,370
Series Closing Date............................................February 21, 1996
Series Termination Date..........................................August 18, 2008
Series 1996-3 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
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<PAGE> 48
13. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1996-4
Group........................................................................One
Class A Initial Investor Interest.................................$1,000,000,000
Class B Initial Investor Interest....................................$52,632,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate...........................................Floating Rate
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date...............................April 15, 2011
Class B Expected Final Payment Date.................................May 16, 2011
Initial Credit Enhancement...........................................$63,157,920
Series Closing Date...............................................April 30, 1996
Series Termination Date.........................................October 16, 2013
Series 1996-4 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
14. CLASS A AND CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES, SERIES 1996-5
Group........................................................................One
Class A Initial Investor Interest................$819,188,676 (DM 1,250,000,000)
Class B Initial Investor Interest....................................$43,116,000
Class A Certificate Rate...........................................Floating Rate
Class B Certificate Rate...........................................Floating Rate
Type.............................................................Bullet Maturity
Class A Expected Final Payment Date................................July 19, 1999
Class B Expected Final Payment Date..............................August 18, 1999
Initial Credit Enhancement...........................................$47,426,758
Series Closing Date................................................July 24, 1996
Series Termination Date.........................................January 18, 2002
Series 1996-5 provides for reallocation of Collections to other series in
Group One to the extent provided in the Series Supplements relating to such
other series.
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DISCOVER CARD MASTER TRUST I
Series 1997-1
Greenwood Trust Company
Master Servicer, Servicer and Seller
$750,000,000
Floating Rate Class A Credit Card
Pass-Through Certificates
$39,474,000
Floating Rate Class B Credit Card
Pass-Through Certificates
-----------------
PROSPECTUS SUPPLEMENT
---------------------
-----------------
Underwriters of the Class A Certificates
MORGAN STANLEY DEAN WITTER
BANCAMERICA SECURITIES, INC.
CHASE SECURITIES INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
Underwriter of the Class B Certificates
MORGAN STANLEY DEAN WITTER
August 19, 1997
