<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 2000.
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
DISCOVER CARD MASTER TRUST I
(Exact name of registrant)
(Issuer with respect to the certificates)
------------------------------------
GREENWOOD TRUST COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6022 51-0020270
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------------------
12 READ'S WAY, NEW CASTLE, DELAWARE 19720
(302) 323-7826
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
GREENWOOD TRUST COMPANY
12 READ'S WAY, NEW CASTLE, DELAWARE 19720
ATTENTION: JOHN J. COANE
(302) 323-7474
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------
Copies to:
<TABLE>
<S> <C>
ELLEN L. MARKS, ESQ. RICHARD M. SCHETMAN, ESQ.
LATHAM & WATKINS CADWALADER, WICKERSHAM & TAFT
Sears Tower, Suite 5800 100 Maiden Lane
Chicago, Illinois 60606 New York, New York 10038
(312) 876-7700 (212) 504-6000
Counsel to Registrant Counsel to Underwriters
</TABLE>
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number for the earlier effective registration statement
for the same offering. [ ]
If delivery of prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
Credit Card Pass-Through Certificates of
Discover Card Master Trust I............ $10,000,000,000 100% $10,000,000,000 $2,640,000
</TABLE>
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(1) This registration statement and the registration fee pertain to the initial
offering of $10,000,000,000 aggregate principal amount of Credit Card
Pass-Through Certificates of Discover Card Master Trust I, and in addition
cover offers and sales related to market-making transactions by Morgan
Stanley & Co. Incorporated and Dean Witter Reynolds Inc., affiliates of the
registrant, and offers and sales in connection with the proportionate share
of underwriters' stabilization activities (if any) by Morgan Stanley & Co.
Incorporated and Dean Witter Reynolds Inc., with respect to all such Credit
Card Pass-Through Certificates.
(2) Estimated solely for purpose of calculating the registration fee.
------------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
EXPLANATORY NOTE
This registration statement pertains to
- the initial offering of $10,000,000,000 aggregate principal amount of
Credit Card Pass-Through Certificates of Discover Card Master Trust I
registered under this registration statement by the registrants,
- offers and sales in connection with the proportionate share of
underwriters' stabilization activities, if any, by Morgan Stanley & Co.
Incorporated and Dean Witter Reynolds Inc., affiliates of the
registrants, with respect to the certificates and
- offers and sales related to market-making transactions in the
certificates by Morgan Stanley & Co. Incorporated and Dean Witter
Reynolds Inc.
<PAGE> 3
Prospectus supplement
to prospectus dated
Discover(R) Card Master Trust I, Series
$ Floating Rate Class A Certificates
$ Floating Rate Class B Certificates
Discover Card Master Trust I
Issuer
Greenwood Trust Company
Master Servicer, Servicer and Seller
-------------------------
The Series Class A Certificates and Class B Certificates represent
interests in the Discover Card Master Trust I. The certificates are not
obligations of Greenwood Trust Company or any of its affiliates, and neither the
certificates nor the underlying credit card receivables are insured or
guaranteed by any governmental agency.
-------------------------
Investing in the certificates involves risks. See "Risk Factors" beginning on
page S- of this prospectus supplement.
-------------------------
<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
-------------------- --------------------
<S> <C> <C>
Interest rate LIBOR + % LIBOR + %
Expected interest payment dates Monthly, beginning Monthly, beginning
Expected maturity date
Initial credit enhancement $ -- % of $ -- % of series
series
Form of credit enhancement Subordination of Class B Cash collateral account
Certificates
Expected ratings -- Moody's/S&P/ Aaa/AAA/AAA A2/A/A+
Fitch IBCA
Price to public % %
Underwriting discounts and commissions % %
Proceeds to Greenwood $ $
</TABLE>
-------------------------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved the certificates or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the certificates to purchasers on
through the facilities of The Depository Trust Company, the Euroclear System and
Clearstream Banking.
Greenwood will apply to list the certificates on the Luxembourg Stock Exchange,
in accordance with the rules of the Luxembourg Stock Exchange, to facilitate
trading in non-U.S. markets.
-------------------------
Underwriters of the Class A Certificates
MORGAN STANLEY DEAN WITTER
Underwriter of the Class B Certificates
MORGAN STANLEY DEAN WITTER
[Date]
<PAGE> 4
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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PAGE
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<S> <C>
Series Summary........................ S-5
Risk Factors.......................... S-13
Investor Risk of Loss............... S-13
Limited Credit Enhancement.......... S-13
Subordination of Class B
Certificates..................... S-13
Rating of the Certificates.......... S-13
Deteriorations in Trust Performance
of Receivables Balance Could
Cause an Amortization Event...... S-13
Greenwood May Change Terms of the
Accounts......................... S-14
Interest on the Receivables and
Interest on the Certificates
Accrue at Different Rates........ S-14
Payments, Generation of Receivable
and Maturity..................... S-15
Competition in the Credit Card
Industry......................... S-15
Consumer Protection Laws and
Regulations...................... S-16
Effects of an Amortization Event.... S-16
Limited Ability to Resell
Certificates..................... S-16
Security Interests and Insolvency
Related Matters.................. S-17
Litigation.......................... S-17
Legislation......................... S-17
Issuance of Additional Series....... S-18
Addition of Accounts................ S-18
Historical Information.............. S-18
The Discover Card Business............ S-20
General............................. S-20
Credit-Granting Procedures.......... S-21
Collection Efforts and Charged-Off
Accounts......................... S-23
The Accounts.......................... S-23
General............................. S-23
</TABLE>
<TABLE>
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PAGE
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<S> <C>
Billing and Payments................ S-24
Effects of the Selection Process.... S-25
Composition of the Accounts......... S-25
Composition and Historical Performance
of the Discover Card Portfolio...... S-27
General............................. S-27
Composition of the Discover Card
Portfolio........................ S-27
Timing of Principal Payments........ S-29
The Certificates...................... S-31
Invested Amounts.................... S-31
Investor Interests.................. S-31
Interest Payments................... S-31
Principal Payments.................. S-32
Investor Accounts................... S-34
Class Finance Charge Collections.... S-35
Other Income (Yield Collections,
Additional Funds and Investment
Income).......................... S-35
Class Principal Collections...... S-36
Class Charge-Offs and Investor
Losses......................... S-37
Subordination of the Class B
Certificates (Class A Credit
Enhancement)..................... S-38
The Credit Enhancement Account...... S-38
Reallocations....................... S-41
Cash Flows.......................... S-41
Amortization Events................. S-43
Clean-up Call; Termination of
Series........................... S-44
Reports to Investors.................. S-45
Underwriting.......................... S-47
Legal Matters......................... S-48
Glossary of Terms..................... S-49
Annex A -- Cash Flows................. S-65
Annex B -- Other Series............... S-73
</TABLE>
PROSPECTUS
<TABLE>
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PAGE
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<S> <C>
Reports to Investors.................. 3
Where You Can Find More Information... 3
Prospectus Summary.................... 5
The Trust............................. 13
The Trustee......................... 14
Indemnification of the Trust and the
Trustee.......................... 14
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Sale and Assignment of Receivables
to the Trust..................... 15
Addition of Accounts................ 15
Removal of Accounts................. 17
Termination of the Trust............ 17
The Certificates...................... 17
</TABLE>
S-2
<PAGE> 5
<TABLE>
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PAGE
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<S> <C>
General............................. 17
Interest Payments................... 18
Principal Payments.................. 18
Issuance of Additional Series....... 19
Collections......................... 20
Class Percentages and Seller
Percentage....................... 21
Subordination....................... 22
Adjustments to Receivables.......... 22
Additional Funds.................... 22
Final Payment of Principal;
Termination of Series............ 23
Credit Enhancement.................. 23
Repurchase of Trust Portfolio....... 24
Repurchase of Specified
Receivables...................... 25
Repurchase of a Series.............. 26
Repurchase of Certificates.......... 26
Sale of Seller Interest............. 26
Reallocation of Series Among
Groups........................... 27
Amendments.......................... 27
List of Certificateholders.......... 28
Meetings............................ 28
Book-Entry Registration............. 28
Definitive Certificates............. 32
Servicing............................. 32
Master Servicer and Servicer........ 32
Servicing Compensation and Payment
of Expenses...................... 33
Certain Matters Regarding the Master
Servicer and the Servicers....... 34
Master Servicer Termination
Events........................... 34
Servicer Termination Events......... 35
</TABLE>
<TABLE>
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PAGE
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<S> <C>
Evidence as to Compliance........... 36
The Seller............................ 37
Greenwood........................... 37
Insolvency-Related Matters.......... 37
Certain Legal Matters Relating to the
Receivables......................... 38
Transfer of Receivables............. 38
Certain UCC Matters................. 39
Consumer Protection Laws and Debtor
Relief Laws Applicable to the
Receivables...................... 39
Claims and Defenses of Cardmembers
Against the Trust................ 40
Use of Proceeds....................... 40
Federal Income Tax Consequences....... 40
General............................. 40
Tax Treatment of the Certificates as
Debt............................. 41
United States Investors............. 42
Foreign Investors................... 45
Backup Withholding and Information
Reporting........................ 46
Possible Characterization of the
Certificates..................... 47
State Tax Consequences................ 48
ERISA Considerations.................. 49
Greenwood's Prohibited Transaction
Exemption........................ 50
The DOL Regulation.................. 51
Plan of Distribution.................. 53
Legal Matters......................... 54
Glossary of Terms..................... 54
</TABLE>
S-3
<PAGE> 6
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate
documents:
- this prospectus supplement, which describes the specific terms of your
certificates, and
- the prospectus, which provides detailed information, some of which may
not apply to your certificates, about the trust and the certificates
issued by the trust.
We include cross-references in this prospectus supplement and the
accompanying prospectus to sections in these materials where you can find
related discussions. You can locate the pages on which these sections begin by
using the table of contents on page S-2.
We have included glossaries of the capitalized terms used in this
prospectus supplement or the prospectus.
IT IS IMPORTANT FOR YOU TO READ AND CONSIDER ALL INFORMATION CONTAINED IN
BOTH THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN MAKING YOUR
INVESTMENT DECISION.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering to sell or soliciting offers to buy any securities
other than the certificates to which this prospectus supplement and the
accompanying prospectus relate, nor are we offering to sell or soliciting offers
to buy certificates in any jurisdiction where the offer is not permitted.
S-4
<PAGE> 7
SERIES SUMMARY
The following summary describes the terms of the certificates and certain
aspects of the trust generally. The remainder of this prospectus supplement and
the prospectus provide much more detailed information about the certificates and
the trust. You should review the entire prospectus and prospectus supplement
before you decide to invest.
THE CERTIFICATES AND THE
SERIES................... Discover Card Master Trust I, Series Floating
Rate Class A Credit Card Pass-Through Certificates
and Series Floating Rate Class B Credit Card
Pass-Through Certificates.
Together, the Class A Certificates and the Class B
Certificates make up this series.
SELLER..................... Greenwood Trust Company. Greenwood's executive
office is located at 12 Read's Way, New Castle,
Delaware 19720.
MASTER SERVICER AND
SERVICER................... Greenwood.
TRUSTEE.................... U.S. Bank National Association.
PRINCIPAL.................. Class A Certificates: $ .
Class B Certificates: $ .
INTEREST RATE.............. Class A Certificates: LIBOR + % per year.
Class B Certificates: LIBOR + % per year.
LIBOR is the London interbank offered rate for
one-month United States dollar deposits, determined
as described in the glossary of terms in this
prospectus supplement.
The trustee will calculate interest on the
certificates monthly, on the basis of the actual
number of days elapsed and a 360-day year.
INTEREST PAYMENT DATES..... The 15th day of each month, or the next business
day, beginning in .
The trust will pay your interest on each interest
payment date from the funds deposited into the
series interest funding account on that date.
EXPECTED MATURITY DATES.... Class A Certificates: , or the next
business day. If an amortization event occurs, the
trust will pay principal monthly and the final
principal payment may be made before or after
.
Class B Certificates: , or the next
business day. If an amortization event occurs, the
trust will pay principal monthly and the final
principal payment may be made before or after
. The trust must generally pay all Class
A principal before it pays any Class B principal.
Amortization events are designed to protect
investors from certain events that may adversely
affect the trust and your investment in the
certificates. These may include: Greenwood's or an
additional seller's inability to continue to
transfer
S-5
<PAGE> 8
receivables to the trust; certain breaches of
representations, warranties or covenants by
Greenwood or an additional seller; receivables
performance that might impair the long-term ability
of the trust to make all required payments with
respect to a series; or certain events of
insolvency with respect to Greenwood or an
additional seller. For some of these events to
become amortization events, the trustee or a
specified percentage of certificateholders must
declare them to be amortization events; others
become amortization events automatically when they
occur. If an amortization event occurs with respect
to this series, the trust becomes obligated to
apply principal collections allocated to this
series on a monthly basis to repay the remaining
principal amount of the certificates.
SERIES CLOSING DATE........ . The series closing date is
the date on which the trust issues the
certificates.
REVOLVING PERIOD........... The revolving period began on . The
revolving period is the period from the first day
of the calendar month in which the trust issues a
series until it begins using principal collections
to make principal payments to investors or to
accumulate the cash to be used to make later
principal payments. In general, during the
revolving period, the trust pays principal
collections to Greenwood in exchange for new
receivables that cardmembers have generated on the
accounts designated as part of the trust.
The trust may also use principal collections to pay
the principal of other series. The revolving period
for this series ends when the accumulation period
begins, or when an amortization event occurs.
ACCUMULATION PERIOD........ The trust will begin to accumulate cash in the
series principal funding account on , or
the next business day, using collections it
receives on or after , to pay principal
at maturity, unless Greenwood elects to delay this
process or an amortization event has occurred. The
trust is scheduled to accumulate principal
collections in the series principal funding account
over several months, so that it will have
collections available to make the final payment.
Greenwood may elect to shorten the accumulation
period if:
- it determines that enough principal collections
from other series will be available to make
larger deposits into the series principal funding
account, and
- the required rating agencies have approved the
election to shorten the accumulation period.
AMORTIZATION PERIOD........ The amortization period begins when an amortization
event occurs and continues until the trust has
fully paid the principal of this series or until
the series termination date.
S-6
<PAGE> 9
SERIES TERMINATION DATE.... The first business day following , or
the second business day following , if
is not a business day. The series termination date
is the last day on which the trust will pay
principal to investors in this series. If the trust
owes principal in the month before the series
termination date, the trustee will sell
receivables, proportionate to this series'
remaining interest in the trust, to repay the
principal. After the series termination date, the
trust will not allocate collections to this series.
CLASSES, ALLOCATIONS AND
REALLOCATIONS.......... This series has two classes; the Class B
Certificates rank junior to the Class A
Certificates.
The trust allocates collections among the series
based on each series' investor interest in
receivables. The trust also allocates receivables
that Greenwood has charged off as uncollectible to
series based on the investor interest in
receivables. The series supplement to the pooling
and servicing agreement specifies the percentages
of these collections and charged-off receivables
that are allocated to each class of this series at
each point in time. These percentages vary based on
a number of factors, including whether the trust
has started to pay principal to investors in this
series and whether Greenwood has made certain
choices regarding credit enhancement. The class
percentages differ for finance charge collections,
principal collections and charged-off amounts. The
pooling and servicing agreement determines whether
collections are finance charge collections or
principal collections. Once this determination is
made, finance charge collections and principal
collections are generally not interchangeable; each
can only be used to fund certain payments, deposits
and reimbursements. When Greenwood charges off a
receivable as uncollectible, it reduces the amount
of principal receivables in the trust, and
allocates a portion of the amount charged off
against your interest in principal receivables
based on your class percentage. However, the trust
typically uses finance charge collections to pay
interest and to reimburse you for charged-off
receivables that have been allocated to you,
reinstating your interest in principal receivables.
The trust typically uses principal collections to
repay your principal.
In general, the trust will use this series' share
of collections to make required payments, to pay
its share of servicing fees and to reimburse its
share of charged-off amounts. If this series has
more collections than it needs in any month, the
trust may make the excess collections available to
other series so those series may make their
payments and reimbursements. You will not be
entitled to receive these excess collections. If
this series does not have enough collections in any
month, the trust may use excess collections from
other series to make payments and reimbursements
for this series.
S-7
<PAGE> 10
INVESTOR INTEREST AND
INVESTED AMOUNT............ The trust generally allocates collections and
charged-off amounts to you based on your investor
interest, which is your interest in the
receivables. The trust makes payments to you based
on your invested amount, which generally is the
principal balance of your certificates. Your
investor interest in receivables may decrease over
time as principal is paid to you or as principal
collections are deposited into the series principal
funding account to be paid to you at a later time.
Although your investor interest in receivables and
your invested amount are related, they diverge
under certain circumstances; for instance, as the
trustee accumulates principal in the series
principal funding account, your investor interest
in receivables will decline but your invested
amount will not be affected. Your invested amount
will shift from an interest entirely in the
receivables to an interest in the cash in the
series principal funding account and a smaller
interest in the receivables.
DISTRIBUTION DATES......... The distribution date is the date in each month,
typically the 15th, on which the trust allocates
collections from the preceding calendar month to
investors and the trustee deposits them into
appropriate accounts.
SUBORDINATION OF CLASS B
CERTIFICATES -- CLASS A
CREDIT ENHANCEMENT....... The Class B Certificates are subordinated to the
Class A Certificates up to a specified dollar
amount that is the available subordinated amount.
This means that the trust may reallocate
collections and other assets that it initially
allocated to the Class B Certificates to instead
make payments, deposits and reimbursements for the
Class A Certificates. The available subordinated
amount decreases to the extent that the trust
reallocates subordinated amounts such as Class B
collections and the Class B investor interest in
receivables in the trust to the Class A
Certificates. As long as the available subordinated
amount is greater than zero, the trust will
generally make payments, deposits and
reimbursements for the Class B Certificates only
after it has satisfied the requirements of the
Class A Certificates.
The initial available subordinated amount is
$ . If the trust uses part of the
available subordinated amount in any month, it may
increase the available subordinated amount up to
its initial level, to the extent that this series
has excess finance charge collections and other
income in any subsequent month. Greenwood may also
cause the available subordinated amount to increase
if it elects to change the way in which the trust
allocates finance charge collections during an
amortization period. The available subordinated
amount may increase if Standard & Poor's withdraws
or significantly downgrades Green-
S-8
<PAGE> 11
wood's long-term debt or deposit rating. You should
review the information under "The
Certificates -- Subordination of Class B
Certificates" for more information about this
amount. If the available subordinated amount
declines to zero, the Class A Certificates will
lack credit enhancement and will have to rely
solely on their own allocations of collections.
CASH COLLATERAL ACCOUNT --
CLASS B CREDIT
ENHANCEMENT.............. Greenwood will arrange to have a cash collateral
account funded with $ . The trustee may
withdraw funds from this account
- to pay interest or servicing fees for the Class B
Certificates, and
- to reimburse the Class B investors for amounts
that would otherwise reduce the Class B investor
interest in receivables.
The trustee may not withdraw funds from this
account to pay any amounts on the Class A
Certificates, but the Class A investors benefit
indirectly from this account because the trustee
can withdraw funds to protect the Class B investor
interest in receivables, and the Class A investors
can then use the Class B investor interest in
receivables in subsequent months as part of the
available subordinated amount.
The maximum amount that will be on deposit in this
account on any distribution date will initially be
$ , but it may increase under certain
circumstances. It will generally decrease during
the accumulation period as the series investor
interest in receivables declines. If an
amortization event occurs, the maximum amount of
the account will be the maximum amount immediately
before the amortization event occurred. If the
trustee withdraws funds from the account, then
until those funds have been replaced, the maximum
amount of the account will be the maximum amount at
the time of the withdrawal. You should review the
"Maximum Class B Credit Enhancement Amount" table
on page S- of this prospectus supplement for more
information about this amount.
FORMATION OF THE TRUST;
TRUST ASSETS............... Greenwood and the trustee formed the trust in
October 1993. Greenwood has transferred to the
trust the credit card receivables generated under
certain designated Discover(R) Card accounts. Those
receivables included principal receivables --
amounts owed by cardmembers representing the
principal balances of cash advances, purchases that
cardmembers have made with their Discover Cards and
balances transferred by cardmembers to their
Discover Card accounts from other credit card
accounts. They also included finance charge
receivables -- amounts owed by cardmembers
representing finance charges
S-9
<PAGE> 12
accrued on unpaid principal balances, late fees and
other service charges. As cardmembers make
additional charges and incur additional finance
charges and other fees in accounts designated for
the trust, Greenwood also transfers these
additional receivables to the trust on an ongoing
basis. Greenwood also may designate additional
accounts as trust accounts, and transfer
receivables in those accounts to the trust. Even
though Greenwood transfers receivables to the
trust, Greenwood continues to own and service the
related accounts.
The trust's assets include, or may include, the
following:
- credit card receivables;
- cash payments by cardmembers;
- cash recoveries on receivables in the trust that
have been charged off as uncollectible and
proceeds from the trust's sales of those
receivables;
- investment income on funds on deposit in investor
accounts, if any;
- interests in other credit card receivables pools;
- credit support or enhancement for each series;
- additional funds that Greenwood may elect to add
to the trust;
- currency swaps for series denominated in foreign
currencies; and
- interest rate protection agreements.
The trust has issued many series of certificates,
and Greenwood expects that the trust will issue
additional series. The pooling and servicing
agreement that created the trust and applies to all
series permits the trust to issue additional series
without the consent of certificateholders of any
outstanding series. Greenwood and the trust will
not request your consent to issue new series.
The Class A Certificates and the Class B
Certificates represent an interest in the aggregate
pool of receivables in the trust, not an interest
in any specific receivable or subset of the
receivables. That interest reflects your right to
receive a portion of the collections paid on the
receivables, your share of receivables that
Greenwood has charged off as uncollectible, your
share of investment income on funds on deposit in
investor accounts, if any, and your right to the
benefit of the credit enhancement for this series.
Your right to receive any of these amounts is
limited to the amount of interest accrued on your
certificates and the principal amount of your
certificates. Greenwood and the
S-10
<PAGE> 13
investors in other series currently outstanding own
the remaining interest in the trust.
- Greenwood's interest varies based on the size of
the interests of the trust's investors and the
total amount of the trust's receivables.
- Assuming the aggregate investor interest in
receivables stays the same, if in any month the
principal collections and charge-offs exceed the
amount of new principal receivables created,
Greenwood's interest in the trust declines.
- Assuming the aggregate investor interest in
receivables stays the same, if in any month the
principal collections and charge-offs are less
than the amount of new principal receivables
created, Greenwood's interest in the trust
increases.
CURRENTLY OUTSTANDING
SERIES..................... Each series belongs to a group of series for
purposes of reallocating collections among series.
The trust currently has outstanding
series of certificates in Group One. Annex B to
this prospectus supplement summarizes the terms of
these series.
NO SUBORDINATION OF
SERIES..................... The collections for this series will not be
available to other series in any month until the
trust has made all payments, deposits and
reimbursements for this series.
THE RECEIVABLES............ The receivables in the trust as of
totaled $ .
RATINGS.................... The trust will only issue the certificates if
Standard & Poor's has rated the Class A
Certificates "AAA" and the Class B Certificates at
least "A" and Moody's Investors Service, Inc. has
rated the Class A Certificates "Aaa" and has rated
the Class B Certificates at least "A2." These
ratings reflect the rating agencies' views as to
how likely it is that the trust will pay interest
on a timely basis and will ultimately repay
principal.
ERISA CONSIDERATIONS....... In light of an exemption obtained by Greenwood from
the U.S. Department of Labor, Greenwood believes
that many employee benefit plans subject to ERISA
may acquire Class A Certificates. The Class B
Certificates will not meet the requirements of the
exemption, nor will they be considered "publicly
offered securities" and therefore employee benefit
plans subject to ERISA may not acquire Class B
Certificates. See "ERISA Considerations" in the
prospectus. Advisors to employee benefit plans
should consult their own counsel.
LISTING.................... To facilitate trading in non-U.S. markets,
Greenwood expects to list the certificates on the
Luxembourg Stock Exchange, in accordance with the
rules of the Luxembourg Stock Exchange.
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CLEARANCE AND SETTLEMENT... You may elect to hold the certificates only through
the following clearing organizations:
- The Depository Trust Company, or DTC, in the
United States;
- Clearstream Banking, in Europe; and
- Euroclear, in Europe.
These organizations permit transfers of securities
or interests in securities by computer entries
instead of paper transfers. Certificates will not
be available in paper form. You may transfer your
interests within DTC, Clearstream Banking or
Euroclear in accordance with the usual rules and
operating procedures of the relevant system.
Persons holding directly or indirectly through DTC,
on the one hand, and counterparties holding
directly or indirectly through Clearstream Banking
or Euroclear, on the other hand, may effect
cross-market transfers through the relevant
depositaries of Clearstream Banking and Euroclear.
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<PAGE> 15
RISK FACTORS
INVESTOR RISK OF LOSS
You will only receive payments of interest and principal on your
certificates to the extent that the trust has funds available to make these
payments. The trust will allocate charged-off receivables to your certificates
each month, and will reimburse you for those charge-offs, only to the extent
that the trust has funds available to make those reimbursements. You should
review the cash flow provisions described in "The Certificates -- Cash Flows" to
understand the priority in which the trust allocates its assets to pay interest
and principal and to reimburse charge-offs on this series and other series. To
the extent the trust cannot fully reimburse your charge-offs, the aggregate
amount of principal you ultimately receive will be less than the face amount of
your certificates, and the amount of collections allocated to you and interest
paid to you in any month may also be reduced.
LIMITED CREDIT ENHANCEMENT
The credit enhancement for the Class A Certificates is limited by the
available subordinated amount. The credit enhancement for the Class B
Certificates is limited by the amount on deposit in the cash collateral account
and the maximum amount that can be on deposit in that account. If you own a
certificate and all of your credit enhancement has been used, you will bear
directly the credit and other risks associated with your investment in the
trust.
SUBORDINATION OF CLASS B CERTIFICATES
The Class B Certificates will be subordinated to the Class A Certificates.
The trust will generally pay interest on the Class A Certificates before it pays
interest on the Class B Certificates, and will not pay Class B principal until
it has paid Class A principal in full. The Class B investors will generally
absorb losses relating to charged-off receivables and shortfalls in finance
charge collections before the Class A investors. If receivables had to be sold,
the net proceeds of that sale available to pay principal on the certificates
would be paid first to the Class A investors before any remaining net proceeds
would be available for payments due to the Class B investors. Accordingly, if
you own a Class B Certificate, you are less likely to receive all payments of
interest and principal than an investor in the Class A Certificates. For more
information about the subordination provisions, see "The Certificates -- Cash
Flows" and "Annex A -- Cash Flows."
RATING OF THE CERTIFICATES
Ratings assigned by a rating agency to the certificates of this series are
not a recommendation for you to purchase, hold or sell the certificates. The
ratings do not reflect market price or whether the certificates are suitable for
your investment. The ratings address timely payment of interest and ultimate
payment of principal, but do not address timely payment of principal. The
ratings may not remain in effect and the rating agencies may lower or entirely
withdraw their ratings at any time if they determine that a reduction or
withdrawal of their ratings is appropriate.
DETERIORATIONS IN TRUST PERFORMANCE OR RECEIVABLES BALANCE COULD CAUSE AN
AMORTIZATION EVENT
If the trust's finance charge collections for your series and your group
are less than the interest expense, servicing fees and charge-offs for your
series and your group, averaged over a
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<PAGE> 16
three-month period, an amortization event for your series will occur. If the
level of receivables in the trust declines because cardmembers generate fewer
new receivables on their accounts, and Greenwood cannot add enough receivables
from other accounts or interests in other pools of credit card receivables to
maintain the required minimum level of receivables in the trust, an amortization
event will also occur. The following five factors could cause trust performance
to deteriorate or could cause the receivables balance in the trust to decline:
(1) GREENWOOD MAY CHANGE TERMS OF THE ACCOUNTS
Greenwood transfers receivables, but not accounts, to the trust. As owner
of any account, Greenwood has the right to determine the rate for periodic
finance charges, to alter the account's minimum required monthly payment, to
change the account's credit limit and to change various other account terms. If
periodic finance charges or other fees decrease, the trust's finance charge
collections and the effective yield on the receivables could also decrease. In
addition, if Greenwood increases credit limits on accounts, charged-off amounts
might increase and the levels of receivables in the trust and in the Discover
Card portfolio might decrease. The recently introduced Discover Platinum Card
offers cardmembers credit limits that may be substantially higher, and imposes
periodic finance charges that in some cases are lower, than those available with
a classic Discover Card. Although Greenwood anticipates that the introduction of
the Discover Platinum Card will have a positive impact on the number of Discover
Card accounts, the size of revolving balances and cardmember loyalty, Greenwood
cannot assure you that the higher credit limits and lower periodic finance
charges of the Discover Platinum Card will not have the effects set forth above
in this paragraph.
Except as described in this paragraph, the pooling and servicing agreement
does not restrict Greenwood's ability to change the terms of accounts or
receivables. Greenwood may decide, because of changes in the market place or
applicable laws, or as a prudent business practice, to change the terms of some
or all of its Discover Card accounts. Greenwood may not change the terms
governing an account designated for the trust unless it changes the terms of its
other accounts of the same general type and as to which the cardmembers reside
in a particular affected state or similar jurisdiction. Changes to account terms
may not, however, affect the accounts designated for the trust to the same
degree as they affect Greenwood's other accounts. Sellers other than Greenwood
will be able to change accounts terms in the same circumstances and subject to
the same limitations as Greenwood.
(2) INTEREST ON THE RECEIVABLES AND INTEREST ON THE CERTIFICATES ACCRUE AT
DIFFERENT RATES
Some of the receivables in the trust will accrue periodic finance charges
at the prevailing prime rate plus a margin, while the certificates of this
series accrue interest at [fixed rates] [rates that float against LIBOR].
[Changes in LIBOR might not be reflected in the prime rate, resulting in a
higher or lower spread, or difference, between the amount of finance charge
collections on the receivables and the amounts of interest payable on your
certificates and other amounts required to be funded out of finance charge
collections.]
[Similarly, some of the receivables in the trust will accrue periodic
finance charges at fixed rates, while the certificates of this series accrue
interest at rates that float against LIBOR. If LIBOR increases, the interest
payments on your certificates and other amounts required to be funded out of
finance charge collections will increase, while the amount of finance charge
collections on these receivables will remain the same unless and until Greenwood
resets the fixed rates on the accounts.]
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<PAGE> 17
(3) PAYMENTS, GENERATION OF RECEIVABLES AND MATURITY
Cardmembers may pay the receivables at any time and in any pattern, and
they may decide not to create additional receivables in their accounts.
Cardmembers' credit use and payment patterns may change because of many social,
legal and economic factors, including the rate of inflation and relative
interest rates offered for various types of loans, and legislative change.
Greenwood's ability to compete in the credit card industry at any point in time
will affect how cardmembers pay existing receivables and how they generate new
receivables that Greenwood can convey to the trust. In addition, if convenience
use increases -- more cardmembers pay their receivables within the grace period
to avoid all finance charges on purchases of merchandise and services -- then
the effective yield on the receivables in the trust might decrease. Conversely,
the terms governing the accounts require only a minimum monthly payment, and if
cardmembers repay a smaller percentage of their balances than they currently
repay each month, the trust may not be able to make scheduled principal payments
to you on a timely basis. Heightened levels of consumer debt, large numbers of
personal bankruptcies and a weakened national economy may cause increases in
delinquencies in, and charge-offs of, the receivables in the trust. Any delay in
the trust's payment of principal with respect to any series will extend the
period during which charged-off receivables may be allocated to your
certificates.
(4) COMPETITION IN THE CREDIT CARD INDUSTRY
The credit card industry in which the Discover Card competes is highly
competitive. Competition in the credit card industry affects Greenwood's ability
to obtain applicants for Discover Card accounts, to encourage cardmembers to use
accounts and, through its arrangements with Discover Financial Services, Inc.,
to persuade service establishments to accept the Discover Card. If Greenwood
does not compete successfully in these areas, the level of receivables in the
trust and in the Discover Card portfolio may decline.
The competition in the credit card industry focuses on features and
financial incentives of credit cards such as annual fees, finance charges,
rebates and other enhancement features. The market includes:
- bank-issued credit cards, including co-branded cards issued by banks in
cooperation with industrial, retail or other companies, and affinity
cards issued by banks in cooperation with organizations such as
universities and professional groups, and
- charge cards issued by travel and entertainment companies.
Many bank credit card issuers have instituted balance transfer programs that
offer a favorable annual percentage rate or other financial incentives for a
specified length of time on any portion of account balances transferred from
outstanding account balances maintained on another credit card. The vast
majority of the bank-issued credit cards bear the Visa or MasterCard service
mark and are issued by the many banks that participate in one or both of the
national bank card networks operating by Visa U.S.A., Inc. and MasterCard
International Incorporated. The Visa and MasterCard associations have been in
existence for approximately 30 years. Cards bearing their service marks have
worldwide acceptance by merchants of goods and services and recognition by
consumers and the general public. Co-branded credit cards, which offer the
cardholder certain benefits relating to the industrial, retail or other business
of the bank's co-branding partner, such as credits towards purchases of airline
tickets or rebates for the purchase of an automobile, and affinity cards, which
give cardholders the opportunity to support and affiliate with the affinity
partner's organization and often provide other benefits, both currently
represent a large segment of the bank-issued credit card market. American
Express Company,
S-15
<PAGE> 18
which has been issuing cards since 1958, issues the majority of travel and
entertainment cards. Travel and entertainment cards differ in many cases from
bank cards in that they generally have no pre-established credit limits and have
limited provisions for repayment in installments. The Discover Card, which
Greenwood introduced nationwide in 1986, competes with general purpose credit
cards issued by other banks and with travel and entertainment cards. In late
December 1998, Greenwood introduced the Discover Platinum Card to compete with
gold, platinum and other premium credit, travel and entertainment cards of other
issuers.
(5) CONSUMER PROTECTION LAWS AND REGULATIONS
Greenwood must comply with federal and state consumer protection laws and
regulations in connection with making and enforcing consumer loans such as
credit card loans, including the loans in the trust. These laws and regulations,
including any changes to these laws and regulations, could adversely affect
Greenwood's ability to collect on the receivables in the trust or to maintain
previous levels of monthly periodic finance charges. If Greenwood does not
comply with these laws and regulations, it may not be able to collect the
receivables. These laws and regulations will also apply to any other servicer of
the receivables, with the same possible effects. Greenwood has agreed that, if:
- it has not complied in all material respects with the legal requirements
that applied to its creation of a receivable included in the trust,
- it does not cure its noncompliance in a specified period of time, and
- the noncompliance has a material adverse effect on the trust's interest
in all of the receivables in the trust,
Greenwood will purchase all receivables in the affected accounts. Greenwood does
not anticipate that the trustee will examine the receivables or the records
relating to the receivables to determine whether they have legal defects or for
any other purpose.
EFFECTS OF AN AMORTIZATION EVENT
If an amortization event occurs with respect to this series:
- you may receive payments of principal earlier than you expected;
- you may not receive all principal payments by the expected maturity date
for your certificates;
- we cannot predict how much principal the trust will pay you in any month
or how long it will take to pay your invested amount in full; and
- the risk that you will not receive full interest payments or that you
will not receive an aggregate amount of principal equal to the face
amount of your certificates will increase.
LIMITED ABILITY TO RESELL CERTIFICATES
We anticipate that the underwriters will make a market in the certificates.
A secondary market, however, may not develop. If a secondary market does
develop, it might not continue until your certificates mature, or it might not
be sufficiently liquid to allow you to resell any of your certificates.
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<PAGE> 19
SECURITY INTERESTS AND INSOLVENCY RELATED MATTERS
The trust's interest in the receivables may be impaired if:
- the transfer of the receivables by Greenwood to the trust is neither a
sale of the receivables to the trust nor a grant to the trust of a
security interest in the receivables; or
- the transfer of the receivables to the trust is a grant of a security
interest, but the trustee does not have a perfected security interest in
the receivables pursuant to the Uniform Commercial Code in effect in
Delaware.
Greenwood has taken certain actions to perfect the trust's interest in the
receivables, including filing notices of the trust's interest with the Secretary
of State of Delaware. In general, a security interest in receivables is
perfected against Greenwood if it can be enforced not only against Greenwood but
also against creditors of Greenwood that might want to claim those receivables.
Typically, a security interest in receivables is perfected by notice such as
through a filing. Unless the trustee files continuation statements within the
time specified in the UCC to continue the perfection of the security interest of
the trust in the receivables, the perfection of the security interest will
lapse. More than one person can have a perfected security interest in the same
receivables, and the person with the higher priority, which is determined by
statute, will have the first claim to the property. Because priority is
determined by statute, a tax or statutory lien on Greenwood's property may have
priority over the trust's interest in the receivables.
Greenwood, as servicer, will receive cash collections each month for the
account of the trust and may use those cash collections until it distributes
them on the distribution date in the following month. The trust may not have a
perfected security interest in any collections that Greenwood has not deposited
in the collections account for the trust.
Greenwood may add to the trust receivables in credit accounts other than
accounts originated by Greenwood, in which case the trust may have additional
sellers and servicers. The trustee must take certain actions to perfect the
trust's interest in these receivables as well, and they will be subject to the
same risks as the Greenwood receivables, namely that the perfection of the
security interest will lapse, or that a tax or statutory lien on the seller's
property may have priority over the trust's interest. Similarly, the servicers
of these receivables may use the cash collections they receive each month in the
same manner and subject to the same conditions as Greenwood. The trust may not
have a perfected security interest in any collections that the servicers have
not deposited in the collections account for the trust.
LITIGATION
Greenwood is involved in various legal proceedings in the ordinary course
of its business. Greenwood does not believe that any of these proceedings will
have a material adverse effect on Greenwood's financial condition or on the
receivables in the trust. Greenwood cannot assure you, however, about the effect
of these proceedings.
LEGISLATION
The Competitive Equality Banking Act of 1987, or CEBA, as amended by the
Gramm-Leach-Bliley Financial Modernization Act of 1999, limits the ability of
nonbanking companies, such as Morgan Stanley Dean Witter & Co. and NOVUS Credit
Services Inc., to own banks. However, CEBA permits any nonbanking company that
owned a bank on March 5, 1987 to retain control of the bank. MSDW and NOVUS are
permitted to retain control of Greenwood under CEBA, as amended. CEBA, as
amended, provides that if MSDW, NOVUS or
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<PAGE> 20
Greenwood fails to comply with certain statutory restrictions, MSDW and NOVUS
will be required to divest control of Greenwood or to become a bank holding
company subject to regulation by the Federal Reserve Board. MSDW and NOVUS may
also avoid divestiture of Greenwood or becoming a bank holding company by curing
the CEBA violation within 180 days of notice from the Federal Reserve Board of
the violation. Greenwood believes, however, that in light of the programs it has
in place, the limitations of CEBA will not have a material impact on Greenwood's
ability to service, or maintain the level of, the receivables in the trust. In
addition, future federal or state legislation, regulation or interpretation of
federal or state legislation or regulation could adversely affect the business
of Greenwood or the relationship of MSDW or NOVUS with Greenwood.
ISSUANCE OF ADDITIONAL SERIES
The trust may issue additional series of certificates without your consent,
and Greenwood and the trust will not request your consent to issue new series.
The trustee will authenticate and deliver a new series of certificates only if
Standard & Poor's and Moody's have confirmed that they will not reduce or
withdraw the rating of any class of any series outstanding at the time of the
new issuance because of the new issuance. If the trust does issue one or more
additional series, those series may impact the timing and amount of payments you
receive on this series.
ADDITION OF ACCOUNTS
Greenwood may designate additional accounts, the receivables in which will
be transferred to the trust. It may also designate interests in other pools of
credit card receivables for inclusion in the trust. The additional accounts may
be Discover Card accounts originated by Greenwood or an affiliate of Greenwood,
and they may be newly originated accounts. If the accounts are not originated by
Greenwood, they may be serviced by their originator, and the risks discussed
above under the headings "-- Security Interests and Insolvency Related Matters"
and "-- Consumer Protection Laws and Regulations" will apply to the new
originator and servicer to the same extent that they apply to Greenwood. Because
any additional accounts or accounts underlying interests in other pools of
receivables may not be accounts of the same type as the accounts already
included in the trust, the additional accounts:
- may contain a higher proportion of newly originated accounts,
- may include accounts originated using criteria different from the
criteria Greenwood used in the accounts already in the trust,
- may not be of the same credit quality as the accounts already included in
the trust,
- may have different terms than the accounts already included in the trust,
including lower periodic finance charges, which may reduce the average
yield on the receivables in the trust, and
- may include accounts for which the cardmembers pay receivables at a
slower rate, which could delay principal payments to you.
HISTORICAL INFORMATION
All of the information describing the composition and historical
performance of the Discover Card accounts in this prospectus supplement reflects
the composition and historical performance of the Discover Card portfolio and
not that of the trust accounts, except as presented under "The
Accounts -- Composition of the Accounts" and where otherwise noted. The
historical perform-
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<PAGE> 21
ance of the Discover Card portfolio may not be representative of its future
performance in all material respects.
The remainder of this prospectus supplement uses some capitalized terms. We
have defined these terms in a glossary beginning on page S- .
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<PAGE> 22
THE DISCOVER CARD BUSINESS
GENERAL
Greenwood has conveyed Receivables to the trust pursuant to the Pooling and
Servicing Agreement. These Receivables 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 before the date of this prospectus
supplement include only receivables arising under accounts in the Discover Card
portfolio, although at a later date Greenwood may add other receivables to the
trust that do not arise under accounts in the Discover Card portfolio. See "The
Trust -- Addition of Accounts" in the prospectus. In this prospectus supplement,
we present information about both (1) the Discover Card portfolio generally, in
which case we refer to "receivables" and the "accounts" in which they arise, and
(2) the pool of Receivables that Greenwood has conveyed to the trust, in which
case we refer to "Receivables" and the "Accounts" in which they arise. When we
refer to the Discover Card in this section entitled "The Discover Card
Business," we are referring to the classic Discover Card and the Discover
Platinum Card, both of which are issued by Greenwood. In addition, except where
we specifically refer to classic Discover Card accounts or Discover Platinum
Card accounts, references to Discover Card accounts include both of these types
of accounts. 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 has also issued, and
may from time to time introduce, additional general purpose credit cards.
Greenwood first issued the classic Discover Card in regional pilot markets
in September 1985, and began distributing the Discover Card nationally in March
1986. In early January 1999, Greenwood began issuing the Discover Platinum Card,
a Discover Card with additional features and benefits. The Discover Card gives
cardmembers access to a revolving line of credit. Each cardmember can use his or
her Discover Card to purchase merchandise and services from participating
service establishments. Holders of the Discover Card can also obtain cash
advances at automated teller machines and at certain other locations throughout
the United States. Cardmembers can also obtain cash advances by writing checks
against their accounts. The number of service establishments that accept the
Discover Card has continued to increase. There are currently over million
merchants and cash advance locations that accept the Discover Card. As of
, there were million Discover Card accounts with million
cardmembers.
Cardmembers are generally subject to account terms and conditions that are
uniform from state to state. See "The Accounts -- Billing and Payments." In all
cases, the cardmember agreement governing the terms and conditions of the
account permits Greenwood to change the credit terms, including the rate of the
periodic finance charge and the fees imposed on accounts, upon 15 days' prior
notice to cardmembers. Greenwood assigns each Discover Card account a credit
limit when it opens the account. After the account is opened, Greenwood may
increase or decrease the credit limit on the account, at Greenwood's discretion,
at any time. The credit limits on classic Discover Card accounts generally range
from $1,000 to $10,000, although on a case-by-case basis Greenwood will consider
authorizing higher or lower limits. The credit limits on Discover Platinum Card
accounts are a minimum of $5,000 and can range up to $100,000. Currently,
Greenwood will not grant cash advances that exceed, in the aggregate, an amount
equal to 50% of the cardmember's credit limit.
Greenwood offers various features and services with the Discover Card
accounts. One feature 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. Greenwood remits this amount to cardmembers in
the form of a check or a credit to the cardmember's account, or by giving the
cardmember an option to exchange the Cashback Bonus amount for merchandise. No
such amounts will be paid from the property of the trust. Greenwood offers
cardmembers holding the Discover Platinum Card additional features and services.
These include the ability of cardmembers to double their Cashback Bonus if the
bonus is redeemed for merchandise or services with selected merchants, and to
obtain car rental insurance coverage and higher travel accident insurance
coverage. We also describe certain other features of the Discover Platinum Card
elsewhere in "The Discover Card Business" section and in "The Accounts" section
below.
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<PAGE> 23
Greenwood applies variable rates of finance charges to account balances
arising from purchases of merchandise and services in some Discover Card
accounts, which rates are based on the prevailing prime rate plus a margin, and
applies fixed rates to account balances arising from the purchase of merchandise
and services in the remainder of the Discover Card accounts. Greenwood generally
applies fixed rates to account balances arising from cash advances for all
Discover Card accounts. 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, and to increase accounts,
balances and cardmember loyalty, Greenwood from time to time tests and
implements new offers, promotions and features of the Discover Card.
Greenwood, either through processing arrangements with its affiliate,
Discover Financial Services, Inc., or DFS, 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 soliciting new accounts, processing applications, issuing new
accounts, authorizing and processing transactions, billing cardmembers,
processing payments, providing cardmember service and collecting delinquent
accounts. Greenwood and DFS maintain multiple operations centers across the
country for servicing cardmembers. DFS also maintains an additional operations
center to process accounts that Greenwood has charged off as uncollectible.
DFS has made recent enhancements in its customer services. Cardmembers may
register their account on-line with the Discover Card Account Center which
offers a menu of free e-mail notifications or reminders to regularly inform
cardmembers about the status of their accounts through the Discover Inter@ctive
feature. Types of notifications include reminders that a cardmember's credit
limit is being approached or that a minimum payment is due. In addition,
cardmembers may view detailed account information on-line, such as recent
transactions and account payments. Cardmembers may pay their Discover Card bills
on-line via the SmartCheck(SM) payment option at no cost and receive exclusive
discounts and special Cashback Bonus(R) awards by shopping on-line at the
Internet ShopCenter(SM). Cardmembers may also use the Discover Desk$hop(SM)
virtual credit card to simplify shopping on-line and to access the Discover Card
Account Center.
DFS has established arrangements with service establishments to accept the
Discover Card for cash advances and as the means of payment for merchandise and
services. Greenwood contracts with DFS to have cards issued by Greenwood,
including the Discover Card, accepted at those establishments. Greenwood's
ability to generate new receivables requires locations where cardmembers can use
their Discover Cards. DFS employs a national sales and service force to maintain
and increase the size of its service establishment base. DFS also maintains
additional operations centers that 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, as well as Internet merchandise and service
providers.
Greenwood may change its credit granting, servicing and charge-off policies
and collection practices over time in accordance with Greenwood's business
judgment and applicable law.
CREDIT-GRANTING PROCEDURES
Greenwood solicits accounts for the Discover Card portfolio by various
techniques, including (a) by "preselected" direct mail or telemarketing, (b) by
"take-one" applications distributed in many service establishments that accept
the Discover Card and (c) with various other programs targeting specific
segments of the population.
Greenwood also uses general broadcast and print media advertising to
support these solicitations. All accounts undergo credit review to establish
that the cardmembers meet standards of stability and ability and willingness to
pay. Greenwood implements the same credit review process for applications to
open
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both classic Discover Card accounts and Discover Platinum Card accounts.
Potential applicants who are sent preselected solicitations have met certain
credit criteria relating to their previous payment patterns and longevity of
account relationships with other credit grantors. Since September 1987,
Greenwood has prescreened all lists through credit bureaus before mailing.
Prescreening 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 stability and the willingness
and ability of these persons to repay their obligations. The credit bureaus
return to Greenwood only the names of those persons meeting these criteria.
Greenwood also subsequently screens the applicants who respond to these
preselected solicitations when it receives their completed applications, to
ensure that these individuals continue to meet selection and credit criteria.
Greenwood evaluates applications that are not preselected by using a
credit-scoring system, which is a statistical evaluation model that assigns
point values to credit information regarding applicants. The credit-scoring
system used by Greenwood is based on information reported by cardmembers on
their applications and by the credit bureaus. Greenwood uses information from
both of these sources to establish credit-worthiness. Certain applications not
approved under the credit-scoring system are reviewed by credit analysts. If a
credit analyst recommends that any of these applications be approved, senior
bank review analysts in Greenwood's main office in New Castle, Delaware, review
and may approve them.
As the owner of the Discover Card accounts, Greenwood has the right to
change its credit-scoring criteria and credit-worthiness criteria. Greenwood
regularly reviews and modifies its application procedures and its credit-scoring
system to reflect Greenwood's actual credit experience with Discover Card
account applicants and cardmembers as that historical information becomes
available. Greenwood believes that refinements of these procedures and system
since the inception of the Discover Card program have helped its analysis and
management of credit losses. However, Greenwood cannot assure you that these
refinements will prevent 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 levels of the
receivables in the Discover Card portfolio and the Receivables in the trust. If
there is a decrease in the level of Receivables in the trust, and if Greenwood
does not add additional accounts, or interests in other pools of credit card
receivables, to the trust, an Amortization Event could result, causing the trust
to begin to repay the principal of this series sooner than expected. An increase
in the amount of Receivables charged off as uncollectible, without an offsetting
increase in Finance Charge Receivables, could also cause an Amortization Event
and cause the trust to begin to repay the principal of this series sooner than
expected.
S-22
<PAGE> 25
COLLECTION EFFORTS AND CHARGED-OFF ACCOUNTS
Efforts to collect past-due Discover Card accounts receivable are made
primarily by collections personnel of DFS or Greenwood. Under current practice,
Greenwood includes a request for payment of past-due amounts on the monthly
billing statements of all accounts with these amounts. Cardmembers owing
past-due amounts also receive a written notice of late fee charges on their
monthly statements, and then receive an additional request for payment 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. If 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. Greenwood's current policy 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 that time. In certain cases, such as bankruptcy, an
uncollectible balance may be charged off earlier. In general, after Greenwood
has charged off an account, collections personnel of DFS or Greenwood attempt to
collect all or a portion of the charged-off account for a period of
approximately four months. If those attempts do not succeed, Greenwood generally
places the charged-off account 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 to attach the cardmember's
property or bank accounts or to garnish the cardmember's wages. Greenwood and
the trust may also sell their respective interests in charged-off accounts and
the related receivables to third parties, either before or after collection
efforts have been attempted. In addition, at times a limited number of
charged-off accounts may, subject to Rating Agency consent, be removed from the
trust. Proceeds from sales of any of these removed accounts and the related
receivables will not be included in the assets of the trust.
Under the terms of the Pooling and Servicing Agreement, the trust's assets
include any recoveries received on charged-off Accounts, including the proceeds
of the trust's sales of any charged-off receivables. These recoveries are
treated as Finance Charge Collections. The level of charged-off Accounts in the
trust, and accordingly, the level of recoveries on charged-off Accounts in the
trust, were initially lower than the levels of charged-off Accounts and
recoveries for the Discover Card portfolio as a whole, because Greenwood did not
select charged-off accounts to include in the trust when it was formed or for
account additions. The levels of charged-off Accounts and recoveries, each as a
percentage of the Receivables in the trust, have increased over time to
approximate more closely, and during periods of high portfolio growth to exceed,
the levels of charged-off Accounts and recoveries in the Discover Card portfolio
as a whole. Greenwood cannot assure you that these levels for the trust will
consistently approximate these levels for the Discover Card portfolio as a
whole. Any addition of accounts to the trust will temporarily reduce both the
levels of charged-off Accounts and recoveries, each as a percentage of the
Receivables in the trust, because no added accounts will be charged-off accounts
at the time they are added to the trust.
THE ACCOUNTS
GENERAL
Greenwood selected the Accounts in a random manner intended to produce a
representative sample of all Discover Card accounts not previously segregated
from the Discover Card portfolio. 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
selection process. See "The Accounts -- Effects of the Selection Process."
The Receivables in the Accounts as of totaled $ . The
Accounts had an average balance of $ and an average credit limit of $ as
of . For additional information on the composition of the Accounts,
see "-- Composition of the Accounts."
S-23
<PAGE> 26
BILLING AND PAYMENTS
Discover Card accounts generally have the same billing and payment
structure. Greenwood sends a monthly billing statement to each cardmember who
has an outstanding debit or credit balance of one dollar or more. Discover Card
accounts are grouped into multiple billing cycles for operational purposes. Each
billing cycle has a separate billing date, on which Greenwood processes and
bills to cardmembers all activity that occurred in the related accounts during
the period of approximately 28 to 34 days that ends on that date. The Accounts
include accounts in all billing cycles.
Each cardmember with an outstanding debit balance in his or her Discover
Card account must generally make a minimum payment equal to the greater of $10
or 1/50th of the new balance on the account at the end of the billing cycle for
the account, rounded to the next higher whole dollar amount. If the cardmember's
new balance is less than $10, the minimum payment will be the new balance. If a
cardmember exceeds his or her credit limit, Greenwood may require the cardmember
to immediately pay the amount that is above the credit limit. 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. 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/or
principal due. Although Greenwood does not expect these practices to have a
material adverse effect on investors, collections may be reduced during any
period in which Greenwood offers cardmembers the opportunity to skip the minimum
monthly payment or to extend or change payment schedules.
Greenwood applies various rates of finance charges to account balances, as
described under "The Discover Card Business -- General." Neither cash advances
nor balance transfers are subject to a grace period. Periodic finance charges on
purchases 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 connection with balance
transfers and for other promotional purposes, certain account balances may
accrue periodic finance charges at lower fixed rates for varying periods of
time.
In addition to periodic finance charges, Greenwood may impose other charges
and fees on Discover Card accounts. Greenwood currently charges a cash advance
transaction fee equal to 3.0% of each new cash advance, with a minimum fee of
$5.00 per transaction. Greenwood also currently charges a $29.00 late fee each
time a cardmember has not made a payment by the required due date, a $29.00 fee
for balances exceeding a cardmember's credit limit as of the close of the
cardmember's monthly billing cycle, a $29.00 fee for any payment check returned
unpaid and a $29.00 fee for Discover Card cash advance, balance transfer or
other promotional checks that are returned by Greenwood due to insufficient
credit availability. See "Risk Factors -- Consumer Protection Laws and
Regulations," "-- Payments, Generation of Receivables and Maturity" and
"-- Greenwood May Change Terms of the Accounts."
The yield on the Accounts in the trust -- which consists of the finance
charges and fees -- depends on various factors, including changes in interest
rates over time, 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 its cardmember agreement. Reductions in the yield
could, if large enough, cause the commencement of the Amortization Period or
result in insufficient collections to pay interest and principal to investors.
Greenwood cannot assure you about any of these effects. See "Risk
Factors -- Deteriorations in This Performance or Receivables Balance Could Cause
an Amortization Event," "-- Effect of an Amortization Event" and "-- Investor
Risk of Loss."
S-24
<PAGE> 27
EFFECTS OF THE SELECTION PROCESS
Greenwood selected the Accounts from accounts serviced at all Greenwood and
DFS operations centers and from accounts of residents of the 50 states, the
District of Columbia and the United States' territories and possessions. 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 selection process. Greenwood
cannot assure you that the use and payment performance of cardmembers on the
Accounts will be representative of Discover cardmembers as a whole in all
material respects.
COMPOSITION OF THE ACCOUNTS
We have set forth information below about the Accounts that are part of the
trust. We provide additional information about accounts in the Discover Card
portfolio as a whole under "Composition and Historical Performance of the
Discover Card Portfolio."
Geographic Distribution. As of , the following five
states had the largest Receivables balances:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL RECEIVABLES
STATE BALANCE IN THE ACCOUNTS
- ----- -------------------------------
<S> <C>
California................................................. %
Texas...................................................... %
New York................................................... %
Florida.................................................... %
Illinois................................................... %
</TABLE>
Credit Limit Information. As of , the Accounts had the
following credit limits:
<TABLE>
<CAPTION>
PERCENTAGE
RECEIVABLES OF TOTAL
OUTSTANDING RECEIVABLES
CREDIT LIMIT (000'S) OUTSTANDING
- ------------ ----------- -----------
<S> <C> <C>
Less than or equal to $1,000.00............................. $ %
$1,000.01 to $2,000.00...................................... $ %
$2,000.01 to $3,000.00...................................... $ %
Over $3,000.00.............................................. $ %
-------- ------
Total............................................. $ 100.0%
======== ======
</TABLE>
Seasoning. As of , % of the Accounts were at least
24 months old. The ages of Accounts as of were distributed as
follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
AGE OF ACCOUNTS OF ACCOUNTS OF BALANCES
- --------------- ----------- -----------
<S> <C> <C>
Less than 12 Months......................................... % %
12 to 23 Months............................................. % %
24 to 35 Months............................................. % %
36 Months and Greater....................................... % %
------ ------
100.0% 100.0%
====== ======
</TABLE>
S-25
<PAGE> 28
Summary Current Delinquency Information. As of , the
Accounts had the following delinquency statuses:
<TABLE>
<CAPTION>
AGGREGATE
BALANCES PERCENTAGE
PAYMENT STATUS (000'S) OF BALANCES
- -------------- --------- -----------
<S> <C> <C>
Current..................................................... $ %
1 to 29 Days................................................ $ %
30 to 59 Days............................................... $ %
60 to 89 Days............................................... $ %
90 to 119 Days.............................................. $ %
120 to 149 Days............................................. $ %
150 to 179 Days............................................. $ %
-------- ------
$ 100.0%
======== ======
</TABLE>
S-26
<PAGE> 29
COMPOSITION AND HISTORICAL PERFORMANCE
OF THE DISCOVER CARD PORTFOLIO
GENERAL
Except to the extent we specifically identify information as relating to
the Accounts in the trust, 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 as a whole, and not only that of the Accounts in the trust. Greenwood
opened a limited number of Discover Card accounts using credit scoring criteria
materially different from the credit scoring criteria generally used for
Discover Card accounts. These accounts were historically segregated from the
rest of the Discover Card portfolio. Because these accounts now perform
similarly to other Discover Card accounts, they are no longer segregated and, as
of December 1, 1999, are reflected in the information contained in this
prospectus supplement. 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 believes that the Accounts in the
trust are representative of the Discover Card portfolio in all material
respects. Greenwood cannot assure you, however, that the Accounts have performed
or will perform similarly to the Discover Card portfolio. Greenwood also cannot
assure you that the historical performance of the Discover Card portfolio will
be representative of its performance in the future. See "The Accounts -- Billing
and Payments," "Risk Factors -- Basis Risk" and "Risk Factors -- Payments,
Generation of Receivables and Maturity."
COMPOSITION OF THE DISCOVER CARD PORTFOLIO
Geographic Distribution. The Discover Card portfolio is not highly
concentrated geographically. As of , the following five states had the
largest receivables balances:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL RECEIVABLES
BALANCE OF DISCOVER CARD PORTFOLIO
STATE AS OF
- ----- ----------------------------------
<S> <C>
California............................................... %
Texas.................................................... %
New York................................................. %
Florida.................................................. %
Illinois................................................. %
</TABLE>
No other state accounted for more than 5% of the total receivables balance of
the Discover Card portfolio as of .
Credit Limit Information. As of , the accounts in the Discover
Card portfolio had the following credit limits:
<TABLE>
<CAPTION>
PERCENTAGE
RECEIVABLES OF TOTAL
OUTSTANDING RECEIVABLES
CREDIT LIMIT (000'S) OUTSTANDING
- ------------ ----------- -----------
<S> <C> <C>
Less than or equal to $1,000.00............................. $ %
$1,000.01 to $2,000.00...................................... $ %
$2,000.01 to $3,000.00...................................... $ %
Over $3,000.00.............................................. $ %
-------- ------
Total............................................. $ 100.0%
======== ======
</TABLE>
S-27
<PAGE> 30
Seasoning. As of , % of the accounts in the Discover Card
portfolio were at least 24 months old. The ages of accounts in the Discover Card
portfolio as of were distributed as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
AGE OF ACCOUNTS OF ACCOUNTS OF BALANCES
- --------------- ----------- -----------
<S> <C> <C>
Less than 12 Months......................................... % %
12 to 23 Months............................................. % %
24 to 35 Months............................................. % %
36 Months and Greater....................................... % %
------ ------
100.0% 100.0%
====== ======
</TABLE>
Summary Yield Information. Greenwood calculates the monthly yield for the
Discover Card portfolio by dividing the monthly finance charges billed by
beginning monthly balance. Monthly finance charges include periodic finance
charges, cash advance item charges, late fees, and overlimit fees. The aggregate
monthly yield is the average of monthly yields annualized for each period shown.
The annualized aggregate monthly yield for the Discover Card portfolio is
summarized as follows:
<TABLE>
<CAPTION>
MONTHS TWELVE MONTHS TWELVE MONTHS [ELEVEN] MONTHS
ENDED ENDED ENDED ENDED
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Aggregate Monthly Yields
Excluding Recoveries................. % % % %
Including Recoveries................. % % % %
</TABLE>
Recoveries received with respect to Receivables in the trust that have been
charged off as uncollectible, including the proceeds of the trust's sales of
these Receivables, but excluding proceeds of Greenwood's sales of charged-off
receivables that Greenwood has removed from the trust, are included in the trust
and are treated as Finance Charge Collections. The level of recoveries on
accounts that Greenwood adds to the trust from time to time will initially be
lower than the level of recoveries for the Discover Card portfolio because
Greenwood will not include charged-off accounts in the accounts it selects to
include in the trust. Greenwood believes that, over time, the level of
recoveries on these added Accounts, as a percentage of the Receivables in the
trust, will increase to approximate more closely, and during periods of high
portfolio growth to exceed, the level of recoveries on accounts in the Discover
Card portfolio as a whole. However, Greenwood cannot predict the extent of this
increase and cannot assure you that the level of recoveries for the trust will
consistently approximate the level of recoveries for the Discover Card portfolio
as a whole.
Summary Current Delinquency Information. As of , the accounts in
the Discover Card portfolio had the following delinquency statuses:
<TABLE>
<CAPTION>
AGGREGATE
BALANCES PERCENTAGE
PAYMENT STATUS (000'S) OF BALANCES
- -------------- --------- -----------
<S> <C> <C>
Current..................................................... $ %
1 to 29 Days................................................ $ %
30 to 59 Days............................................... $ %
60 to 89 Days............................................... $ %
90 to 119 Days.............................................. $ %
120 to 149 Days............................................. $ %
150 to 179 Days............................................. $ %
------- ------
$ 100.0%
======= ======
</TABLE>
S-28
<PAGE> 31
Summary Historical Delinquency Information. The accounts in the Discover
Card portfolio had the following historical delinquency rates:
<TABLE>
<CAPTION>
AVERAGE OF MONTHS AVERAGE OF TWELVE MONTHS AVERAGE OF TWELVE MONTHS
ENDED ENDED ENDED
-------------------------- -------------------------- --------------------------
DELINQUENT DELINQUENT DELINQUENT
AMOUNT AMOUNT AMOUNT
(000'S) PERCENTAGE (000'S) PERCENTAGE (000'S) PERCENTAGE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
30-59 Days........... $ % $ % $ %
60-89 Days........... $ % $ % $ %
90-179 Days.......... $ % $ % $ %
---------- ---- ---------- ---- ---------- ----
Total............ $ % $ % $ %
========== ==== ========== ==== ========== ====
<CAPTION>
AVERAGE OF [ELEVEN] MONTHS
ENDED
--------------------------
DELINQUENT
AMOUNT
(000'S) PERCENTAGE
---------- ----------
<S> <C> <C>
30-59 Days........... $ %
60-89 Days........... $ %
90-179 Days.......... $ %
---------- ----
Total............ $ %
========== ====
</TABLE>
Greenwood calculates the percentages in the preceding table by dividing the
delinquent amount by the average receivables outstanding for each period. The
delinquent amount is the average of the monthly ending balances of delinquent
accounts during the periods indicated. The average receivables outstanding is
the average of the monthly average amount of receivables outstanding during the
periods indicated.
WE DISCUSS THE ECONOMIC FACTORS THAT AFFECT THE PERFORMANCE OF THE DISCOVER
CARD PORTFOLIO, INCLUDING DELINQUENCIES, IN "RISK FACTORS -- PAYMENTS,
GENERATION OF RECEIVABLES AND MATURITY."
Summary Charge-Off Information. The accounts in the Discover Card
portfolio have had the following historical charge-offs:
<TABLE>
<CAPTION>
MONTHS TWELVE MONTHS TWELVE MONTHS [ELEVEN] MONTHS
ENDED ENDED ENDED ENDED
------------------ ------------------ ------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Receivables Outstanding.......... $ $ $ $
Gross Charge-offs........................ $ $ $ $
Gross Charge-offs as an Annualized
Percentage of Average Receivables
Outstanding............................ % % % %
</TABLE>
Average receivables outstanding in the preceding table is the average of
the monthly average amount of receivables outstanding during the periods
indicated.
WE DISCUSS THE ECONOMIC FACTORS THAT AFFECT THE PERFORMANCE OF THE DISCOVER
CARD PORTFOLIO, INCLUDING CHARGE-OFFS, IN "RISK FACTORS -- PAYMENTS, GENERATION
OF RECEIVABLES AND MATURITY."
Summary Payment Rate Information. Greenwood calculates the monthly payment
rate by dividing monthly cardmember remittances by the cardmember receivable
balance outstanding as of the beginning of the month. Greenwood calculates the
average monthly payment rate for a period by dividing the sum of individual
monthly payment rates for the period by the number of months in the period. The
accounts in the Discover Card portfolio have had the following historical
monthly payment rates:
<TABLE>
<CAPTION>
MONTHS TWELVE MONTHS TWELVE MONTHS [ELEVEN] MONTHS
ENDED ENDED ENDED ENDED
----------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Average Monthly Payment Rate.............. % % % %
Highest Monthly Payment Rate.............. % % % %
Lowest Monthly Payment Rate............... % % % %
</TABLE>
TIMING OF PRINCIPAL PAYMENTS.
Minimum Monthly Payment Rates. Whether the trust can repay your principal
in full at the expected maturity of your certificates will depend on the yield,
the charge-off rate and the monthly payment rate for the Receivables in the
trust, and certain other factors. The trust will need a minimum monthly payment
rate of % to pay Class A principal in full on , or the next
business day,
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<PAGE> 32
and a minimum payment rate of % in to pay Class B principal in
full on , or the next business day, in each case assuming:
- a yield of % per year, including recoveries;
- a charge-off rate of % per year;
- that the level of Principal Receivables in the trust remains above the
minimum levels required by the Pooling and Servicing Agreement;
- that this series is not receiving collections that were originally
allocated to another series;
- that no Amortization Event occurs; and
- that the master servicer does not elect to defer the start of the
Accumulation Period.
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, Greenwood cannot assure you that the trust will
be able to pay Class A principal in full at maturity or that it will be able to
pay Class B principal in full at maturity.
Economic Early Amortization Events. The Series Supplement provides that an
Amortization Event will occur on any distribution date on which:
- 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.
Series Excess Spread means, generally, for any distribution date with
respect to this series:
- the Class A and Class B Finance Charge Collections and other Class A and
Class B income, minus
- the sum of --
- Class A and Class B monthly interest;
- Class A and Class B monthly servicing fees;
- Class A and Class B monthly charge-offs; and
- the Credit Enhancement Fee,
in each case for the distribution date. Group Excess Spread for any distribution
date is the sum of the Series Excess Spreads for each series in the group. You
should review the more precise definition of "Series Excess Spread" in the
glossary of terms in this prospectus supplement.
The three-month rolling average Group Excess Spread Percentage for Group
One was % for the distribution date in , without giving effect to
the issuance of this series. The Group Excess Spread Percentage equals:
- the Group Excess Spread, multiplied by twelve, divided by
- the sum of the Series Investor Interests for all series in Group One.
If this series had been issued and outstanding from through
, its three-month rolling average Series Excess Spread for the
distribution date in as a percentage of the Series Investor Interest
would have been [higher/lower] than the Group Excess Spread Percentage because
the interest rates for this series would have been [lower/higher] than the
average interest rates for all series in Group One.
If an Amortization Event occurs because of declines in Group Excess Spread
and in Series Excess Spread, or otherwise, the trust will begin to repay
principal on the following distribution date. For a description of other
Amortization Events, see "The Certificates -- Amortization Events." Greenwood
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<PAGE> 33
cannot predict how much principal the trust will pay to you on any distribution
date after an Amortization Event, or when you will receive your final principal
payment. If deficiencies in Series Excess Spread cause the Available
Subordinated Amount or the Available Class B Credit Enhancement Amount to be
reduced to zero, you may not receive all of your interest, or you may lose a
portion of your principal.
THE CERTIFICATES
This summary is not a complete description of the terms of the
certificates. You should refer to the Pooling and Servicing Agreement and the
Series Supplement for a more complete description.
INVESTED AMOUNTS
Your certificate will initially have an invested amount equal to its face
principal amount. Your invested amount will decrease by:
- the amount of principal the trust pays you,
- the amount of any investor loss you suffer if the trust cannot fully
reimburse the charge-offs allocated to your certificate, including, if
you own a Class B Certificate, increased charge-offs because of the way
the trust applies the subordination provisions of this series,
- the amount of any investor loss you suffer if the trust sells Receivables
to make its final payment to you and the proceeds from that sale are not
sufficient to pay your outstanding principal and interest in full, and
- the amount of losses of principal on investments of funds on deposit in
the Series Principal Funding Account for the benefit of your certificate.
The Class A Invested Amount will initially be $ , and the Class B
Invested Amount will initially be $ . These Class Invested Amounts will
equal the face principal amounts of all certificates in the class. Like the
invested amount of your certificate, the Class Invested Amounts will decrease by
the amount of principal the trust pays to all investors in the class, by the
class's share of investor losses due to unreimbursed charge-offs -- including,
for Class B, charge-offs arising by application of the subordination provisions
for this series -- or insufficient proceeds from a sale of Receivables, and by
the class's share of losses of principal on investments of funds on deposit in
the Series Principal Funding Account. The Series Invested Amount equals the sum
of the Class A Invested Amount and Class B Invested Amount.
INVESTOR INTERESTS
Your investor interest is your interest in Principal Receivables in the
trust. During the Revolving Period, your investor interest will equal your
invested amount. During the Accumulation Period and any Amortization Period,
your investor interest will equal your invested amount minus funds on deposit in
the Series Principal Funding Account to pay your principal. Accordingly,
- the Class A Investor Interest equals the Class A Invested Amount minus
funds on deposit in the Series Principal Funding Account to pay Class A
principal;
- the Class B Investor Interest equals the Class B Invested Amount minus
funds on deposit in the Series Principal Funding Account to pay Class B
principal, and
- the Series Investor Interest equals the sum of the Class A Investor
Interest and the Class B Investor Interest.
INTEREST PAYMENTS
The trust will pay you interest on the 15th day of each month, or the next
business day, beginning in .
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<PAGE> 34
Your interest payment for the interest payment date will include
accrued interest from and including to but excluding .
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. The month-long period before each interest payment date is the interest
accrual period for that interest payment date. If any interest payment date is
not a business day, the trust will pay interest to you on the following business
day. The trust will pay you interest on each interest payment date only to the
extent that it has allocated funds for this payment in accordance with the cash
flows for this series. See "The Certificates -- Cash Flows" and "Annex A -- Cash
Flows."
The trust will generally pay you interest on your invested amount at the
interest rate for your class for the related interest accrual period. The
interest rate for your class will be based on one-month LIBOR. The trustee will
determine the new interest rate for your certificates two business days before
each interest accrual period begins. The new interest rate will apply as of the
first day of each interest accrual period. The Glossary of Terms in this
prospectus supplement sets out with greater specificity the procedure used by
the trustee to determine LIBOR. The trust calculates the monthly interest
deposit for each class by multiplying:
- the Class Invested Amount, by
- the interest rate for the class -- LIBOR plus % for Class A and LIBOR
plus % for Class B for the related interest accrual period and dividing
this amount by
- 360 divided by the actual number of days in the related interest accrual
period.
In very limited circumstances, your interest payment may include amounts in
addition to the amounts described above. You will only receive these additional
amounts:
- if the trust could not make your full interest payment on the prior
interest payment date, or
- if you suffered an investor loss that caused the trust to pay interest to
you based on an invested amount that was reduced by the amount of that
loss, and the trust subsequently reimbursed that loss.
These additional amounts, which the trust will pay, to the extent they are
available, in the same priority and from the same funds that it pays interest
generally, may include penalties and other payments intended to compensate you
for the previous interest payment shortfalls.
PRINCIPAL PAYMENTS
The trust will pay you principal in one payment on the Class A expected
maturity date or the Class B expected maturity date, as applicable, subject to
the conditions and exceptions set forth below. The trust will not pay principal
to Class B investors until it has made the final principal payment to Class A
investors. The trust will not pay you principal that exceeds your invested
amount.
Revolving Period. The trust will not pay principal to you during the
Revolving Period.
Accumulation Period. The trustee will deposit funds into the Series
Principal Funding Account on each distribution date of the Accumulation Period
as set forth in steps (30), (31), (33) and (34) of the cash flows for this
series. These funds will generally include:
- Series Principal Collections, minus
- Series Yield Collections, which we describe below under "The
Certificates -- Other Income -- Yield Collections, Additional Funds
and Investment Income"
- Class B Principal Collections used to pay Class A interest and
servicing fees in step (6) of the cash flows for this series, and
- Class B Principal Collections used to reimburse Class A charge-offs in
step (7) of the cash flows for this series;
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<PAGE> 35
- all amounts the trust uses to reimburse Class A and Class B charge-offs
in steps (4), (5), (7), (12), (13), (15), (18), (22) and (24) of the cash
flows for this series;
- similar funds from other series; and
- any similar funds retained in the Collections Account on the previous
distribution date in step (38) of the cash flows for this series.
The trust will pay Class A principal in a lump sum on the Class A expected
maturity date using funds from the Series Principal Funding Account. If that
account does not have sufficient funds to pay the Class A Invested Amount in
full on that date, an Amortization Event will occur. If the trust does pay all
Class A principal on the Class A expected maturity date, it will pay Class B
principal in a lump sum on the Class B expected maturity date using funds from
the Series Principal Funding Account. If that account does not have sufficient
funds to pay the Class B Invested Amount in full on that date, an Amortization
Event will occur. If the expected maturity date for your certificate is not a
business day, the trust will pay your principal on the following business day
and you will not receive any additional interest because of this delay.
Amortization Period. The trustee will deposit funds into the Series
Principal Funding Account on each distribution date of the Amortization Period
as set forth in steps (30), (31) and (33) of the cash flows for this series.
These funds will generally include:
- Series Principal Collections, minus
- Series Yield Collections, which we describe below under "The
Certificates -- Other Income -- Yield Collections, Additional Funds
and Investment Income,"
- Class B Principal Collections used to pay Class A interest and
servicing fees in step (6) of the cash flows for this series, and
- Class B Principal Collections used to reimburse Class A charge-offs in
step (7) of the cash flows for this series;
- all amounts the trust uses to reimburse Class A and Class B charge-offs
in steps (4), (5), (7), (12), (13), (15), (18), (22) and (24) of the cash
flows for this series; and
- any similar funds retained in the Collections Account on the previous
distribution date in step (38) of the cash flows for this series.
The trust will pay Class A principal on each distribution date of the
Amortization Period using funds from the Series Principal Funding Account, until
the Class A Invested Amount has been reduced to zero, and will then use funds
from the Series Principal Funding Account to pay Class B principal on each
distribution date until the Class B Invested Amount has been reduced to zero.
Variable Accumulation Period. Greenwood, as master servicer, may elect to
delay the start of the Accumulation Period, and extend the length of the
Revolving Period, if:
- the master servicer has delivered to the trustee a certificate to the
effect that the master servicer reasonably believes that delaying the
start of the Accumulation Period will not delay payments of Class A
principal and Class B principal to investors;
- Standard & Poor's and Moody's have advised the master servicer that they
will not lower or withdraw their ratings on the trust's outstanding
certificates because of the delay;
- the master servicer increases the amount of principal that the trustee
will deposit into the Series Principal Funding Account each month, so
that the sum of all deposits made during the shortened Accumulation
Period will equal the principal amount due to Class A investors on the
distribution date in ;
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- the Accumulation Period will start no later than ; and
- the master servicer makes this election no later than the first day of
the last month of the Revolving Period, including extensions of the
Revolving Period.
The master servicer may elect to delay the start of the Accumulation Period
because it believes that the trust will be able to reallocate principal from
other series to this series to make larger monthly principal deposits into the
Series Principal Funding Account. However, if an Amortization Event occurs, this
series will not be entitled to receive principal reallocated from other series.
Accordingly, if the master servicer elects to delay the start of the
Accumulation Period and an Amortization Event occurs, you may receive some of
your principal later than you would have received it if the start of the
Accumulation Period had not been delayed. For an example of other possible
consequences of an Amortization Event, see "Composition and Historical
Performance of the Discover Card Portfolio -- Timing of Principal
Payments -- Economic Early Amortization Events."
INVESTOR ACCOUNTS
The trustee has established or will establish the following accounts in the
name of the trust:
- the Collections Account;
- the Group One Collections Account;
- the Group One Principal Collections Reallocation Account;
- the Group One Finance Charge Collections Reallocation Account;
- the Series Collections Account;
- the Series Principal Collections Account;
- the Series Distribution Account;
- the Series Interest Funding Account; and
- the Series Principal Funding Account.
Each of these accounts will be a segregated trust account established with
the trustee or a Qualified Institution -- i.e., a bank satisfying certain rating
agency criteria, as described in the glossary of terms. 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 investors -- to carry out its duties under the Pooling and Servicing
Agreement and the Series Supplement. The paying agent, which will initially be
the trustee, will have the revocable power to withdraw funds from the Series
Distribution Account, the Series Interest Funding Account and the Series
Principal Funding Account to make distributions to the investors. A successor
paying agent may be appointed in the future.
The trustee may only invest funds on deposit in any investor account in
Permitted Investments. We describe these Permitted Investments in the glossary
of terms.
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CLASS FINANCE CHARGE COLLECTIONS
The trust allocates Finance Charge Collections to each class of this series
on each distribution date by multiplying the Finance Charge Collections received
in the prior calendar month by the Class Percentage for that class:
Class Finance Charge Collections = Class Percentage X Finance Charge Collections
The Class Percentage for any distribution date will be based on either:
- in the Revolving Period, in the Accumulation Period and, if Greenwood has
made an Effective Alternative Credit Support Election, in the
Amortization Period, the Class Investor Interest as of the first day of
the prior calendar month; or
- in the Amortization Period, if Greenwood has not made an Effective
Alternative Credit Support Election, the Class Investor Interest as of
the end of the last business day in the calendar month preceding the
month in which an Amortization Event occurred,
and will also be affected by either (1) the total amount of Principal
Receivables in the trust or (2) the aggregate size of the Class Investor
Interests for all outstanding series -- in each case, as of the first day of the
prior calendar month -- whichever amount is greater.
As the trust deposits principal into the Series Principal Funding Account,
we expect this series to receive fewer Finance Charge Collections in each month
to reflect:
- its declining interest in the Receivables in the trust,
- its correspondingly smaller allocation of charge-offs, and
- the availability of investment income from the Series Principal Funding
Account, which the trust will use to pay interest on this series.
However, if an Amortization Event occurs, unless Greenwood has made an
Effective Alternative Credit Support Election and has increased the credit
enhancement for this series, the size of the Class Investor Interest for each
class in this series will be deemed to be fixed at the size each was at before
the Amortization Event occurred, for purposes of calculating the amount of
Finance Charge Collections the trust allocates to each class of this series each
month. You should review clauses (iv) and (v) of the definition of "Class
Percentage" in the glossary of terms in this prospectus supplement, which
describe in more detail how the trust calculates these pro rata shares.
OTHER INCOME -- YIELD COLLECTIONS, ADDITIONAL FUNDS AND INVESTMENT INCOME
The Series Supplement permits the trust to use funds from other sources in
the same way it uses Series Finance Charge Collections. These amounts are:
Series Yield Collections. The master servicer may recharacterize a
percentage of Series Principal Collections as Series Yield Collections. This
recharacterization will cause the trust to allocate those collections to pay
interest and servicing fees, reimburse charge-offs and increase available credit
enhancement, instead of applying them only to pay principal. If the master
servicer makes this designation, it may have fewer funds available to deposit
scheduled principal or to pay the Series Invested Amount.
The percentage of Series Principal Collections that the master servicer
will recharacterize on each distribution date is the Series Yield Factor. The
Series Yield Factor is initially zero. The master servicer may change the Series
Yield Factor, subject to the following conditions:
- the master servicer may not reduce the Series Yield Factor below zero,
nor increase it above five percent;
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- the master servicer shall have delivered to the trustee a certificate to
the effect that the master servicer reasonably believes that the change
will not:
- delay any principal payments on any series outstanding at the time of
the change, or
- cause an amortization event to occur with respect to any series
outstanding at the time of the change; and
- Standard & Poor's shall have advised the master servicer that it will
not, as a result of the change, lower or withdraw the rating of any class
of any series outstanding at the time of the change.
Series Additional Funds. Under limited circumstances, as described in the
prospectus, Greenwood may elect to add funds to the trust on a monthly basis.
This series' share of those funds is Series Additional Funds.
Investment Income. During the Accumulation Period, Greenwood expects the
trust to earn investment income on the funds in the Series Principal Funding
Account. The trust will allocate these funds to this series, up to the amount of
interest that the trust will pay to investors. The trust will pay any excess
investment income to Greenwood.
CLASS PRINCIPAL COLLECTIONS
The trust allocates Principal Collections to each class of this series on
each distribution date by multiplying the Principal Collections received in the
prior calendar month by the Class Percentage for that class:
Class Principal Collections = Principal Collections X Class Percentage
The Class Percentage of Principal Collections will generally be based on:
- the Class Investor Interest on the first day of the calendar month
preceding the distribution date, during the Revolving Period and, before
a Fixed Principal Allocation Event occurs, during the Accumulation
Period; or
- if a Fixed Principal Allocation Event has occurred, the Class Investor
Interest as of the end of the last business day in the calendar month
before the Fixed Principal Allocation Event occurred, during the
Accumulation Period and the Amortization Period.
In general, Greenwood expects this series to receive a smaller allocation
of Principal Collections in each month of the Accumulation Period to reflect its
declining interest in Principal Receivables in the trust. However, if a Fixed
Principal Allocation Event occurs, the size of the Class Investor Interest for
each class in this series will be deemed to be fixed at the size each was at
before this event occurred, for purposes of calculating the amount of Principal
Collections the trust allocates to each class of this series each month. In
general, a Fixed Principal Allocation Event may occur:
- if this series would not be able to make its principal deposits on time
even using the amounts from other series that would be available to it;
- if the master servicer elects to cause a Fixed Principal Allocation Event
to occur; or
- if an Amortization Event occurs.
You should review clauses (ii) and (iii) of the definition of "Class
Percentage" and the definition of "Fixed Principal Allocation Event" in the
glossary of terms in this prospectus supplement, which describe in more detail
how the trust calculates this series' share of Principal Collections and when a
Fixed Principal Allocation Event will occur.
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<PAGE> 39
CLASS CHARGE-OFFS AND INVESTOR LOSSES
The trust allocates charge-offs to each class of this series on each
distribution date by multiplying
- the amount of Receivables in the trust that the servicer charged off as
uncollectible during the previous calendar month, minus
- the cumulative, uncollected amount of these Receivables that related
to finance charges, cash advance fees, annual membership fees,
overlimit fees and late payment charges, and
- the amount of these Receivables repurchased by Greenwood during that
month because they were in accounts that contained Receivables that
were not Eligible Receivables, by
- the Class Percentage with respect to the Charged-Off Amount for that
class.
These class charge-offs will equal a pro rata share of the Charged-Off
Amount for the trust, based on the Class Investor Interest on the first day of
the calendar month preceding the distribution date. You should review clause (i)
of the definition of "Class Percentage" in the glossary of terms in this
prospectus supplement, which describes in more detail how the trust calculates
this pro rata share.
The Class B charge-offs will also increase by
- the amount of Class B Principal Collections that the trust uses to pay
Class A interest and reimburse Class A charge-offs in steps (6) and (7)
of the cash flows for this series, and
- the amount of the Class B Investor Interest used to reimburse Class A
charge-offs in step (13) of the cash flows for this series.
If the trust cannot reimburse all of the class charge-offs for either class
in any month, it will carry forward the amount of unreimbursed charge-offs and
will try to reimburse them in the following month. The unreimbursed charge-offs
on any distribution date are an investor loss, and the trust reduces the Class
Investor Interest and the Class Invested Amount for each class by the amount of
its investor loss. To the extent that the trust subsequently reimburses these
charge-offs, it will reinstate the Class Investor Interest and the Class
Invested Amount. The trust will not reinstate the Class Investor Interest and
the Class Invested Amount to exceed the initial Class Investor Interest minus
- the aggregate amount of principal paid to investors in that class before
the distribution date,
- in the case of the Class Investor Interest, the amount on deposit in the
Series Principal Funding Account for that class, and
- the aggregate amount of losses on investments of principal funds on
deposit in the Series Principal Funding Account for that class.
If the trust reimburses all investor losses, it will also pay interest on
those investor losses for the periods in which the interest payments to
investors were reduced because of those investor losses. This additional
interest will be paid as part of Class A interest in steps (2), (3), (6), (11)
and (21) of the cash flows for this series, and as part of Class B interest in
steps (8), (9), (14), (17) and (23) of the cash flows for this series. If the
Class Investor Interest is reduced to zero on any distribution date, it will not
be reinstated.
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<PAGE> 40
SUBORDINATION OF THE CLASS B CERTIFICATES -- CLASS A CREDIT ENHANCEMENT
The Class B Certificates are subordinated to the Class A Certificates up to
a specified dollar amount, known as the Available Subordinated Amount. The
initial Available Subordinated Amount is $ , which is % of $ . The
Available Subordinated Amount will decrease to the extent that:
- the trust uses Class B Finance Charge Collections, other Class B income
and Class B Principal Collections to pay Class A interest and servicing
fees in steps (6) and (11) and to reimburse Class A charge-offs in steps
(7) and (12) of the cash flows for this series; and
- the trust reallocates Class B Investor Interest to reimburse Class A
charge-offs in step (13) of the cash flows for this series.
The Available Subordinated Amount will increase by:
- the amount by which
- Class A Finance Charge Collections and other Class A income exceed
Class A interest and servicing fees, and
- Class B Finance Charge Collections and other Class B income exceed
Class B interest and servicing fees;
- the amount of funds from the Group One Finance Charge Collections
Reallocation Account that the trust uses
- to pay Class B interest in step (23) of the cash flows for this
series,
- to reimburse Class B charge-offs in step (24) of the cash flows for
this series, and
- to increase the Available Class B Credit Enhancement Amount in step
(27) of the cash flows for this series;
- $ after a Supplemental Credit Enhancement Event, if Greenwood has not
made an Effective Alternative Credit Support Election;
- $ after an Effective Alternative Credit Support Election, if a
Supplemental Credit Enhancement Event has occurred; and
- $ after an Effective Alternative Credit Support Election, if a
Supplemental Credit Enhancement Event has not occurred.
However, the Available Subordinated Amount will never exceed:
- $ before Greenwood has made an Effective Alternative Credit Support
Election and before a Supplemental Credit Enhancement Event occurs;
- $ after a Supplemental Credit Enhancement Event occurs but before
Greenwood has made an Effective Alternative Credit Support Election; or
- $ after Greenwood has made an Effective Alternative Credit Support
Election.
A Supplemental Credit Enhancement Event will occur if Standard & Poor's
withdraws or reduces below BBB- the long-term debt or deposit rating of
Greenwood.
THE CREDIT ENHANCEMENT ACCOUNT
Greenwood, the trustee and one or more lenders, which we refer to
collectively as the Credit Enhancement Provider, will enter into a Credit
Enhancement Agreement on the series closing date. The Credit Enhancement
Provider will deposit $ into a cash collateral account, which we refer to as
the Credit Enhancement Account, which the trustee will initially hold in
accordance with the Credit Enhancement Agreement. The Credit Enhancement Account
may also be moved to a Qualified
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Institution. The funds on deposit in the Credit Enhancement Account will be held
for the direct benefit of the Class B investors of this series and for the
benefit of the Credit Enhancement Provider; their respective interests will be
set out in the Series Supplement and the Credit Enhancement Agreement. The
trustee will act as administrator of 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
liabilities and obligations expressly imposed on it by the Credit Enhancement
Agreement.
The trustee will invest the amounts on deposit in the Credit Enhancement
Account in Permitted Investments selected by Greenwood that mature on or before
the immediately following distribution date. The trustee will pay all earnings
on these investments, less investment losses and expenses, in accordance with
the Credit Enhancement Agreement.
On each distribution date, the trustee may withdraw funds from or deposit
funds into the Credit Enhancement Account pursuant to the Series Supplement and
the Credit Enhancement Agreement. The trustee will make credit enhancement
drawings solely as set forth in steps (17) and (18) of the cash flows for this
series. The trustee will make these drawings solely from amounts on deposit in
the Credit Enhancement Account, and will not use any other assets of the Credit
Enhancement Provider. The trustee will deposit funds into the Credit Enhancement
Account as set forth in steps (16) and (27) of the cash flows for this series,
but only to the extent the Available Class B Credit Enhancement Amount -- i.e.,
the amount available in the Credit Enhancement Account after giving effect to
all deposits and withdrawals -- is less than the Maximum Class B Credit
Enhancement Amount.
The Maximum Class B Credit Enhancement Amount -- i.e., the maximum amount
that the trustee may hold in the Credit Enhancement Account for the benefit of
the Class B investors and the Credit Enhancement Provider -- may increase if:
- Greenwood makes an Effective Alternative Credit Support Election; or
- a Supplemental Credit Enhancement Event occurs.
The Maximum Class B Credit Enhancement Amount may also decrease during the
Accumulation Period as the Series Investor Interest declines. The following
table illustrates the maximum amount that will be available in the Credit
Enhancement Account as of any distribution date:
MAXIMUM CLASS B CREDIT ENHANCEMENT AMOUNT
<TABLE>
<S> <C>
Series Closing Date $
Revolving Period --
Before an Effective Alternative $ , which is % of $
Credit Support Election or a
Supplemental Credit Enhancement Event
After a Supplemental Credit $ , which is % of
Enhancement Event but before an $
Effective Alternative Credit Support
Election
After an Effective Alternative Credit $ , which is % of
Support Election $
</TABLE>
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<TABLE>
<S> <C>
Accumulation Period --
Before an Effective Alternative % of the Series Investor Interest as of
Credit Support Election or a the end of the preceding month, but not
Supplemental Credit Enhancement Event less than $
After a Supplemental Credit % of the Series Investor Interest as of
Enhancement Event but before an the end of the preceding month, but not
Effective Alternative Credit Support less than $
Election
After an Effective Alternative Credit % of the Series Investor Interest as of
Support Election the end of the preceding month, but not
less than $
Amortization Period The Maximum Class B Credit Enhancement
Amount for the distribution date
immediately preceding the Amortization
Event
</TABLE>
An Alternative Credit Support Election is an election by Greenwood to
change the way the trust allocates Finance Charge Collections to the series
during an Amortization Period. An Effective Alternative Credit Support Election
is such an election that has become effective under the Series Supplement. If
Greenwood has not made an Effective Alternative Credit Support Election, the
trust will allocate Finance Charge Collections to this series based on the
Series Investor Interest at the end of the month before the Amortization Event.
Following an Effective Alternative Credit Support Election, the trust will
allocate Finance Charge Collections to this series on each distribution date
during the Amortization Period based on the Series Investor Interest as of the
first day of the month before each distribution date.
To make an Effective Alternative Credit Support Election, Greenwood must
cause the Additional Credit Support Amount to be paid to the trustee for deposit
in the Credit Enhancement Account. If the Alternative Credit Support Election
does not become effective in accordance with the requirements of the Series
Supplement, the trustee will return some or all of the Additional Credit Support
Amount to the entity that funded the deposit, which will be either the holder of
the Seller Certificate or the Credit Enhancement Provider.
Greenwood as servicer will, within 60 days of notice from Standard & Poor's
of a Supplemental Credit Enhancement Event, or a longer period that Standard &
Poor's agrees to, arrange to increase the amount on deposit in the Credit
Enhancement Account by the Supplemental Credit Enhancement Amount to be paid by
a person other than Greenwood to the trustee as administrator of the Credit
Enhancement Account. Greenwood may also use Series Finance Charge Collections
and other income that the trust does not need to pay interest and servicing and
to reimburse charge-offs for this series to pay this amount. The trustee will
apply the Supplemental Credit Enhancement Amount as provided in the Credit
Enhancement Agreement. Greenwood may determine the form and the provider of the
Supplemental Credit Enhancement Amount at the time it is to be paid, provided
that Standard & Poor's confirms that it will not withdraw or lower the rating of
the certificates because of these arrangements.
The trustee may terminate the Credit Enhancement Account and the Credit
Enhancement Agreement without penalty if
- the master servicer elects to replace this credit enhancement, and
- the Rating Agencies agree that they will not lower or withdraw the
ratings on the certificates if the master servicer replaces the credit
enhancement.
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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.
If on the business day immediately preceding the distribution date, the
Credit Enhancement Provider is unable to pay its debts as they become due, the
trustee may not pay to or deposit for the Credit Enhancement Provider any
amounts that are measured by reference to --
- Class Finance Charge Collections and other income that exceed the
required payments and reimbursements for that class,
- Series Finance Charge Collections and other income that exceed the
required payments and reimbursements for this series, or
- the amount on deposit at any time in the Group One Finance Charge
Collections Reallocation Account.
However, if the replacement credit enhancement is funded credit
enhancement -- for example, a reserve account or cash collateral account -- then
the trustee may pay such amounts regardless of the financial condition of the
Credit Enhancement Provider.
REALLOCATIONS
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.
Greenwood cannot assure you, however, that any funds will be available to be
reallocated to this series. Greenwood also cannot assure you that it will not
move any series from its original group to another group.
Although the series supplements do permit reallocations among series, the
trust will use the Finance Charge Collections, other income and Principal
Collections allocated to any series to make all payments, deposits and
reimbursements for that series before it reallocates them to other series.
Accordingly, Series Finance Charge Collections and other income for this series
will not be reallocated unless the trust has deposited all Class A and Class B
interest and servicing fees, reimbursed all Class A and Class B charge-offs and
increased the Available Class B Credit Enhancement Amount to the Maximum Class B
Credit Enhancement Amount. Similarly, the trust will not reallocate to other
series any Series Principal Collections or amounts used to reimburse Class A and
Class B charge-offs until the trust has made the scheduled principal deposit for
this series, during the Accumulation Period, or until the trust has paid the
Series Invested Amount in full, during the Amortization Period.
We describe the reallocation priorities in "-- Cash Flows" below, and you
should review those priorities.
CASH FLOWS
In this section, we describe the manner in which the trust prioritizes the
allocation of its funds. We have also included descriptions of the numbered
steps of the cash flows for this series in Annex A to this prospectus
supplement, and you should review those descriptions.
Series Finance Charge Collections and other income. In general, the trust
uses Series Finance Charge Collections and other income for this
series -- including Series Additional Funds, interest on the Series Principal
Funding Account and Series Yield Collections -- in the following order of
priority on each distribution date, to the extent funds are available:
- First, to pay Class A interest and servicing fees;
- Second, to reimburse Class A charge-offs, including any unreimbursed
charge-offs carried forward from prior months;
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- Third, to pay Class B interest and servicing fees;
- Fourth, to reimburse Class B charge-offs, including any unreimbursed
charge-offs carried forward from prior months;
- Fifth, to increase the Available Class B Credit Enhancement Amount to the
Maximum Class B Credit Enhancement Amount;
- Sixth, to pay fees and interest to the Credit Enhancement Provider;
- Seventh, to pay interest and monthly servicing fees and to reimburse
charge-offs for other series in Group One; and
- Eighth, to pay the Credit Enhancement Provider and then Greenwood, as the
holder of the Seller Certificate, in accordance with the terms of the
Credit Enhancement Agreement.
Series Principal Collections and amounts used to reimburse charge-offs. In
general, the trust uses Series Principal Collections and amounts used to
reimburse charge-offs, minus Series Yield Collections, in the following order of
priority on each Distribution Date:
- First, to pay shortfalls in Class A interest and servicing fees after
Series Finance Charge Collections and other income have been used. In
this step, the trust uses Class B Principal Collections only;
- Second, to reimburse Class A charge-offs after Series Finance Charge
Collections and other income have been used. In this step, the trust uses
Class B Principal Collections only;
- Third, to make the scheduled principal deposit into the Series Principal
Funding Account, during the Accumulation Period, or to pay the Series
Investor Interest, during the Amortization Period;
- Fourth, to pay the scheduled principal payments or make the scheduled
principal deposits for other series in Group One; and
- Fifth, to pay Greenwood, up to the amount of the Seller Interest, with
remaining amounts to be allocated as Principal Collections in the
following month.
Reallocations of Finance Charge Collections and other income from other
series. In general, if the trust cannot make all payments, deposits and
reimbursements for this series -- other than principal payments and deposits,
which are reallocated as discussed below -- using Series Finance Charge
Collections, other income and credit enhancement, it will use similar funds
reallocated from other series, to the extent funds are available, in the
following order of priority:
- First, to pay Class A interest and servicing fees;
- Second, to reimburse Class A charge-offs, including any unreimbursed
charge-offs carried forward from prior months;
- Third, to pay Class B interest and servicing fees;
- Fourth, to reimburse Class B charge-offs, including any unreimbursed
charge-offs carried forward from prior months;
- Fifth, to increase the available credit enhancement for series that have
Class A cash collateral credit enhancement or shared credit enhancement;
- Sixth, to increase the Available Class B Credit Enhancement Amount to the
Maximum Class B Credit Enhancement Amount;
- Seventh, to fund certain other amounts for Series 1993-3; and
- Eighth, to pay the Credit Enhancement Provider and then Greenwood, as the
holder of the Seller Certificate, in accordance with the terms of the
Credit Enhancement Agreement.
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<PAGE> 45
The amount allocated to this series will generally be determined by
dividing the shortfall in the amount the trust is trying to fund for this series
by the sum of the shortfalls in the amounts the trust is trying to fund for each
other series in Group One.
Reallocations of Principal Collections and amounts used to reimburse
charge-offs from other series. In general, if the trust cannot make the
scheduled principal deposit using Series Principal Collections and amounts used
to reimburse charge-offs for this series, it will use similar funds reallocated
from other series. The amount allocated to this series will generally be
determined by dividing the shortfall in the amount the trust is trying to fund
for this series by the sum of the shortfalls in the amounts the trust is trying
to fund for each other series in Group One. However, if the trust is trying to
make a scheduled principal deposit for the Class B Certificates, it will only
use those funds remaining after principal has been paid or deposited for the
Class A certificates of all other series in Group One. During the Amortization
Period, if any, the trust will not use any funds reallocated from other series
to pay principal for this series.
Credit Enhancement for each Class. In addition to the payment priorities
described above, the trust may use the credit enhancement for this series to
make payments, deposits or reimbursements for this series. The trust may:
- reallocate the Class B Investor Interest to reimburse Class A
charge-offs;
- use the Available Class B Credit Enhancement Amount to pay Class B
interest and servicing fees; or
- use the Available Class B Credit Enhancement Amount to reimburse Class B
charge-offs, including any unreimbursed charge-offs carried forward from
prior months and any increases in Class B charge-offs from allocations of
Class B Principal Collections and the Class B Investor Interest to
benefit the Class A Certificates.
AMORTIZATION EVENTS
An Amortization Period commences only if an Amortization Event occurs.
Subject to the notice provisions described in the following paragraphs, an
Amortization Event is any of the following:
(a) any seller fails 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 after that date;
(b) any seller fails to perform in any material respect any other material
covenant of that seller under the Pooling and Servicing Agreement or the
Series Supplement, and does not remedy that failure for 60 days after:
- written notice to that seller by the trustee;
- written notice to that seller and the trustee by holders of certificates
that represent at least 25% of the Class Invested Amount of any class
materially adversely affected by that seller's failure;
(c) any representation or warranty made by any seller under the Pooling and
Servicing Agreement or the Series Supplement, or any information required
to be given to the trustee for identifying the Accounts, proves to have
been materially inaccurate when made and remains inaccurate for 60 days
after written notice of its inaccuracy to that seller by the trustee or to
that seller and the trustee by holders of certificates that represent at
least 25% of the Class Invested Amount of any class materially adversely
affected by the inaccuracy;
(d) certain events of bankruptcy, insolvency or receivership relating to any
seller;
(e) Greenwood as seller becomes unable to transfer Receivables to the trust in
accordance with the Pooling and Servicing Agreement and that inability
continues for five business days;
(f) any seller other than Greenwood becomes unable to transfer Receivables to
the trust in accordance with the Pooling and Servicing Agreement and that
inability continues for five business days;
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(g) the trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(h) any Master Servicer Termination Event or any Servicer Termination Event
occurs;
(i) the amount of Principal Receivables in the trust at the end of any month or
on any distribution date is less than the Minimum Principal Receivables
Balance, and Greenwood fails to assign Receivables in additional Accounts
or interests in other credit card receivables pools to the trust in at
least the amount of the deficiency within ten days;
(j) 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;
(k) the trust does not pay all Class A principal on the Class A expected
maturity date or all Class B principal on the Class B expected maturity
date; or
(l) if a Supplemental Credit Enhancement Event occurs, Greenwood as servicer
fails to arrange for the Supplemental Credit Enhancement Amount as required
by the Series Supplement.
If any event described in clauses (a), (b), (c), (f) or (h) occurs, it will
only be an Amortization Event if:
- the event has a material adverse effect on the certificateholders; and
- after the applicable grace period described in those clauses, either
- the trustee declares by written notice to Greenwood and the master
servicer that an Amortization Event has occurred; or
- certificateholders holding certificates that represent at least 51% of
the Class Invested Amount for either class, declare by written notice
to Greenwood, the master servicer and the trustee that an Amortization
Event has occurred as of the date of the notice.
Any event described in clauses (d), (e), (g), (i), (j), (k) or (l) will
immediately be an Amortization Event without any notice or other action from the
trustee or the certificateholders. The Amortization Period will commence on the
date on which an Amortization Event is deemed to have occurred.
Beginning on the distribution date in the month after an Amortization Event
has occurred, the trust will pay Class A principal on each distribution date
until the Class A Invested Amount has been reduced to zero and will then pay
Class B principal on each distribution date until the Class B Invested Amount
has been reduced to zero.
CLEAN-UP CALL; TERMINATION OF SERIES
Greenwood may purchase the remaining Series Investor Interest from the
trust on any distribution date during the Accumulation Period or the
Amortization Period if the Series Investor Interest is less than or equal to
$ -- which is 5.0% of the initial Series Investor Interest -- after
giving effect to required payments, deposits and reimbursements on that
distribution date.
If Greenwood elects to purchase the Series Investor Interest, on the next
distribution date it will deposit an amount equal to the Series Investor
Interest as of the last day of the month before the deposit into the Series
Principal Funding Account, during the Accumulation Period, or into the Series
Distribution Account, during the Amortization Period.
In any event, the trust will not pay you principal after the first business
day following the distribution date in . If the trust owes you
principal after the distribution date in , the trustee will sell
Receivables proportionate to the remaining Series Investor Interest in the trust
to repay the principal. If proceeds of that sale are not sufficient to pay the
outstanding principal and interest in full, Class B investors will suffer an
investor loss and Class A investors may also suffer an investor loss. After the
Series Termination Date, the trust will not allocate collections to this series.
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REPORTS TO INVESTORS
For each distribution date, the master servicer will prepare a statement
for you setting forth:
- the amount of interest and principal paid to holders of each class of
this series on that date per $1,000 of initial Class Investor Interest,
the number of days in the interest accrual period and the applicable
interest rate;
- the Series Investor Interest and the Class Investor Interest for each
class of this series, as of the end of the prior calendar month;
- the Aggregate Investor Interest, the Seller Interest and the sum of the
Series Investor Interests for each series in the same group as this
series, as of the end of the prior calendar month;
- the amount of Finance Charge Collections, Principal Collections,
Additional Funds, if any, and Yield Collections, if any, from the prior
calendar month allocated to this series, to each class of this series, to
the group of which this series is a member, and to the seller;
- the amount of Principal Collections, Finance Charge Collections and total
collections from the prior calendar month, each as a monthly percentage
of Receivables in the trust at the beginning of that month;
- Series Investment Income since the prior distribution date;
- the amount deposited into the Series Principal Funding Account on that
date, the amount of any shortfall in the scheduled principal deposit, and
the total amount on deposit in the Series Principal Funding Account;
- the amount of charge-offs allocated to each class of this series, to the
series, and to the group of which this series is a member for the prior
calendar month, and the total amount of unreimbursed charge-offs for each
class of this series, for this series, and for the group of which this
series is a member, including increases in Class B charge-offs relating
to the Class B subordination;
- the total amount of investor losses for the prior calendar month and the
amount of these losses per $1,000 of initial Class Investor Interest, the
amount of reimbursements of investor losses for the prior calendar month
of the aggregate amount of unreimbursed investor losses as of the end of
the prior calendar month, and the amount of these losses per $1,000 of
initial Class Investor Interest, in each case for each class of this
series, and the sum of those amounts for this series and for the group of
which this series is a member;
- the monthly servicing fee for each class of this series and the sum of
those fees for this series and for the group of which this series is a
member for the prior calendar month;
- the Available Subordinated Amount as of the end of the distribution date,
and the Available Subordinated Amount as a percentage of the Class A
Invested Amount;
- the amounts of any credit enhancement drawings and the amount of the
Credit Enhancement Fee payable on the distribution date and the Maximum
Class B Credit Enhancement Amount and Available Class B Credit
Enhancement Amount, in each case as of the end of the distribution date;
- total delinquency information with respect to the Receivables, and
delinquency information as a percentage of outstanding Receivables;
- the Series Excess Spread Percentage for this series and the Group Excess
Spread Percentage for the group of which this series is a member; and
- the total amount of charge-offs and the amount of charge-offs net of
recoveries in the prior calendar month, each as an annualized percentage
of Principal Receivables at the beginning of that month.
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You may obtain a copy of the statement free of charge by calling
302-323-7434. On or about January 31 of each calendar year, you may also obtain
in the same manner a statement prepared by the master servicer aggregating the
amount of interest and principal for each class of this series for the preceding
calendar year or the applicable portion of that year, together with such other
customary information as the trustee or the master servicer deems necessary or
desirable to enable you to prepare your tax returns.
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UNDERWRITING
The underwriters named below have severally agreed, subject to the terms
and conditions of the underwriting agreement, dated , and the terms
agreement, dated , to purchase from Greenwood the respective
principal amounts of certificates set forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF CLASS A OF CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
- ------------ ---------------- ----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated........................... $ $
.................................................. $
.................................................. $
.................................................. $
.................................................. $
----------- -----------
Total............................................. $ $
=========== ===========
</TABLE>
The underwriting agreement provides that the underwriters will only be
obligated to purchase the certificates if their legal counsel approves of
certain legal matters and if various other conditions are met. The underwriters
must purchase all of the certificates if they purchase any.
The underwriters and Greenwood have agreed that the closing of the sale of
the certificates to the underwriters will occur [five] business days after the
date of this prospectus supplement or on a later date if they mutually agree.
Each underwriter of the Class A Certificates has advised Greenwood that it
proposes 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 the initial public offering price less a
concession of up to % of the aggregate principal amount of the Class
A Certificates.
The underwriters of the Class A Certificates may allow, and these dealers
may reallow, a concession of up to % of the aggregate principal amount 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 the initial public offering price less a
concession of up to % of the aggregate principal amount of the Class
B Certificates.
The underwriter of the Class B Certificates may allow, and these dealers
may reallow, a concession of up to % of the aggregate principal amount of
the Class B Certificates to certain other dealers.
After the initial offering of the certificates to the public, the
underwriters may vary the offering price and other selling terms of the
certificates.
There currently is no secondary market for the certificates. Although
Morgan Stanley & Co. Incorporated, and intend to make a
market in the certificates, Greenwood cannot assure you that a secondary market
will develop or, if a secondary market does develop, that it will continue until
the termination of this series.
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Each underwriter has represented and agreed that:
- it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Public Offers of Securities
Regulations 1995 with respect to anything done by it in relation to the
certificates in, from or otherwise involving the United Kingdom;
- it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue
of the certificates to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or who is a person to whom the document may
otherwise lawfully be issued or passed on;
- if it is an authorized person under Chapter III of Part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02 of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) 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) Regulations 1991; and
- it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
Morgan Stanley & Co. Incorporated is an affiliate of Greenwood. Alexander
C. Frank is a director of Greenwood, an officer of Morgan Stanley & Co.
Incorporated and an officer of Morgan Stanley Dean Witter & Co., parent of both
Morgan Stanley & Co. Incorporated and Greenwood.
Greenwood's proceeds, as set out on the cover of this prospectus
supplement, will be reduced by the amount of its expenses to issue the
certificates, which it estimates at $ .
Greenwood has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
To facilitate the offering of the certificates, the underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
certificates, including the following:
- the underwriters may overallot in connection with any offering of
certificates, creating a short position in the certificates for their own
accounts;
- the underwriters may bid for, and purchase, the certificates in the open
market to cover overallotments or to stabilize the price of the
certificates; and
- in any offering of the certificates through a syndicate of underwriters,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the certificates in the offering
if the syndicate repurchases previously distributed 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
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
Latham & Watkins will give opinions on the legality of the certificates,
the tax consequences of issuance of the certificates and certain creditors'
rights matters for Greenwood. Young Conaway Stargatt & Taylor, LLP will also
give opinions on certain creditors' rights matters for Greenwood.
Cadwalader, Wickersham & Taft will also give opinions on the legality of
the certificates for the underwriters.
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<PAGE> 51
GLOSSARY OF TERMS
The certificates will be issued pursuant to the Pooling and Servicing
Agreement and the Series Supplement. The following glossary of terms is not
complete. You should also refer to the prospectus, the Pooling and Servicing
Agreement and the Series Supplement for additional definitions. If you send a
written request to the trustee at its corporate trust office, the trustee will
provide to you without charge a copy of the Pooling and Servicing Agreement,
without exhibits and schedules, and the Series Supplement, without exhibits.
Unless the context requires otherwise, the definitions contained in this
glossary of terms apply only to this series of certificates and will not
necessarily apply to any other series of certificates the trust may issue. For
terms that apply to both Class A and Class B, we have only included a single
definition; for example, we define "Class Additional Funds" instead of both
"Class A Additional Funds" and "Class B Additional Funds."
"ACCOUNT" will mean:
- a Discover Card account established pursuant to a credit agreement
between Greenwood and any person, receivables under which are transferred
to the trust by Greenwood pursuant to either the Pooling and Servicing
Agreement or an Assignment of Additional Accounts;
- a Discover Card account established pursuant to a credit agreement
between an Additional Seller and any person, receivables under which are
transferred to the trust by the Additional Seller pursuant to an
Assignment of Additional Accounts; and
- a credit account that is not a Discover Card account, established
pursuant to a credit agreement between Greenwood or an Additional Seller
and any person, receivables under which are transferred to the trust by
Greenwood or the Additional Seller pursuant to an Assignment of
Additional Accounts.
No Account will be a Charged-Off Account as of the date the Account is selected
to be added to the trust. The definition of an Account will include the
surviving credit account of a combination of credit accounts if:
- an Account or another credit account is combined with an Account pursuant
to the credit guidelines for the Account; and
- the surviving credit account was an Account before the accounts were
combined.
The term "Account" will be deemed to refer to an additional Account only from
and after the addition date for that additional Account. The definition of
Account will not include any Account removed from the trust after it has been
reassigned to the holder of the Seller Certificate.
"ACCUMULATION PERIOD" will mean the period beginning on and
ending on the earlier to occur of:
- , or the next business day, and
- the date on which an Amortization Period begins,
unless Greenwood elects to delay the start of the Accumulation Period. The first
distribution date of the Accumulation Period is scheduled to be , or
the next business day.
"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:
- $ , before a Supplemental Credit Enhancement Event occurs;
- $ , after a Supplemental Credit Enhancement Event occurs; and
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- 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 mean additional funds that the master servicer
elects to add to the trust. The initial amount of Additional Funds will be zero.
"ADDITIONAL SELLER" will mean an affiliate of Greenwood that is included in
the same "affiliated group" as Greenwood for United States federal income tax
purposes and that transfers Receivables in additional Accounts to the trust.
"AGGREGATE INVESTED AMOUNT" will mean at any time the sum of the series
invested amounts of all series of certificates then issued and outstanding.
"AGGREGATE INVESTOR INTEREST" will mean at any time the sum of the series
investor interests of all series of certificates then issued and outstanding.
"AGGREGATE INVESTOR PERCENTAGE" will mean at any time the sum of the
allocation percentages for all series of certificates then issued and
outstanding.
"AMORTIZATION EVENT" will mean an event that may adversely affect the trust
and your investment in the certificates, and that may cause the trust to begin
to repay the certificates. We describe these events in more detail in "The
Certificates -- Amortization Events."
"AMORTIZATION PERIOD" will mean the period beginning when an Amortization
Event occurs and continuing until the trust has fully paid the principal of this
series or until the Series Termination Date. The first distribution date of the
Amortization Period will be the distribution date in the calendar month
following the date on which the Amortization Event occurred.
"ALTERNATIVE CREDIT SUPPORT ELECTION" will mean an election made by
Greenwood to change the way Finance Charge Collections are allocated to this
series during the Amortization Period. The election will become effective after
- Greenwood has notified the Rating Agencies, the trustee and the Credit
Enhancement Provider of its election,
- Greenwood has arranged for payment of the Additional Credit Support
Amount to the trustee as administrator of the credit enhancement, and
- upon satisfaction of certain other requirements.
"ASSIGNMENT OF ADDITIONAL ACCOUNTS" will mean an assignment entered into
between Greenwood, the trustee, and if applicable an Additional Seller, pursuant
to which additional accounts are designated as Accounts for the trust.
"AVAILABLE CLASS B CREDIT ENHANCEMENT AMOUNT" will mean, with respect to
the first distribution date, $ , and, after the first distribution date, the
amount available to be drawn under the credit enhancement for the benefit of the
Class B investors 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 that immediately
preceding distribution date, 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
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<PAGE> 53
- following an Effective Alternative Credit Support Election, the
Additional Credit Support Amount, plus
- following a Supplemental Credit Enhancement Event, the Supplemental
Credit Enhancement Amount.
"AVAILABLE SUBORDINATED AMOUNT" will mean, on a distribution date, the sum
of:
- with respect to the first distribution date, $ , or with respect to
any other distribution date, the Available Subordinated Amount after
giving effect to all adjustments on the prior distribution date; and
- the amount of Series Finance Charge Collections, Series Yield
Collections, Series Additional Funds and Series Investment Income, as
this amount may be:
- reduced pursuant to the provisions of the Series Supplement to take
into account:
- the amount of these funds used to deposit interest and servicing
fees and to reimburse the Class A charge-offs;
- the amount of the Class B Principal Collections used to deposit
Class A interest and servicing fees and to reimburse Class A
charge-offs; and
- the amount of any reduction in the Class B Investor Interest
resulting from reimbursement of the Class A charge-offs,
in each case on that distribution date; and
- increased pursuant to the provisions of the Series Supplement to take
into account the application of amounts on deposit in the Group One
Finance Charge Collections Reallocation Account:
- to deposit Class B interest and servicing fees;
- to reimburse Class B charge-offs; and
- to increase the Available Class B Credit Enhancement Amount,
in each case for that distribution date.
If a Supplemental Credit Enhancement Event occurs before Greenwood has made an
Effective Alternative Credit Support Election, the Available Subordinated Amount
will be increased by $ . If a Supplemental Credit Enhancement Event occurs
after Greenwood has made an Effective Alternative Credit Support Election, the
event will have no impact on the Available Subordinated Amount. In addition, on
the first distribution date after an Effective Alternative Credit Support
Election, the Available Subordinated Amount will be increased by (a) $ if a
Supplemental Credit Enhancement Event has not occurred, or (b) $ if a
Supplemental Credit Enhancement Event has occurred. In no event, however, will
the Available Subordinated Amount exceed:
- through the last distribution date before an Effective Alternative Credit
Support Election, $ , if a Supplemental Credit Enhancement Event has
not occurred;
- through the last distribution date before an Effective Alternative Credit
Support Election, $ , if a Supplemental Credit Enhancement Event has
occurred; and
- after the distribution date immediately after an Effective Alternative
Credit Support Election, $ .
"CEBA" will mean the Competitive Equality Banking Act of 1987.
"CHARGED-OFF ACCOUNT" will mean each Account with respect to which the
servicer has charged off the Receivables in the Account as uncollectible.
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<PAGE> 54
"CHARGED-OFF AMOUNT" will mean, for any distribution date or Trust
Distribution Date, the total amount of Receivables in Accounts that became
Charged-Off Accounts in the previous calendar month minus:
- the cumulative, uncollected amount previously billed by the servicers to
Accounts that became Charged-Off Accounts during the prior calendar month
with respect to finance charges, cash advance fees, annual membership
fees, if any, fees for transactions that exceed the credit limit on the
Account, late payment charges, and any other type of charges that the
servicer has designated as "Finance Charge Receivables" for Accounts that
are not Charged-Off Accounts, and
- the full amount of any Receivables in these Charged-Off Accounts that
Greenwood repurchased.
"CLASS ADDITIONAL FUNDS," if applicable, will mean, for any distribution
date, an amount equal to:
- the Class Investor Interest, divided by
- the Series Investor Interest, multiplied by
- the amount of Series Additional Funds, in each case for that distribution
date.
"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:
- the Class Percentage with respect to Finance Charge Collections for the
related distribution date; and
- the amount of Finance Charge Collections for such day or for the prior
calendar month, as applicable;
provided, however, that Class Finance Charge Collections for each class will be
increased by the lesser of:
- the amount of Class Investment Shortfall for that class; and
- an amount equal to the product of the total amount of Finance Charge
Collections otherwise allocable to Greenwood for the prior calendar month
and a fraction the numerator of which is the Class Invested Amount for
that 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
to Finance Charge Collections for that class were the percentage equivalent of a
fraction the numerator of which is the amount of the Class Investor Interest as
of the end of the last business day in the calendar month before the start of
the Accumulation Period, and the denominator of which is the greater of:
- the amount of Principal Receivables in the trust on the first day of the
prior calendar month; and
- 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 this series, as of that day,
distribution date or Trust Distribution Date, as applicable.
"CLASS INVESTED AMOUNT" will mean, for any distribution date, an amount
equal to the initial principal amount of the certificates of a class minus the
sum of:
- the aggregate amount of principal paid to investors in that class before
that distribution date;
- the aggregate amount of investor losses of that class not reimbursed
before that distribution date; and
- the aggregate amount of losses of principal on investments of funds on
deposit for the benefit of that class in the Series Principal Funding
Account, if applicable.
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<PAGE> 55
"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 that class, up to the amount of interest on those funds the trust
is required to pay for that class.
"CLASS INVESTMENT SHORTFALL" will mean, with respect to each class with
respect to any distribution date during the Accumulation Period, an amount equal
to the positive difference, if any, between:
- one-twelfth of the product of:
- the interest rate for the class; and
- the amount on deposit in the Series Principal Funding Account for the
benefit of that class as of the end of the previous distribution date;
and
- Class Investment Income for the prior calendar month.
"CLASS INVESTOR INTEREST" will mean, on any distribution date, an amount
equal to the Class Invested Amount for the class, minus the aggregate amount on
deposit in the Series Principal Funding Account for the benefit of the class,
other than investment income.
"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 on the first day of the prior calendar
month and the denominator of which will be the greater of:
- the amount of Principal Receivables in the trust; and
- the Aggregate Investor Interest,
in each case on the first day of the prior calendar month; or
(ii) when used with respect to Principal Collections before a Fixed
Principal Allocation Event has occurred, 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 prior calendar month and the
denominator of which will be the greater of:
- the amount of Principal Receivables in the trust on the first day of
the prior calendar month; and
- 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 date
a Fixed Principal Allocation Event has occurred, 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 calendar month
before the Fixed Principal Allocation Event occurred, and the
denominator of which will be the greater of:
- the amount of Principal Receivables in the trust on the first day of
the calendar month preceding the distribution date, and
- 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
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<PAGE> 56
which will be the amount of the Class Investor Interest on the first
day of the prior calendar month and the denominator of which will be
the greater of:
- the amount of Principal Receivables in the trust on the first day of
the prior calendar month; and
- 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 calendar month before the
Amortization Event occurred, and the denominator of which will be the
greater of:
- the amount of Principal Receivables in the trust on the first day of
the calendar month preceding the distribution date; and
- 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:
- the Class Percentage with respect to Principal Collections for the
related distribution date; and
- the amount of Principal Collections for that day or for the prior
calendar month, as applicable.
"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 that day or for
the prior calendar month, as applicable.
"CLASS YIELD PERCENTAGE" will mean, on any distribution date:
- during the Revolving Period, the Accumulation Period and, if an Effective
Alternative Credit Support Election has been made, the Amortization
Period, the Class Investor Interest divided by the Series Investor
Interest, in each case as of the first day of the prior calendar month;
or
- if an Effective Alternative Credit Support Election has not been made,
during the Amortization Period, the amount of the Class Investor Interest
on the last day of the calendar month before the Amortization Event
occurred divided by the Series Investor Interest on the last day of the
calendar month before the Amortization Event occurred.
"COLLECTIONS ACCOUNT" will mean the non-interest bearing segregated trust
account established and maintained by the trustee with an office or branch of
the trustee or a Qualified Institution for the benefit of the investors in the
trust.
"CREDIT ENHANCEMENT ACCOUNT" will mean the non-interest bearing segregated
trust account established and maintained by the trustee with an office or branch
of the trustee or a Qualified Institution with respect to the credit
enhancement.
"CREDIT ENHANCEMENT AGREEMENT" will mean the agreement among the sellers,
the master servicer, the trustee and a Credit Enhancement Provider with respect
to the credit enhancement.
"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 Account for the prior calendar month
pursuant to the Credit Enhancement Agreement.
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"CREDIT ENHANCEMENT PROVIDER" will mean, collectively, the one or more
lenders that will make a loan to provide the initial funds on deposit in the
Credit Enhancement Account.
"DFS" will mean Discover Financial Services, Inc.
"EFFECTIVE ALTERNATIVE CREDIT SUPPORT ELECTION" will mean an Alternative
Credit Support Election that has become effective in accordance with the Series
Supplement.
"ELIGIBLE RECEIVABLE" will mean each Receivable:
- which is payable in United States dollars;
- which was created in compliance, in all material respects, with all
requirements of law applicable to the seller and the servicer with
respect to that Receivable, and pursuant to a credit agreement that
complies, in all material respects, with all requirements of law
applicable to that seller and servicer;
- as to which, if the Receivable was created before October 27, 1993, or
the relevant addition date if the Account was added to the trust after
October 27, 1993,
- at the time the Receivable was created, the seller of the Receivable
had good and marketable title to the Receivable free and clear of all
liens arising under or through the seller, and
- at the time the Seller conveyed the Receivable to the trust, the
seller had, or the trust will have, good and marketable title to the
Receivable free and clear of all liens arising under or through the
seller;
- as to which, if the Receivable was created on or after October 27, 1993
or the relevant addition date if the Account was added to the trust after
October 27, 1993, at the time the Receivable was created, the trust will
have good and marketable title to the Receivable free and clear of all
liens arising under or through the seller with respect to the Receivable;
and
- which constitutes an "account" or "general intangible" under and as
defined in Article 9 of the UCC as then in effect in the state in which
the chief executive office of the seller of that Receivable is located.
"ESTIMATED INVESTMENT SHORTFALL" will mean, on any date of determination,
the positive difference between:
- the interest rate for the class for whose benefit the amounts on deposit
in the Series Principal Funding Account are held as of the date of
determination; and
- the weighted average yield, expressed as a Money Market Yield, on the
investments in the Series Principal Funding Account as of the date of
determination.
"ESTIMATED YIELD" will mean, on any date of determination, the Portfolio
Yield for the immediately preceding calendar month, less 2.00%.
"FINANCE CHARGE COLLECTIONS" for any calendar month will mean the sum of:
(a) the lesser of:
- the aggregate amount of Finance Charge Receivables for the preceding
calendar month and
- collections actually received in the applicable calendar month; and
(b) all amounts received during the calendar month with respect to
Receivables in the trust that have previously been charged-off as uncollectible,
including all proceeds from sales of those receivables by the trust to third
parties pursuant to the Pooling and Servicing Agreement.
"FINANCE CHARGE RECEIVABLES" will mean, for any Account for any calendar
month,
- the net amount billed by the servicer during that month as periodic
finance charges on the Account and cash advance fees, annual membership
fees, if any, fees for transactions that exceed the credit
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limit on the Account, late payment charges billed during that month to
the Account and any other charges that the servicer may designate as
"Finance Charge Receivables" from time to time, provided that the
servicer will not designate amounts owing for the payment of goods and
services or cash advances as "Finance Charge Receivables," minus
- if the Account becomes a Charged-Off Account during that month, the
cumulative, uncollected amount previously billed by the servicer to the
Account as periodic finance charges, cash advance fees, annual membership
fees, if any, fees for transactions that exceed the credit limit on the
Account, late payment charges and any other type of charges that the
servicer has designated as "Finance Charge Receivables" with respect to
Accounts that are not Charged-Off Accounts.
"FIXED PRINCIPAL ALLOCATION EVENT" will mean the earliest of:
- if the Series Available Principal Amount is less than zero on any
distribution date during the Accumulation Period, the first day of the
month in which that distribution date occurred;
- the date on which an Amortization Event occurs; and
- a date selected by the master servicer, if any.
If the master servicer establishes a date for a Fixed Principal Allocation
Event, the master servicer will provide notification of that date to Greenwood,
the trustee, the Credit Enhancement Provider and the Rating Agencies no later
than two business days before that date.
"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 that account for the benefit of any series in Group One, but
before that amount is withdrawn from the Group One Principal Collections
Reallocation Account and deposited into the Collections Account pursuant to 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 this
series, in each case for that distribution date.
"GROUP EXCESS SPREAD PERCENTAGE" will mean, for any distribution date:
- the Group Excess Spread, multiplied by twelve, divided by
- the sum of the series investor interests for all series in Group One as
of the first day of the prior calendar month.
"GROUP ONE COLLECTIONS ACCOUNT" will mean the non-interest bearing
segregated trust account for collections allocated to Group One established and
maintained by the trustee with an office or branch of the trustee or a Qualified
Institution for the benefit of the certificateholders in each series that is a
member of Group One.
"GROUP ONE FINANCE CHARGE COLLECTIONS REALLOCATION ACCOUNT" will mean the
non-interest bearing segregated trust account for reallocated Finance Charge
Collections and other income for Group One established and maintained by the
trustee with an office or branch of the trustee or a Qualified Institution for
the benefit of the certificateholders of each series that is a member of Group
One.
"GROUP ONE PRINCIPAL COLLECTIONS REALLOCATION ACCOUNT" will mean the
non-interest bearing segregated trust account for reallocated Principal
Collections for Group One established and maintained by the trustee with an
office or branch of the trustee or a Qualified Institution for the benefit of
the certificateholders of each series that is a member of Group One.
"GROUP PRINCIPAL ALLOCATION EVENT" will mean the first distribution date,
if any, on which:
- 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 or its early accumulation period,
if applicable, is less than
- the Group Required Principal Amount for that distribution date.
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"GROUP REQUIRED PRINCIPAL AMOUNT" will mean, with respect to Group One, for
any distribution date, the sum of the Series Required Principal Amounts for that
distribution date for each series that is a member of Group One that is in its
controlled liquidation period or accumulation period, as applicable.
"HIGHEST RATING" will mean, for purposes of the definition of Permitted
Investments, with respect to Moody's, P-1 or Aaa, and, with respect to Standard
& Poor's, A-1+ or AAA, or with respect to either Standard & Poor's or Moody's,
any rating category that will not cause the Rating Agency to reduce or withdraw
its rating on any class of any series then outstanding, as confirmed in writing
by the applicable Rating Agency.
"LIBOR" will mean, for any interest accrual period, the rate determined by
the trustee two business days before the beginning of the interest accrual
period as follows:
- If a rate for one-month deposits in United States dollars appears on
Telerate Page 3750 as of 11:00 a.m., London time, on that day, then LIBOR
will be the rate that appears on that page.
- If no rate appears on Telerate Page 3750 as described above on that day,
the trustee will request the principal London office of four major banks
in the London interbank market to provide a quotation of the rate, at
approximately 11:00 a.m., London time, on that day, at which it would
offer one-month dollar deposits in U.S. dollars to prime banks in the
London interbank market.
- If at least two banks provide the requested quotations, then LIBOR will
be the arithmetic mean of the quotations.
- If fewer than two banks provide the requested quotations as described
above, the trustee will request four major banks in New York City to
provide a quotation of the rate, at approximately 11:00 a.m., New York
City time, on that day, at which it would offer one-month loans in U.S.
dollars to leading European banks, and LIBOR will be the arithmetic mean
of those quotations.
"MASTER SERVICER TERMINATION EVENT" will mean an event that will give
either the trustee or investors holding certificates representing at least 51%
of the class invested amount for any class of any series then outstanding that
is materially adversely affected by the event the right to:
- terminate the master servicer's rights and obligations under the Pooling
and Servicing Agreement and any series supplement then outstanding, and
- cause the trustee to appoint a successor master servicer.
These events include certain breaches of representations, warranties or
covenants, or certain events of insolvency with respect to the master servicer.
We describe these events in more detail in the prospectus under
"Servicing -- Master Servicer Termination Events."
"MAXIMUM CLASS B CREDIT ENHANCEMENT AMOUNT" will mean:
- on any distribution date before the master servicer makes an Effective
Alternative Credit Support Election, the greater of:
- $ ;
- if a Supplemental Credit Enhancement Event has not occurred, an amount
equal to % of the Series Investor Interest as of the last day of the
prior calendar month; and
- if a Supplemental Credit Enhancement Event has occurred, an amount
equal to % of the Series Investor Interest as of the last day of the
prior calendar month; or
- on any distribution date after the master servicer has made an Effective
Alternative Credit Support Election, the greater of:
- $ ; and
- an amount equal to % of the Series Investor Interest as of the last
day of the prior calendar month;
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provided, however, that if an Amortization Event occurs with respect to this
series, the Maximum Class B Credit Enhancement Amount for each distribution date
after the Amortization Event will equal the Maximum Class B Credit Enhancement
Amount for the distribution date immediately before 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 that credit enhancement drawing,
the Maximum Class B Credit Enhancement Amount will be the Maximum Class B Credit
Enhancement Amount as of the date of that credit enhancement drawing.
"MINIMUM PRINCIPAL RECEIVABLES BALANCE" will mean, on any date of
determination, an amount equal to the sum of the series minimum principal
receivables balances for each series then outstanding.
"MONEY MARKET YIELD" will 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:
<TABLE>
<S> <C> <C>
D x 360 x 100
Money Market Yield = -------------
360 - (D x M)
</TABLE>
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.
"PERMITTED INVESTMENTS" will mean:
(i) negotiable instruments or securities represented by instruments in
bearer or registered form which evidence:
(a) obligations issued or fully guaranteed, as to timely payment, by the
United States of America or any instrumentality or agency of the
United States of America, when those obligations are backed by the
full faith and credit of the United States of America;
(b) time deposits in, or bankers' acceptances issued by, any depository
institution or trust company:
- incorporated under the laws of the United States of America or any
state of the United States, or which is a domestic branch of a
foreign bank,
- subject to supervision and examination by federal or state banking
or depository institution authorities; and
- that has, at the time the trust invests or contractually commits to
invest in its time deposits or bankers' acceptances, the Highest
Rating on its short-term deposits or commercial paper or, if its
short-term deposits or commercial paper are unrated, the Highest
Rating on its long-term unsecured debt obligations;
(c) commercial paper or other short-term obligations having the Highest
Rating at the time the trust invests or contractually commits to
invest in that commercial paper or other short-term obligations; or
(d) investments in money market funds having the Highest Rating;
(ii) demand deposits in the name of the trust or the trustee in any
depository institution or trust company referred to in clause (i)(b)
above;
(iii) shares of an open end diversified investment company that is
registered under the Investment Company Act of 1940, as amended, and
that:
(a) invests its assets exclusively in obligations of or guaranteed by
the United States of America or any instrumentality or agency of the
United States of America, having in each instance a
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final maturity date of less than one year from their date of
purchase, or other Permitted Investments;
(b) seeks to maintain a constant net asset value per share; and
(c) has aggregate net assets of not less than $100,000,000 on the date
the trust purchases those shares.
These securities will not be represented by an instrument, will be
registered in the name of the trustee upon books maintained for that
purpose by or on behalf of the issuer of these securities and will be
identified on books maintained for that purpose by the trustee as held
for the benefit of the trust or the investors. The trust may only invest
in these securities if they will not result in a reduction or withdrawal
of the rating of any class of any series then outstanding, as confirmed
in writing by the Rating Agencies;
(iv) a guaranteed investment contract -- guaranteed as to timely
payment -- the terms of which meet the criteria of the Rating Agencies
and with an entity whose credit standards meet the criteria of the
Rating Agencies necessary to preserve the rating of each class of each
series then outstanding; and
(v) repurchase agreements transacted with either
(a) an entity subject to the United States federal bankruptcy code,
provided that:
(1) the term of the repurchase agreement is consistent with the
requirements set forth in Section 4.02(c) of the Pooling and
Servicing Agreement with regard to the maturity of Permitted
Investments or is due on demand,
(2) the trustee or a third party acting solely as agent for the
trustee has possession of the collateral,
(3) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the trustee, the trustee on behalf
of the trust has a perfected first priority security interest in
the collateral,
(4) the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with the
standards of the Rating Agencies,
(5) the failure to maintain the requisite collateral level will
obligate the trustee to liquidate the collateral immediately,
(6) the securities subject to the repurchase agreement are
certificates of deposit, bankers acceptances or obligations of,
or fully guaranteed as to principal and interest by, the United
States of America or an agency of the United States of America,
(7) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the Trustee, the securities subject
to the repurchase agreement are free and clear of any third party
lien or claim; or
(b) a financial institution insured by the FDIC, or any broker-dealer
with "retail customers" that is under the jurisdiction of the
Securities Investors Protection Corp., or SIPC, provided that:
(1) the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with the
standards of the Rating Agencies,
(2) the trustee or a third party acting solely as agent for the
trustee has possession of the collateral,
(3) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the trustee, the trustee on behalf
of the trust has a perfected first priority security interest in
the collateral,
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(4) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the trustee, the collateral is free
and clear of third party liens; and, in the case of an SIPC
broker, was not acquired pursuant to a repurchase or reverse
repurchase agreement and
(5) failure to maintain the requisite collateral percentage will
obligate the trustee to liquidate the collateral.
At the time the trust invests or contractually commits to invest in any
repurchase agreement, the entity or institution must have the Highest
Rating on its short-term deposits or commercial paper or, if its
short-term deposits or commercial paper are unrated, the Highest Rating
on its long-term unsecured debt obligations. Permitted Investments will
include, without limitation, securities of Greenwood or any of its
affiliates which otherwise qualify as a Permitted Investment under
clause (i), (ii), (iii), (iv) or (v) above.
"POOLING AND SERVICING AGREEMENT" will mean the Pooling and Servicing
Agreement dated as of October 1, 1993, by and between Greenwood Trust Company,
as master servicer, servicer and seller, and U.S. Bank National Association,
formerly First Bank National Association, successor trustee to Bank of America
Illinois, formerly Continental Bank, National Association, as trustee, as that
agreement may be amended or supplemented from time to time.
"PORTFOLIO YIELD" will mean, with respect to any calendar month, the
annualized percentage equivalent of a fraction, the numerator of which will be
the sum of:
- the amount of Finance Charge Collections received during that month;
- the amount of Series Yield Collections for each series then outstanding,
including this series, for that month; and
- the amount of Series Additional Funds for each series then outstanding,
including this series, for that month;
and the denominator of which will be the total amount of Principal Receivables
in the trust as of the first day of that month.
"PRINCIPAL COLLECTIONS" will mean, for any calendar month, all collections
other than Finance Charge Collections.
"PRINCIPAL RECEIVABLE" will mean each Receivable other than Finance Charge
Receivables.
"QUALIFIED INSTITUTION" will mean a depository institution organized under
the laws of the United States of America or any one of the states of the United
States of America that at all times has a short-term certificate of deposit
rating of A-1 or better by Standard & Poor's and P-1 or better by Moody's, and
whose deposits are insured by the FDIC.
"RATING AGENCY" will mean Moody's or Standard & Poor's, and "Rating
Agencies" will mean Moody's and Standard & Poor's.
"RECEIVABLE" will mean any amounts owing by the obligor under an Account
from time to time, including, without limitation, amounts owing for the payment
of goods and services, cash advances, finance charges and other charges, if any.
A Receivable will be deemed to have been created at the end of the day on the
date the servicer first records the transaction on the cardmember master file of
the accounts maintained by the servicer or on the servicer's behalf, without
regard to the effective date of recordation. A Receivable will not include any
amount owing under a Charged-Off Account or an Account the Receivables in which
have been repurchased pursuant to the Pooling and Servicing Agreement. Reference
to a "receivable" will include any amount owing by an Obligor under a
Charged-Off Account or an Account in which the Receivables have been repurchased
pursuant to the Pooling and Servicing Agreement.
"REQUIRED DAILY DEPOSIT" will mean, for any servicer that is required
during any month to deposit collections into the Collections Account on a daily
basis pursuant to the Pooling and Servicing Agreement,
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amounts that will be available to pay interest and principal, as applicable,
under the cash flows for this series, up to that servicer's proportionate share
of the interest and principal expected to be paid to investors in this series on
the related distribution date, as more fully specified in the Series Supplement.
"REVOLVING PERIOD" will mean the period from to, but not
including, the earliest to occur of:
- the beginning of the Accumulation Period; or
- the date an Amortization Event occurs.
"SELLER CERTIFICATE" will mean:
- if a seller elects to evidence its interest in the trust in certificated
form pursuant to the Pooling and Servicing Agreement, the certificate
executed by Greenwood and authenticated by the trustee, or
- an uncertificated interest in the trust as evidenced by a recording in
the books and records of the trustee,
in each case representing a residual interest in the assets of the trust not
represented by the certificates of any series.
"SELLER CERTIFICATE OWNERSHIP AGREEMENT" will mean, if applicable, the
agreement entered into by Greenwood, as seller, and any Additional Seller, as
that agreement may be amended or supplemented from time to time.
"SELLER INTEREST" will mean, for any Trust Distribution Date or
distribution date, the aggregate amount of Principal Receivables in the Trust at
the end of the previous calendar month minus the Aggregate Investor Interest at
the end of that day; provided, however, that the Seller Interest will not be
less than zero.
"SELLER PERCENTAGE" will mean, on any date of determination, for any
specified category, an amount equal to 100% minus the applicable Aggregate
Investor Percentage for that category.
"SERIES ADDITIONAL FUNDS" will mean this series' share of any Additional
Funds in the trust.
"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 that distribution date -- and if more than one series has the same Series
Investor Interest on that distribution date, beginning with whichever of those
series has the longest time remaining in its controlled liquidation period or
accumulation period, as applicable, assuming that no amortization event or early
accumulation event occurs with respect to that series -- an amount equal to:
- the Group Available Principal Amount; less
- the Series Required Principal Amount less the amount of such series'
scheduled principal payment or deposit, plus prior shortfalls, as
applicable, that was funded on that distribution date, including any
portion of that amount that was funded by amounts withdrawn from the
Group One Principal Collections Reallocation Account pursuant to the
Series Supplement for that series.
For purposes of calculating the Series Available Principal Amount for each other
such series, the Group Available Principal Amount will be reduced by the Series
Available Principal Amount for the prior series for which the Series Available
Principal Amount was calculated.
"SERIES CLOSING DATE" will mean .
"SERIES COLLECTIONS ACCOUNT" will mean the non-interest bearing segregated
trust account for collections allocated to this series, established and
maintained by the trustee with an office or branch of the trustee or a Qualified
Institution for the benefit of the investors in this series.
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"SERIES DISTRIBUTION ACCOUNT" will mean a non-interest bearing segregated
trust account established and maintained by the trustee with an office or branch
of the trustee or a Qualified Institution for the benefit of the investors of
this series.
"SERIES EXCESS SPREAD" will mean, for any distribution date, an amount
equal to:
- the sum of Series Finance Charge Collections, Series Yield Collections,
Series Additional Funds and any Class Investment Income for any class of
this series; minus
- the sum of:
- the monthly interest for each class of this series;
- the monthly servicing fee for each class of this series;
- the product of the Series Percentage with respect to the Charged-Off
Amount and the Charged-Off Amount; and
- the Credit Enhancement Fee,
in each case for the distribution date.
"SERIES EXCESS SPREAD PERCENTAGE" will mean, for any distribution date:
- the Series Excess Spread, multiplied by twelve, divided by
- the Series Investor Interest as of the first day of the prior calendar
month.
"SERIES FINANCE CHARGE COLLECTIONS" will mean the sum of the amount of
Class Finance Charge Collections for each class for any day or, with respect to
any distribution date or Trust Distribution Date, for the prior calendar month.
"SERIES INTEREST FUNDING ACCOUNT" will mean the non-interest bearing
segregated trust account for interest to be paid to the investors in this
series, established and maintained by the trustee with an office or branch of
the trustee or a Qualified Institution for the benefit of the investors in this
series.
"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 that
distribution date.
"SERIES INVESTMENT INCOME" will mean the Class A Investment Income plus the
Class B Investment Income.
"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 that distribution date. On the Series Closing Date, the Series Investor
Interest will be $ .
"SERIES MINIMUM PRINCIPAL RECEIVABLES BALANCE" will mean, on any date of
determination, the sum of:
- if a Fixed Principal Allocation Event has not occurred, the Series
Investor Interest on such date of determination, divided by 0.93; or
- if a Fixed Principal Allocation Event has occurred, the Series Investor
Interest as of the date of the Fixed Principal Allocation Event, divided
by 0.93; and
- the product of:
- - the sum of (1) the amount on deposit in the Series Principal Funding Account
on the date of determination and (2) for any date of determination during the
Accumulation Period, the scheduled principal deposit, and any shortfalls from
prior months, for the next distribution date; and
- - 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 0.93;
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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 divisor set forth
above -- 0.93 -- subject to the condition that Greenwood shall have been
notified by the Rating Agencies that the Rating Agencies would not lower or
withdraw their ratings on any class of any series then outstanding because of
the reduction, and provided, further, that Greenwood may not increase the
divisor set forth above to more than 0.98.
"SERIES PERCENTAGE" will mean, with respect to any specified category
described in clauses (i)-(v) of the definition of "Class Percentage," 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 that
category on that distribution date or Trust Distribution Date, as applicable.
"SERIES PRINCIPAL COLLECTIONS" will mean the sum of the amount of Class
Principal Collections for each class for any day or, with respect to any
distribution date or Trust Distribution Date, for the prior calendar month.
"SERIES PRINCIPAL COLLECTIONS ACCOUNT" will mean a non-interest bearing
segregated trust account for this series established and maintained by the
trustee with an office or branch of the trustee or a Qualified Institution for
the benefit of the investors in this series.
"SERIES PRINCIPAL FUNDING ACCOUNT" will mean the non-interest bearing
segregated trust account for principal to be paid to the investors in this
series, established and maintained by the trustee with an office or branch of
the trustee or a Qualified Institution for the benefit of the investors in this
series.
"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:
- if the distribution date is not in March, 125%; or
- if the distribution date is in March, 105%,
of the scheduled principal payment or deposit, plus prior shortfalls, as
applicable, for the series for that distribution date.
"SERIES SUPPLEMENT" will mean the Series Supplement to the Pooling and
Servicing Agreement, dated as of between Greenwood and the trustee,
that establishes each series of certificates.
"SERIES TERMINATION DATE" will mean the first business day following
or, if is not a business day, the second business day
following .
"SERIES YIELD COLLECTIONS" will mean those Series Principal Collections
that the master servicer has elected to recharacterize as Finance Charge
Collections, and will be an amount equal to the product of the Series Yield
Factor and the amount of Series Principal Collections for any day or, with
respect to any distribution date, for the prior calendar month.
"SERIES YIELD FACTOR" will initially be zero, but may be increased by the
master servicer pursuant to the terms of the Series Supplement for this series.
"SERVICER TERMINATION EVENT" will mean an event that will give either the
trustee or investors holding certificates representing at least 51% of the class
invested amount for any class of any series then outstanding that is materially
adversely affected by the event the right to:
- terminate the servicer's rights and obligations under the Pooling and
Servicing Agreement and any series supplement then outstanding, and
- cause the trustee to appoint a successor servicer.
These events include certain breaches of representations, warranties or
covenants, or certain events of insolvency with respect to the servicer. We
describe these events in more detail in the prospectus under
"Servicing -- Servicer Termination Events."
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"SUPPLEMENTAL CREDIT ENHANCEMENT AMOUNT" will mean the lesser of:
- $ before an Effective Alternative Credit Support Election; or
- zero after an Effective Alternative Credit Support Election; and
- the difference between the Maximum Class B Credit Enhancement Amount,
after giving effect to the occurrence of a Supplemental Credit
Enhancement Event, and the Available Class B Credit Enhancement Amount,
immediately before giving effect to the occurrence of a Supplemental
Credit Enhancement Event.
"SUPPLEMENTAL CREDIT ENHANCEMENT EVENT" will occur the first time the
long-term debt or deposit rating of Greenwood or any Additional Seller is
withdrawn or reduced below BBB- by Standard & Poor's.
"SUPPLEMENTAL SUBORDINATED AMOUNT" will mean:
- $ before an Effective Alternative Credit Support Election; or
- zero after an Effective Alternative Credit Support Election.
"TELERATE PAGE 3750" will mean the display page so designated on Bridge
Telerate Inc., or any other page that may replace that page on that service or a
successor service for the purpose of displaying comparable rates or prices.
"TRUST DISTRIBUTION DATE" will mean November 10, 1993 and the tenth day of
each calendar month thereafter, or, if that tenth day is not a business day, the
next succeeding business day.
"YIELD COLLECTIONS" will mean the sum of the series yield collections for
each series in the trust.
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ANNEX A
CASH FLOWS
We have summarized the cash flow provisions for this series and we have
used familiar terms in this summary instead of the more complex defined terms
that the Series Supplement uses. You should review the complete cash flows in
the form of Series Supplement that we filed with the registration statement for
these securities. References to interest, servicing fees and charged-off amounts
can include amounts that the trust did not fully pay, deposit or reimburse in
prior months, and are therefore carried forward. Although the cash flows account
for subordinate series, no subordinate series are currently outstanding.
FUNDS DISTRIBUTED TO THIS 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:
- Series Finance Charge Collections for the preceding month; and
- Series Principal Collections for the preceding month.
The trustee will also deposit into the Series Collections Account:
- Class A Additional Funds, if any; and
- Class B Additional Funds, if any.
The trustee will deposit funds into and distribute funds from the Series
Collections Account as described below.
DISTRIBUTION AND APPLICATION OF FUNDS. On or before each distribution
date, the master servicer will direct the trustee to allocate funds in the order
set forth below, to the extent funds are available:
(1) INTEREST DEPOSIT. If the trust has earned interest on the Series
Principal Funding Account in the prior month, the trustee will deposit the
investors' share of this interest into the Series Collections Account.
(2) CLASS A INTEREST AND SERVICING FEES. The trust will use
- Class A Finance Charge Collections and
- other Class A income, if any, including Class A Additional Funds,
interest on the Series Principal Funding Account and Class A Yield
Collections
to deposit Class A interest and servicing fees. (To the Series Distribution
Account.)
(3) CLASS A INTEREST AND SERVICING FEES. If the trust cannot deposit Class
A interest and servicing fees in full in step (2), it will also use
- funds available from a subordinate series, if any, to pay the
shortfall
to deposit Class A interest and servicing fees. (To the Series Distribution
Account.)
(4) CLASS A CHARGE-OFFS. The trust will use
- Class A Finance Charge Collections remaining after step (2), and
- other Class A income, if any, remaining after step (2)
to reimburse Class A charge-offs. (To the Series Principal Collections
Account.)
(5) CLASS A CHARGE-OFFS. If the trust cannot reimburse Class A charge-offs
in full in step (4), it also will use
- funds available to reimburse the shortfall from a subordinate series,
if any,
to reimburse Class A charge-offs. (To the Series Principal Collections
Account.)
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(6) CLASS A INTEREST AND SERVICING FEES. If the trust cannot deposit Class
A interest and servicing fees in full in steps (2) and (3), it will also
use
- Class B Finance Charge Collections,
- other Class B income, including Class B Additional Funds and Class B
Yield Collections, if any, and
- Class B Principal Collections
to deposit Class A interest and servicing fees. In this step, the trust
will only use Class B Finance Charge Collections and other Class B income
up to the amount of monthly Class B interest and servicing fees, and the
trust will only use these Class B amounts, including Class B Principal
Collections, up to the Available Subordinated Amount. The Available
Subordinated Amount will decline by the amount used in this step. (To the
Series Distribution Account.)
(7) CLASS A CHARGE-OFFS. If the trust cannot reimburse Class A charge-offs
in full in steps (4) and (5), it will also use
- Class B Finance Charge Collections remaining after step (6),
- other Class B income remaining after step (6), and
- Class B Principal Collections remaining after step (6)
to reimburse Class A charge-offs. In this step, the trust will only use
Class B Finance Charge Collections and other Class B income up to the
amount of monthly Class B interest and servicing fees minus the amount used
in step (6), and the trust will only use Class B amounts, including Class B
Principal Collections, up to the Available Subordinated Amount. The
Available Subordinated Amount will decline by the amount used in this step.
(To the Series Principal Collections Account.)
(8) CLASS B INTEREST AND SERVICING FEES. The trust will use
- Class B Finance Charge Collections remaining after steps (6) and (7),
and
- other Class B income remaining after steps (6) and (7)
to deposit Class B interest and servicing fees. In this step, the trust
will only use Class B Finance Charge Collections and other Class B income
up to the amount equal to:
- the Class B interest and servicing fees, minus
- the amount used in steps (6) and (7).
(To the Series Distribution Account.)
(9) CLASS B INTEREST AND SERVICING FEES. If the trust cannot deposit Class
B interest and servicing fees in full in step (8), it will also use
- funds remaining available after steps (3) and (5) to pay the shortfall
from a subordinate series, if any
to deposit Class B interest and servicing fees. (To the Series Distribution
Account.)
(10) CLASS B CHARGE-OFFS. The trust will use
- funds remaining available to reimburse charge-offs after steps (3),
(5) and (9) from a subordinate series, if any,
to reimburse Class B charge-offs. (To the Series Principal Collections
Account.)
(11) CLASS A INTEREST AND SERVICING FEES. If the trust cannot deposit
Class A interest and servicing fees in full in steps (2), (3), and (6), it
will also use
- Class B Finance Charge Collections remaining after step (8), and
- other Class B income remaining after step (8)
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to deposit Class A interest and servicing fees. The trust will only use
these Class B amounts up to the Available Subordinated Amount; the
Available Subordinated Amount will decline by the amount used in this step.
(To the Series Distribution Account.)
(12) CLASS A CHARGE-OFFS. If the trust cannot reimburse Class A
charge-offs in full in steps (4), (5) and (7), it will also use
- Class B Finance Charge Collections remaining after step (11), and
- other Class B income remaining after step (11)
to reimburse Class A charge-offs. The trust will only use these Class B
amounts up to the Available Subordinated Amount; the Available Subordinated
Amount will decline by the amount used in this step. (To the Series
Principal Collections Account.)
(13) CLASS A CHARGE-OFFS. If the trust cannot reimburse Class A
charge-offs in full in steps (4), (5), (7) and (12), it will reallocate
- the Class B Investor Interest
to reimburse Class A charge-offs. The trust will only reallocate the Class
B Investor Interest up to the Available Subordinated Amount; the Available
Subordinated Amount will decline by the amount used in this step. (To the
Series Principal Collections Account.)
(14) CLASS B INTEREST AND SERVICING FEES. If the trust cannot deposit
Class B interest and servicing fees in full in steps (8) and (9), it will
also use
- Class A Finance Charge Collections remaining after step (4),
- other Class A income remaining after step (4),
- Class B Finance Charge collections remaining after step (12), and
- other Class B income remaining after step (12)
to deposit Class B interest and servicing fees. (To the Series Distribution
Account.)
(15) CLASS B CHARGE-OFFS. If the trust cannot reimburse Class B
charge-offs in full in step (10), it will also use
- Class A Finance Charge Collections remaining after step (14),
- other Class A income remaining after step (14),
- Class B Finance Charge Collections remaining after step (14), and
- other Class B income remaining after step (14)
to reimburse Class B charge-offs. (To the Series Principal Collections
Account.)
(16) CREDIT ENHANCEMENT. The trust will use
- Class A Finance Charge Collections remaining after step (15),
- other Class A income remaining after step (15),
- Class B Finance Charge Collections remaining after step (15), and
- other Class B income remaining after step (15)
to increase the Available Class B Credit Enhancement Amount to the Maximum
Class B Credit Enhancement Amount. The Available Subordinated Amount will
increase by the amount deposited in this step. (To the Credit Enhancement
Account.)
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(17) CLASS B INTEREST AND SERVICING FEES. If the trust cannot deposit
Class B interest and servicing fees in full in steps (8), (9) and (14), it
will also use
- the Available Class B Credit Enhancement Amount
to deposit Class B interest and servicing fees. (To the Series Distribution
Account.)
(18) CLASS B CHARGE-OFFS. If the trust cannot reimburse Class B
charge-offs in full in steps (10) and (15), it will also use
- the Available Class B Credit Enhancement Amount remaining after step
(17)
to reimburse Class B charge-offs. (To the Series Principal Collections
Account.)
(19) CREDIT ENHANCEMENT FEE. The trust will use
- Class A Finance Charge Collections remaining after step (16),
- other Class A income remaining after step (16),
- Class B Finance Charge Collections remaining after step (16), and
- other Class B income remaining after step (16)
to pay fees and interest to the Credit Enhancement Provider. (To the
trustee; to be applied in accordance with the Credit Enhancement
Agreement.)
(20) REALLOCATION TO OTHER SERIES. The trust will reallocate
- Class A Finance Charge Collections remaining after step (19),
- other Class A income remaining after step (19),
- Class B Finance Charge Collections remaining after step (19), and
- other Class B income remaining after step (19)
to pay or deposit interest and servicing fees and to reimburse charge-offs
for other series in Group One. (To the Group One Finance Charge Collections
Reallocation Account.)
(21) CLASS A INTEREST AND SERVICING FEES. If the trust cannot deposit
Class A interest and servicing fees in full in steps (2), (3), (6) and
(11), it will also use
- a pro rata share of funds from other series in the Group One Finance
Charge Collections Reallocation Account
to deposit Class A interest and servicing fees. (To the Series Distribution
Account.) The pro rata share equals:
- the amount of Class A interest and servicing fees not deposited after
step (11), divided by
- the amount of Class A interest and servicing fees not deposited for
all series in Group One after step (11) of the cash flows for each
series, or an equivalent step.
(22) CLASS A CHARGE-OFFS. If the trust cannot reimburse Class A charge-offs
in full in steps (4), (5), (7), (12) and (13), it will also use
- a pro rata share of funds from other series remaining in the Group One
Finance Charge Collections Reallocation Account after step (21) for
each series, or an equivalent step,
to reimburse Class A charge-offs. (To the Series Principal Collections
Account.) The pro rata share equals:
- the amount of Class A charge-offs unreimbursed after step (13),
divided by
- the amount of Class A charge-offs unreimbursed for all series in Group
One after step (13) of the cash flows for each series, or an
equivalent step.
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(23) CLASS B INTEREST AND SERVICING FEES. If the trust cannot deposit
Class B interest and servicing fees in full in steps (8), (9), (14) and
(17), it will also use:
- a pro rata share of funds from other series remaining in the Group One
Finance Charge Collections Reallocation Account after step (22) of the
cash flows for each series, or an equivalent step,
to deposit Class B interest and servicing fees. (To the Series Distribution
Account.) The pro rata share equals:
- the amount of Class B interest and servicing fees not deposited after
step (17), divided by
- the amount of Class B interest and servicing fees not deposited for
all series in Group One after step (17) of the cash flows for each
series, or an equivalent step.
The Available Subordinated Amount will be increased by the amount deposited
in this step.
(24) CLASS B CHARGE-OFFS. If the trust cannot reimburse Class B
charge-offs in full in steps (10), (15), and (18), it will also use
- a pro rata share of funds from other series remaining in the Group One
Finance Charge Collections Reallocation Account after step (23) of the
cash flows for each series, or an equivalent step,
to reimburse Class B charge-offs. (To the Series Principal Collections
Account.) The pro rata share equals:
- the amount of Class B charge-offs unreimbursed after step (18),
divided by
- the amount of Class B charge-offs unreimbursed for all series in Group
One after step (18) of the cash flows for each series, or an
equivalent step.
The Available Subordinated Amount will be increased by the amount deposited
in this step.
(25) INTEREST, SERVICING FEES AND CHARGE-OFFS FOR OTHER SERIES. If the
trust cannot deposit the interest and servicing fees, or reimburse the
charge-offs, for junior classes -- such as Class C, if any -- of all other
series in Group One in accordance with earlier cash flows steps for those
series, the trust will use
- funds remaining in the Group One Finance Charge Collections
Reallocation Account after step (24) of the cash flows for each
series, or an equivalent step,
to deposit the interest and servicing fees, and reimburse the charge-offs,
for those junior classes in accordance with the cash flow provisions for
those series.
(26) CREDIT ENHANCEMENT FOR OTHER SERIES. If the available Class A credit
enhancement amount is less than the maximum Class A credit enhancement
amount, or the available shared credit enhancement amount is less than
maximum shared credit enhancement amount for any other series in Group One,
the trust will use funds remaining in the Group One Finance Charge
Collections Reallocation Account after step (25) of the cash flows for each
series, or an equivalent step, to increase the available Class A credit
enhancement amount or the available shared credit enhancement amount, as
applicable, to the maximum Class A credit enhancement or the maximum shared
credit enhancement amount, as applicable, for each such series.
(27) CREDIT ENHANCEMENT. If the Available Class B Credit Enhancement
Amount is less than the Maximum Class B Credit Enhancement Amount after
steps (16), (17) and (18), the trust will use
- a pro rata share of funds from other series remaining in the Group One
Finance Charge Collections Reallocation Account after step (26) of the
cash flows for each series, or an equivalent step,
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to increase the Available Class B Credit Enhancement Amount to the Maximum
Class B Credit Enhancement Amount. (To the Credit Enhancement Account.) The
pro rata share equals:
- the difference between the Maximum Class B Credit Enhancement Amount
and the Available Class B Credit Enhancement Amount after step (18),
divided by
- the sum of this difference for all series in Group One after step (18)
of the cash flows for each series, or an equivalent step.
The Available Subordinated Amount will increase by the amount deposited in
this step.
(28) PAYMENTS TO GREENWOOD AND THE CREDIT ENHANCEMENT PROVIDER. The trust
will use
- a pro rata share of funds from this series and other series remaining
in the Group One Finance Charge Collections Reallocation Account after
step (27) for each series, or an equivalent step,
to pay Greenwood and the Credit Enhancement Provider in accordance with the
Credit Enhancement Agreement. (To the trustee; to be applied in accordance
with the Credit Enhancement Agreement.) The pro rata share equals:
- the Series Investor Interest, divided by
- the series investor interests for all series in Group One.
(29) PRINCIPAL COLLECTIONS. The trustee will deposit
- funds remaining in the Series Collections Account after step (20)
into the Series Principal Collections Account. (To the Series Principal
Collections Account.)
(30) PRINCIPAL. The trust will use
- funds in the Series Principal Collections Account
to make the scheduled principal deposit during the Accumulation Period
or, in the Amortization Period, to pay the Series Investor Interest. (To
the Series Principal Funding Account.)
(31) PRINCIPAL. If the trust cannot make the scheduled principal deposit
during the Accumulation Period or, in the Amortization Period, pay the
Series Investor Interest in full in step (30), it will also use
- funds available to pay the shortfall from a subordinate series, if any
to make the scheduled principal deposit or pay the Series Investor
Interest. (To the Series Principal Funding Account.)
(32) REALLOCATION TO OTHER SERIES. The trust will reallocate
- funds remaining in the Series Principal Collections Account
to pay the scheduled principal payment or make the scheduled principal
deposit for other series in Group One. (To the Group One Principal
Collections Reallocation Account.)
(33) CLASS A PRINCIPAL. During the Accumulation Period only, if the trust
cannot make the scheduled principal deposit for Class A in full in steps
(30) and (31), it will also use
- a pro rata share of funds from other series in the Group One Principal
Collections Reallocation Account
to make the scheduled principal deposit for Class A. (To the Series
Principal Funding Account.) The pro rata share equals:
- the amount of the scheduled principal deposit for Class A that the
trust did not deposit in steps (30) and (31), divided by
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- the amount of the scheduled principal deposits or payments for Class A
of all series in Group One in their accumulation periods or controlled
liquidation periods, or in any period treated as an accumulation
period or controlled liquidation period for purposes of an equivalent
step of the cash flow provisions of the applicable other series, that
the trust did not pay or deposit in steps (30) and (31) of the cash
flows for each series in Group One, or equivalent steps.
(34) CLASS B PRINCIPAL. During the Accumulation Period only, if the trust
cannot make the scheduled principal deposit for Class B in full in steps
(30) and (31), it will also use
- a pro rata share of funds from other series remaining in the Group One
Principal Collections Reallocation Account after step (33) for each
series in Group One, or an equivalent step,
to make the scheduled principal deposit for Class B. (To the Series
Principal Funding Account.) The pro rata share equals
- the amount of the scheduled principal deposit for Class B that the
trust did not deposit in steps (30) and (31), divided by
- the amount of the scheduled principal deposits or payments for Class B
of all series in Group One in their accumulation periods or controlled
liquidation periods, or in any period treated as an accumulation
period or controlled liquidation period for purposes of an equivalent
step of the cash flow provisions of the applicable other series, that
the trust did not pay or deposit in steps (30) and (31) of the cash
flows for each series in Group One, or equivalent steps.
(35) PRINCIPAL FOR OTHER SERIES. If the trust cannot pay or deposit the
scheduled principal payment or deposit for junior classes -- such as Class
C, if any -- of all other series in Group One in their accumulation periods
or controlled liquidation periods in accordance with earlier cash flow
steps for those series, the trust will use
- funds remaining in the Group One Principal Collections Reallocation
Account after step (34), or an equivalent step,
to pay or deposit the scheduled principal payment or deposit for those
junior classes in accordance with the cash flow provisions for those
series.
(36) PRINCIPAL FOR OTHER SERIES. If the cash flow provisions for any other
series in Group One permit those series to use funds in the Group One
Principal Collections Reallocation Account to make unscheduled principal
payments or deposits, the trust will use funds remaining in the Group One
Principal Collections Reallocation Account after step (35), or an
equivalent step, to pay or deposit the unscheduled principal payment or
deposit for each of those series in accordance with the cash flow
provisions of those series.
(37) DEPOSIT TO THE COLLECTIONS ACCOUNT. The trustee will deposit
- funds remaining in the Group One Principal Collections Reallocation
Account after step (36) of the cash flows for each series in Group
One, or the steps described in step (36), or an equivalent step, into
the Collections Account. (To the Collections Account.)
(38) PAYMENT TO THE HOLDER OF THE SELLER CERTIFICATE. After the trust has
made all allocations for all of its series, it will use
- funds on deposit in the Collections Account to pay Greenwood, as the
holder of the Seller Certificate, the amount of the Seller Interest.
Any funds that remain in the Collections Account after this payment will
remain there until the next Trust Distribution Date, when the trust will
allocate them as Principal Collections.
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PAYMENTS
Interest and Servicing Fees. On or before each distribution date, after the
trustee applies the funds as described in "Cash Flows," the trustee, acting on
the master servicer's directions, will make the following deposits and payments
in the order set forth below, to the extent funds are available:
(1) CLASS A INTEREST. The trust will use:
- funds deposited into the Series Distribution Account for Class A
to deposit Class A interest. (To the Series Interest Funding Account.)
(2) CLASS A SERVICING FEES. The trust will use:
- funds remaining in the Series Distribution Account for Class A after
step (1)
to pay Class A servicing fees. (To the master servicer.)
(3) CLASS B INTEREST. The trust will use:
- funds deposited into the Series Distribution Account for Class B
to deposit Class B interest. (To the Series Interest Funding Account.)
(4) CLASS B SERVICING FEES. The trust will use:
- funds remaining in the Series Distribution Account for Class B after
step (3)
to pay Class B servicing fees. (To the master servicer.)
On each interest payment date the trustee will pay to Class A investors the
Class A interest deposited into the Series Interest Funding Account since the
last interest payment date, or, on the first interest payment date, since the
date the trust issued the certificates. On each interest payment date, the
trustee will also pay to Class B investors the Class B interest deposited into
the Series Interest Funding Account since the last interest payment date, or, on
the first interest payment date, since the date the trust issued the
certificates.
Principal. Unless an Amortization Event has occurred:
- on , or, if not a business day, the next business day, the
trustee will withdraw all amounts on deposit in the Series Principal
Funding Account, up to the Class A Invested Amount, and pay them to
the Class A investors; and
- on , or, if not a business day, the next business day, the
trustee will withdraw all funds remaining on deposit in the Series
Principal Funding Account, up to the Class B Invested Amount, and pay
them to the Class B investors.
If an Amortization Event has occurred, on each distribution date the
trustee will withdraw all funds from the Series Principal Funding Account and
pay them:
- first, to the Class A investors until the Class A Invested Amount is
reduced to zero; and then
- to the Class B investors until the Class B Invested Amount is reduced
to zero.
The trustee will not pay more than the Class A Invested Amount to the Class
A investors or more than the Class B Invested Amount to the Class B investors
from the funds in the account. The trustee will not pay any principal to the
Class B investors until it has paid the Class A investors the full amount of
their principal investment.
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ANNEX B
OTHER SERIES
The table below sets forth the principal characteristics of the Class A and
Class B certificates of all of the series the trust has issued that are
currently outstanding. All series are in Group One. For more specific
information with respect to any series, you should contact the master servicer
at (302) 323-7434. The master servicer will provide you, without charge, a copy
of the prospectus, prospectus supplement, if applicable, and Series Supplement,
without exhibits, for any publicly issued series.
<TABLE>
<CAPTION>
SERIES 1993-3 1994-2 1994-A 1995-1 1995-2
- ------------------------------- ------------------ ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A....................... $350,000,000 $850,000,000 $2,550,000,000 $600,000,000 $500,000,000
Class B....................... $16,493,000 $44,737,000 -- $31,579,000 $26,316,000
Interest Rate
Class A....................... 6.20% LIBOR + 0.35% Variable(3) LIBOR + 0.28% 6.55%
Class B....................... 6.45% 8.05% N/A LIBOR + 0.45% 6.75%
Initial Credit Enhancement(1)
Class A....................... 6.50% 10.00% 8.00% 11.00% 6.50%
Class B....................... 4.00% 5.00% N/A 6.00% 3.00%
Closing Date................... November 23, 1993 October 14, 1994 December 20, 1994 April 19, 1995 August 1, 1995
Expected Maturity Date
Class A....................... November 17, 2003 April 15, 2002 N/A August 16, 2004 August 15, 2000
Class B....................... December 15, 2003 May 15, 2002 N/A September 15, 2004 September 15, 2000
Type of Principal Payment(2)
Class A....................... Bullet Cont Liq Cont Liq Bullet Bullet
Class B....................... Bullet Bullet N/A Bullet Bullet
Series Termination Date........ May 16, 2006 October 16, 2004 June 16, 2004 February 16, 2007 February 18, 2003
</TABLE>
<TABLE>
<CAPTION>
SERIES 1995-3 1996-1 1996-2 1996-3 1996-4
- ------------------------------- ------------------ ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A....................... $500,000,000 $1,000,000,000 $900,000,000 $600,000,000 $1,000,000,000
Class B....................... $26,316,000 $52,632,000 $47,369,000 $31,579,000 $52,632,000
Interest Rate
Class A....................... LIBOR + 0.21% LIBOR + 0.17% LIBOR + 0.22% 6.05% LIBOR + 0.375%
Class B....................... LIBOR + 0.33% LIBOR + 0.30% LIBOR + 0.36% 6.25% LIBOR + 0.55%
Initial Credit Enhancement(1)
Class A....................... 11.00% 10.00% 11.00% 6.00% 11.00%
Class B....................... 6.00% 5.50% 6.00% 3.00% 6.00%
Closing Date................... September 28, 1995 January 18, 1996 January 29, 1996 February 21, 1996 April 30, 1996
Expected Maturity Date
Class A....................... September 16, 2002 January 15, 2001 January 15, 2003 February 15, 2006 April 15, 2011
Class B....................... October 15, 2002 February 15, 2001 February 17, 2003 March 15, 2006 May 16, 2011
Type of Principal Payment(2)
Class A....................... Bullet Bullet Bullet Bullet Bullet
Class B....................... Bullet Bullet Bullet Bullet Bullet
Series Termination Date........ March 16, 2005 July 16, 2003 July 18, 2005 August 18, 2008 October 16, 2013
</TABLE>
- -------------------------
(1) Expressed as a percentage of the initial Series Investor Interest.
(2) "Cont Liq" means that the trust is scheduled to repay principal in 12 equal
monthly payments. "Bullet" means that the trust is scheduled to repay
principal in one payment.
(3) Based on the cost of commercial paper that is issued by the holder of the
Class A Certificate.
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<PAGE> 76
<TABLE>
<CAPTION>
SERIES 1997-1 1997-2 1997-3 1997-4 1998-1
- ----------------------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A..................... $750,000,000 $500,000,000 $650,000,000 $750,000,000 $350,000,000
Class B..................... $39,474,000 $26,316,000 $34,211,000 $39,474,000 $18,422,000
Interest Rate
Class A..................... LIBOR + 0.09% 6.792% LIBOR + 0.13% LIBOR + 0.07% LIBOR + 0.09%
Class B..................... LIBOR + 0.27% LIBOR + 0.40% LIBOR + 0.31% LIBOR + 0.25% LIBOR + 0.27%
Initial Credit Enhancement(1)
Class A..................... 12.50% 9.00% 12.50% 12.50% 12.50%
Class B..................... 7.50% 4.00% 7.50% 7.50% 7.50%
Closing Date................. August 26, 1997 October 15, 1997 October 23, 1997 October 31, 1997 January 14, 1998
Expected Maturity Date
Class A..................... August 15, 2002 October 15, 2007 October 15, 2004 October 16, 2000 February 15, 2001
Class B..................... September 16, 2002 November 15, 2007 November 15, 2004 November 15, 2000 March 15, 2001
Type of Principal Payment(2)
Class A..................... Bullet Cont Liq(4) Bullet Bullet Bullet
Class B..................... Bullet Bullet Bullet Bullet Bullet
Series Termination Date...... February 16, 2005 April 16, 2010 April 17, 2007 April 16, 2003 August 18, 2003
</TABLE>
<TABLE>
<CAPTION>
SERIES 1998-2 1998-3 1998-4 1998-5 1998-6
- ----------------------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A..................... $500,000,000 $750,000,000 $500,000,000 $671,980,000 $500,000,000
Class B..................... $26,316,000 $39,474,000 $26,316,000 $35,368,000 $26,316,000
Interest Rate
Class A..................... 5.80% LIBOR + 0.125% 5.75% LIBOR - 0.125% 5.85%
Class B..................... 5.95% LIBOR + 0.29% 5.90% LIBOR + 0.33% 6.05%
Initial Credit Enhancement(1)
Class A..................... 8.50% 12.50% 8.50% 12.50% 8.50%
Class B..................... 4.00% 7.50% 4.00% 7.50% 4.00%
Closing Date................. March 4, 1998 March 25, 1998 April 9, 1998 June 12, 1998 July 30, 1998
Expected Maturity Date
Class A..................... March 15, 2001 March 17, 2003 April 16, 2001 June 16, 2008 July 15, 2003
Class B..................... April 16, 2001 April 15, 2003 May 15, 2001 July 15, 2008 August 15, 2003
Type of Principal Payment(2)
Class A..................... Bullet Bullet Bullet Bullet Bullet
Class B..................... Bullet Bullet Bullet Bullet Bullet
Series Termination Date...... September 16, 2003 September 16, 2005 October 16, 2003 December 16, 2010 January 18, 2006
</TABLE>
- -------------------------
(4) The controlled liquidation period for Series 1997-2 has a variable length of
up to 90 months. The amount of principal repaid each month is based on an
index.
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<TABLE>
<CAPTION>
SERIES 1998-7 1999-1 1999-2 1999-3 1999-4
- -------------------------------- ----------------- ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A........................ $1,000,000,000 $500,000,000 $500,000,000 $500,000,000 $850,000,000
Class B........................ $52,632,000 $26,316,000 $26,316,000 $26,316,000 $44,737,000
Interest Rate
Class A........................ 5.60% 5.30% 5.90% LIBOR + 0.11% 5.65%
Class B........................ 5.90% 5.55% 6.10% LIBOR + 0.31% 5.85%
Initial Credit Enhancement(1)
Class A........................ 8.50% 8.50% 8.50% 12.50% 8.50%
Class B........................ 4.00% 4.00% 4.00% 7.50% 4.00%
Closing Date.................... November 12, 1998 February 9, 1999 March 10, 1999 April 6, 1999 April 27, 1999
Expected Maturity Date
Class A........................ November 17, 2003 February 15, 2002 April 15, 2002 March 15, 2002 May 15, 2002
Class B........................ December 15, 2003 March 15, 2002 May 15, 2002 April 15, 2002 June 17, 2002
Type of Principal Payment(2)
Class A........................ Bullet Bullet Bullet Bullet Bullet
Class B........................ Bullet Bullet Bullet Bullet Bullet
Series Termination Date......... May 16, 2006 August 16, 2004 October 18, 2004 September 16, 2004 November 16, 2004
</TABLE>
<TABLE>
<CAPTION>
SERIES 1999-5 1999-6 2000-1 2000-2 2000-3
- -------------------------------- ----------------- ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A........................ $500,000,000 $750,000,000 $500,000,000 $750,000,000 $500,000,000
Class B........................ $26,316,000 $39,474,000 $26,316,000 $39,474,000 $26,316,000
Interest Rate
Class A........................ LIBOR + 0.18% 6.85% LIBOR + 0.17% LIBOR + 0.18% LIBOR + 0.12%
Class B........................ LIBOR + 0.41% 7.10% LIBOR + 0.37% LIBOR + 0.37% LIBOR + 0.30%
Initial Credit Enhancement(1)
Class A........................ 12.50% 8.50% 12.50% 12.50% 12.50%
Class B........................ 7.50% 4.00% 7.50% 7.50% 7.50%
Closing Date.................... June 15, 1999 December 14, 1999 January 27, 2000 March 14, 2000 April 4, 2000
Expected Maturity Date
Class A........................ June 15, 2004 January 18, 2005 February 15, 2005 March 15, 2005 March 17, 2003
Class B........................ July 15, 2004 February 15, 2005 March 15, 2005 April 15, 2005 April 15, 2003
Type of Principal Payment(2)
Class A........................ Bullet Bullet Bullet Bullet Bullet
Class B........................ Bullet Bullet Bullet Bullet Bullet
Series Termination Date......... December 18, 2006 July 17, 2007 August 16, 2007 September 18, 2007 September 16, 2005
</TABLE>
<TABLE>
<CAPTION>
SERIES 2000-4
- -------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Initial Investor Interest
Class A........................ $650,000,000
Class B........................ $34,211,000
Interest Rate
Class A........................ LIBOR + 0.21%
Class B........................ LIBOR + 0.45%
Initial Credit Enhancement(1)
Class A........................ 12.50%
Class B........................ 7.50%
Closing Date.................... May 10, 2000
Expected Maturity Date
Class A........................ May 15, 2007
Class B........................ June 15, 2007
Type of Principal Payment(2)
Class A........................ Bullet
Class B........................ Bullet
Series Termination Date......... November 17, 2009
</TABLE>
S-75
<PAGE> 78
Prospectus
Discover(R) Card Master Trust I
Issuer
Credit Card Pass-Through Certificates
Greenwood Trust Company
Master Servicer, Servicer and Seller
-------------------
Greenwood Trust Company intends to sell up to $ aggregate principal amount
of certificates in one or more series from time to time, representing interests
in the Discover Card Master Trust I. The trust's assets consist primarily of
credit card receivables arising under selected Discover Card accounts and the
cash payments of those receivables. The certificates are not obligations of
Greenwood Trust Company or any of its affiliates, and neither the certificates
nor the underlying credit card receivables are insured or guaranteed by any
governmental agency.
The trust will pay interest and principal on each series of certificates as
specified in the prospectus supplement for the series.
-------------------
Investing in the certificates involves risks. See "Risk Factors" beginning on
page S- in the prospectus supplement.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THE CERTIFICATES OR DETERMINED IF THIS PROSPECTUS OR THE
ACCOMPANYING PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS AND A PROSPECTUS SUPPLEMENT FOR A PARTICULAR SERIES MUST BE USED
TO CONFIRM SALES OF CERTIFICATES OF THAT SERIES.
THE PROSPECTUS SUPPLEMENT FOR ANY SERIES USING UNDERWRITERS OR AGENTS WILL
DISCLOSE THE NAME OF THE MANAGING UNDERWRITER OR UNDERWRITERS OR THE AGENTS AND
ANY DISCOUNTS OR COMMISSIONS.
MORGAN STANLEY DEAN WITTER
, 2000
<PAGE> 79
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Investors.................. 3
Where You Can Find More Information... 3
Prospectus Summary.................... 5
The Trust............................. 13
The Trustee......................... 14
Indemnification of the Trust and the
Trustee.......................... 14
Sale and Assignment of Receivables
to the Trust..................... 15
Addition of Accounts................ 15
Removal of Accounts................. 17
Termination of the Trust............ 17
The Certificates...................... 17
General............................. 17
Interest Payments................... 18
Principal Payments.................. 18
Issuance of Additional Series....... 19
Collections......................... 20
Class Percentages and Seller
Percentage....................... 21
Subordination....................... 22
Adjustments to Receivables.......... 22
Additional Funds.................... 22
Final Payment of Principal;
Termination of Series............ 23
Credit Enhancement.................. 23
Repurchase of Trust Portfolio....... 24
Repurchase of Specified
Receivables...................... 25
Repurchase of a Series.............. 26
Repurchase of Certificates.......... 26
Sale of Seller Interest............. 26
Reallocation of Series Among
Groups........................... 27
Amendments.......................... 27
List of Certificateholders.......... 28
Meetings............................ 28
Book-Entry Registration............. 28
Definitive Certificates............. 32
Servicing............................. 32
Master Servicer and Servicer........ 32
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Servicing Compensation and Payment
of Expenses...................... 33
Certain Matters Regarding the Master
Servicer and the Servicers....... 34
Master Servicer Termination
Events........................... 34
Servicer Termination Events......... 35
Evidence as to Compliance........... 36
The Seller............................ 37
Greenwood........................... 37
Insolvency-Related Matters.......... 37
Certain Legal Matters Relating to the
Receivables......................... 38
Transfer of Receivables............. 38
Certain UCC Matters................. 39
Consumer Protection Laws and Debtor
Relief Laws Applicable to the
Receivables...................... 39
Claims and Defenses of Cardmembers
Against the Trust................ 40
Use of Proceeds....................... 40
Federal Income Tax Consequences....... 40
General............................. 40
Tax Treatment of the Certificates as
Debt............................. 41
United States Investors............. 42
Foreign Investors................... 45
Backup Withholding and Information
Reporting........................ 46
Possible Characterization of the
Certificates..................... 47
State Tax Consequences................ 48
ERISA Considerations.................. 49
Greenwood's Prohibited Transaction
Exemption........................ 50
The DOL Regulation.................. 51
Plan of Distribution.................. 53
Legal Matters......................... 54
Glossary of Terms..................... 54
</TABLE>
2
<PAGE> 80
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents:
- this prospectus, which provides detailed information, some of which may
not apply to your certificates, about the trust and the certificates
issued by the trust, and
- the prospectus supplement, which describes the specific terms of your
certificates.
We include cross-references in this prospectus and the accompanying
prospectus supplement to sections in these materials where you can find related
discussions. You can locate the pages on which these sections begin by using the
table of contents on page 2.
We have included glossaries of the capitalized terms used in this
prospectus or the prospectus supplement.
IT IS IMPORTANT FOR YOU TO READ AND CONSIDER ALL INFORMATION CONTAINED IN
BOTH THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT IN MAKING YOUR
INVESTMENT DECISION.
The SEC allows us to incorporate by reference information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the prospectus supplement for any series. We incorporate by
reference any future annual, monthly and special reports and proxy materials
filed by or on behalf of the trust with the SEC until we terminate our offering
of the certificates.
You should rely on the information contained or incorporated by reference
in this prospectus and the accompanying prospectus supplement. We have not
authorized anyone to provide you with different information.
We are not offering to sell or soliciting offers to buy any securities
other than the certificates to which this prospectus and the accompanying
prospectus supplement relate, nor are we offering to sell or soliciting offers
to buy certificates in any jurisdiction where the offer is not permitted.
REPORTS TO INVESTORS
Greenwood, as master servicer, will prepare monthly and annual reports for
each outstanding series of certificates containing information about the trust
and that series. You may obtain a copy of each report free of charge by calling
302-323-7434. See "Reports to Investors" in the related prospectus supplement.
The annual reports will not contain financial information that has been examined
and reported on by independent public accountants. Greenwood does not intend to
send you any of its financial reports.
WHERE YOU CAN FIND MORE INFORMATION
Greenwood, as originator of the trust, and the trust have filed a
registration statement with the SEC on behalf of the trust relating to the
certificates offered by this prospectus and any prospectus supplement
accompanying this prospectus.
You may read and copy any reports, statements or other information that
Greenwood or the trust files at the SEC's public reference rooms at:
- 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
- 7 World Trade Center, Suite 1300, New York, New York 10048; and
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511.
3
<PAGE> 81
You can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. SEC filings relating
to the trust are also available to the public on the SEC Internet site
(http://www.sec.gov). The trust is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and in accordance with that
act, Greenwood, on behalf of the trust, files reports and other information with
the SEC.
We incorporated by reference the following reports and documents filed by
Greenwood on behalf of the trust pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended:
(1) the trust's Annual Reports on Form 10-K for the years ended December
31, 1995, December 31, 1996 and December 31, 1997, the trust's
Transition Report on Form 10-K for the transition period from January
1, 1998 through November 30, 1998, and the trust's Annual Report on
Form 10-K for the year ended November 30, 1999; and
(2) Current Reports on Form 8-K filed since January 1, 1995.
All reports and other documents filed by Greenwood on behalf of the trust
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, after the date of this prospectus and before the termination
of the offering of the certificates will be deemed to be incorporated by
reference into this prospectus and to be a part of it.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents, unless the
exhibits are specifically incorporated by reference, at no cost, by calling
Greenwood, as master servicer at (302) 323-7434.
4
<PAGE> 82
PROSPECTUS SUMMARY
The following summary describes certain aspects of the trust generally,
including the typical provisions of each series of certificates. The remainder
of this prospectus and the accompanying prospectus supplement provide much more
detailed information about the certificates and the trust. You should review the
entire prospectus and prospectus supplement before you decide to invest.
SELLER............................... Greenwood Trust Company. Greenwood's
executive office is located at 12
Read's Way, New Castle, Delaware
19720.
MASTER SERVICER AND SERVICER......... Greenwood.
TRUSTEE.............................. U.S. Bank National Association.
FORMATION OF THE TRUST; TRUST
ASSETS............................... Greenwood and the trustee formed the
trust in October 1993. Greenwood has
transferred to the trust the credit
card receivables generated under
certain designated Discover(R) Card
accounts. Those receivables included
principal receivables--amounts owed
by cardmembers representing the
principal balances of cash advances,
purchases that cardmembers have made
with their Discover Cards and
balances transferred by cardmembers
to their Discover Card accounts from
other credit card accounts. They also
included finance charge
receivables--amounts owed by
cardmembers representing finance
charges accrued on unpaid principal
balances, late fees and other service
charges. As cardmembers make
additional charges and incur
additional finance charges and other
fees in accounts designated for the
trust, Greenwood also transfers these
additional receivables to the trust
on an ongoing basis. Greenwood also
may designate additional accounts as
trust accounts, and transfer
receivables in those accounts to the
trust. Even though Greenwood
transfers receivables to the trust,
Greenwood continues to own and
service the related accounts.
The trust's assets include, or may
include, the following:
- credit card receivables;
- cash payments by cardmembers;
- cash recoveries on receivables in
the trust that have been charged
off as uncollectible and proceeds
from the trust's sales of those
receivables;
- investment income on funds on
deposit in investor accounts, if
any;
- interests in other credit card
receivables pools;
5
<PAGE> 83
- credit support or enhancement for
each series;
- additional funds that Greenwood may
elect to add to the trust;
- currency swaps for series
denominated in foreign currencies;
and
- interest rate protection
agreements.
The trust has issued many series of
certificates, and Greenwood expects
that the trust will issue additional
series. The pooling and servicing
agreement that created the trust and
applies to all series permits the
trust to issue additional series
without the consent of
certificateholders of any outstanding
series. Greenwood and the trust will
not request your consent to issue new
series.
The certificates of each series
represent an interest in the
aggregate pool of receivables in the
trust, not an interest in any
specific receivable or subset of the
receivables. That interest reflects
your right to receive a portion of
the collections paid on the
receivables, your share of
receivables that Greenwood has
charged off as uncollectible, your
share of investment income on funds
on deposit in investor accounts, if
any, your right to the benefit of the
credit enhancement established for
the series and your right to the
benefit of any currency swap or
interest rate protection agreements
for the series. Your right to receive
any of these amounts will be limited
to the amount of interest accrued on
your certificates and the principal
amount of your certificates.
Greenwood and the investors in other
series currently outstanding own the
remaining interest in the trust.
- Greenwood's interest varies based
on the size of the interests of the
trust's investors and the total
amount of the trust's receivables.
- Assuming the aggregate investor
interest in receivables stays the
same, if in any month the principal
collections and charge-offs exceed
the amount of new principal
receivables created, Greenwood's
interest in the trust declines.
- Assuming the aggregate investor
interest in receivables stays the
same, if in any month the principal
collections and charge-offs are
less than the amount of new
principal receivables created,
Greenwood's interest in the trust
increases.
6
<PAGE> 84
Each series has a particular set of
terms that we will describe in a
series supplement to the pooling and
servicing agreement. The series
supplement for each series will
specify, among other things, the
classes in the series, its size and
payment terms, the group to which the
series belongs, the methods for
allocating collections and
charged-off receivables to it, the
kind and size of credit enhancement
for the series and any applicable
amendments to the pooling and
servicing agreement.
CLASSES, ALLOCATIONS AND
REALLOCATIONS........................ Each series will have one or more
classes; typically Class B
certificates rank junior to Class A
certificates.
The trust allocates collections among
the series based on each series'
investor interest in receivables. The
trust also allocates receivables that
Greenwood has charged off as
uncollectible to series based on the
investor interest in receivables.
Each series supplement to the pooling
and servicing agreement specifies the
percentages of these collections and
charged-off receivables that are
allocated to each class of the series
at each point in time. These
percentages vary based on a number of
factors, including whether the trust
has started to pay principal to
investors in the series and whether
Greenwood has made certain choices
regarding credit enhancement. The
class percentages may differ for
finance charge collections, principal
collections and charged-off amounts.
The pooling and servicing agreement
determines whether collections are
finance charge collections or
principal collections. Once this
determination is made, finance charge
and principal collections are
generally not interchangeable; each
can only be used to fund certain
payments, deposits and
reimbursements. When Greenwood
charges off a receivable as
uncollectible, it reduces the amount
of principal receivables in the
trust, and allocates a portion of the
amount charged off against your
interest in principal receivables
based on your class percentage.
However, the trust typically uses
finance charge collections to pay
interest and to reimburse you for
charged-off receivables that have
been allocated to you, reinstating
your interest in principal
receivables. The trust typically uses
principal collections to repay your
principal.
In general, the trust will use each
series' share of collections to make
required payments, to pay its share
of servicing fees and to reimburse
7
<PAGE> 85
its share of charged-off amounts. If
a series has more collections than it
needs in any month, the trust may
make the excess collections available
to other series so those series may
make their payments and
reimbursements. You will not be
entitled to receive these excess
collections. If a series does not
have enough collections in any month,
the trust may use excess collections
from other series to make payments
and reimbursements for that series.
Each prospectus supplement describes
how the trust uses collections to
make payments, deposits and
reimbursements for a particular
series.
INVESTOR INTEREST AND INVESTED
AMOUNT............................... The trust generally allocates
collections and charged-off amounts
to you based on your investor
interest, which is your interest in
the receivables. The trust makes
payments to you based on your
invested amount, which generally is
the principal balance of your
certificates. Your investor interest
in receivables may decrease over time
as principal is paid to you or as
principal collections are deposited
into the series principal funding
account to be paid to you at a later
time.
Although your investor interest in
receivables and your invested amount
are related, they diverge under
certain circumstances. For instance,
if your series has an accumulation
period, as the trustee accumulates
principal in the series principal
funding account, your investor
interest in receivables will decline
but your invested amount will not be
affected. Your invested amount will
shift from an interest entirely in
the receivables to an interest in the
cash in the series principal funding
account and a smaller interest in the
receivables.
DISTRIBUTION DATES................... The distribution date is the date in
each month, typically the 15th, on
which the trust allocates collections
from the preceding calendar month to
investors and the trustee deposits
them into appropriate accounts. A
distribution date may also be a date
the trust pays principal or interest
to investors, but it will not always
be a payment date. For example, a
series that pays interest
semiannually will have twelve
distribution dates each year but only
two interest payment dates; the trust
will set aside funds on each
distribution date to make the next
interest payment.
INTEREST............................. The certificates accrue interest at
the rates specified in or determined
in accordance with the prospectus
supplement.
8
<PAGE> 86
PRINCIPAL............................ The trust will be scheduled to pay
principal on each class of a series
in a single payment on a specified
date or in monthly payments beginning
on a specified date, as set forth in
the prospectus supplement. Under
certain circumstances, the trust may
be unable to meet the schedule.
Amortization events are designed to
protect investors from certain events
that may adversely affect the trust
and your investment in the
certificates. These may include:
Greenwood's or an additional seller's
inability to continue to transfer
receivables to the trust; certain
breaches of representations,
warranties or covenants by Greenwood
or another seller; receivables
performance that might impair the
long-term ability of the trust to
make all required payments with
respect to a series; or certain
events of insolvency with respect to
Greenwood or an additional seller.
For some of these events to become
amortization events, the trustee or a
specified percentage of
certificateholders must declare them
to be amortization events; others
become amortization events
automatically when they occur. If an
amortization event occurs with
respect to a series, the trust
becomes obligated to apply principal
collections allocated to that series
on a monthly basis to repay the
remaining principal amount of the
certificates of that series.
Each series of certificates will have
two types of maturity dates, an
expected maturity date, which may be
different for different classes, and
a series termination date. The
expected maturity date is the date
Greenwood believes the trust will
make the final principal payment to
investors in that class of
certificates unless an amortization
event occurs. The series termination
date is always later than the
expected maturity date, and is the
last day on which the trust will pay
principal to investors in a series.
If the trust owes principal in the
month before the series termination
date, the trustee will sell
receivables, proportionate to the
series' remaining interest in the
trust, to repay the principal. After
the series termination date, the
trustee will not allocate collections
to the series.
REVOLVING PERIOD..................... The revolving period is the period
from the first day of the calendar
month in which the trust issues a
series until the trust begins using
principal collections to make
principal payments to investors or to
accumulate the cash to
9
<PAGE> 87
be used to make later principal
payments. In general, during the
revolving period, the trust pays
principal collections to Greenwood in
exchange for new receivables that
cardmembers have generated on the
accounts designated as part of the
trust.
The trust may also use principal
collections to pay the principal of
other series. The revolving period
for a series ends when the controlled
liquidation period or the
accumulation period begins, or when
an amortization event or an early
accumulation event occurs.
CONTROLLED LIQUIDATION PERIOD........ If a series provides that the
principal on its certificates will be
repaid in scheduled monthly payments,
the series will have a controlled
liquidation period. During the
controlled liquidation period, the
trust will apply principal
collections allocated to the series
to pay principal on the certificates,
up to the amount of the scheduled
monthly principal payment. The
controlled liquidation period will
begin on the first day of the month
immediately preceding the month in
which the trust will make the first
principal payment for the series and
continue until the principal of the
series has been repaid in full, until
an amortization event or an early
accumulation event has occurred or
until the series termination date.
ACCUMULATION PERIOD.................. If a series provides that its
principal will be repaid in a single
payment, it will have an accumulation
period. During the accumulation
period, the trust will accumulate
cash in the series principal funding
account using collections it
receives, to pay principal at
maturity, unless Greenwood elects to
delay this process or an amortization
event or an early accumulation event
has occurred. The trust generally is
scheduled to accumulate principal
collections in the series principal
funding account over several months,
so that it will have collections
available to make the final payment.
Greenwood may elect to shorten the
accumulation period if:
- it determines that enough principal
collections from other series will
be available to make larger
deposits into the series principal
funding account, and
- the required rating agencies have
approved the election to shorten
the accumulation period.
10
<PAGE> 88
Typically, the accumulation period
will begin on a date specified in the
prospectus supplement, or on a later
date if Greenwood elects to shorten
the accumulation period, and will
continue until the principal of the
series has been repaid in full, until
an amortization event or an early
accumulation event has occurred or
until the series termination date.
AMORTIZATION PERIOD.................. The amortization period begins when
an amortization event occurs and
continues until the trust has fully
paid the principal of the series or
until the series termination date.
EARLY ACCUMULATION EVENTS............ Certain events that the series
supplement would typically designate
as amortization events may instead be
designated as early accumulation
events for a particular series. If an
early accumulation event occurs with
respect to a series, the trust
becomes obligated to accumulate
principal collections allocated to
the series on a monthly basis in the
series principal funding account. In
general, the trust would make
principal payments to investors after
an early accumulation event in
accordance with its original
schedule, to the extent it has funds
available, unless an amortization
event subsequently occurs.
CREDIT ENHANCEMENT................... A series may have credit enhancement
that provides the trust with an
additional source of funds if the
trust does not receive sufficient
collections on receivables to make
all required payments, deposits and
reimbursements with respect to that
series in any month. The credit
enhancement may include:
- cash collateral accounts or reserve
funds,
- letters of credit,
- surety bonds, or
- insurance policies
The prospectus supplement may also
identify other forms of credit
enhancement. Series or classes of
series may have credit enhancement
that is also provided by
subordination provisions in other
classes or series. These
subordination provisions may require
the trust to reallocate collections
and other assets that it initially
allocated to a junior class or a
junior series to instead make
payments, deposits and reimbursements
for a senior class or a senior
series. The trust would generally
make payments, deposits and
reimbursements for a junior class or
a junior series only after it had
satisfied the
11
<PAGE> 89
requirements of each applicable
senior class or senior series.
CLEARANCE AND SETTLEMENT............. You may elect to hold the
certificates only through the
following clearing organizations:
- The Depository Trust Company, or
DTC, in the United States;
- Clearstream Banking, in Europe; and
- Euroclear, in Europe
These organizations permit transfers
of securities or interests in
securities by computer entries
instead of paper transfers.
Certificates will not be available in
paper form.
You may transfer your interests
within DTC, Clearstream Banking or
Euroclear in accordance with the
usual rules and operating procedures
of the relevant system. Persons
holding directly or indirectly
through DTC, on the one hand, and
counterparties holding directly or
indirectly through Clearstream
Banking or Euroclear, on the other
hand, may effect cross-market
transfers through the relevant
depositaries of Clearstream Banking
and Euroclear.
The remainder of this prospectus uses some capitalized terms. We have
defined these terms in a glossary beginning on page .
12
<PAGE> 90
THE TRUST
Greenwood and the trustee formed the trust in October 1993 pursuant to the
Pooling and Servicing Agreement. Greenwood has transferred Discover Card
receivables existing as of specified dates in designated accounts to the trust.
As cardmembers make additional charges and incur additional finance charges and
other fees with respect to these accounts, Greenwood is also obligated to
transfer these additional Receivables to the trust on a daily basis until the
trust terminates. If we refer to the pool of receivables in the trust, we refer
to "Receivables" and the "Accounts" in which they arise. If we refer to the
Discover Card portfolio generally, we refer to "receivables" and the "accounts"
in which they arise.
In exchange for the transfer of Receivables, Greenwood received the Seller
Certificate. As Greenwood transfers additional Receivables, the Seller Interest
increases. Greenwood also receives the net cash proceeds from each sale of
certificates of a series.
The trust's assets include, or may include, the following:
- the Receivables;
- all monies due or to become due under the Receivables;
- all proceeds of the Receivables, including collections that Greenwood or
any other servicer may use for its own benefit before each distribution
date;
- all monies on deposit in the investor accounts;
- cash recoveries on Receivables charged off as uncollectible and proceeds
from the trust's sale of those Receivables;
- investment income on funds on deposit in investor accounts, if any;
- interests in other credit card receivables pools;
- credit support or enhancement for each series;
- additional funds that Greenwood may elect to add to the trust;
- currency swaps for series denominated in foreign currencies; and
- interest rate protection agreements.
Greenwood has the right, and in some circumstances the obligation, to designate
additional Accounts, which may be Discover Card accounts or other credit
accounts originated by Greenwood or an affiliate of Greenwood, to be included as
Accounts, or to add interests in other credit card receivables pools to the
trust, subject to conditions that we describe in "--Addition of Accounts." In
addition, Greenwood has the right to designate Accounts for removal from the
trust, subject to conditions that we describe in "--Removal of Accounts."
Greenwood formed the trust to issue certificates of various series pursuant
to the Pooling and Servicing Agreement and a Series Supplement for each series.
The trust has issued many series of certificates, and Greenwood expects that the
trust will issue additional series from time to time and will continue as a
trust after the Series Termination Date of any particular series. The trust will
not engage in any business activity other than:
- acquiring and holding the Receivables and the proceeds from the
Receivables;
- issuing certificates and the Seller Certificate;
- making payments on certificates and the Seller Certificate;
- selling receivables in Charged-Off Accounts;
- investing funds on deposit in the investor accounts;
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- entering into interest rate swap, currency swap or interest rate cap or
other rate protection agreements; and
- entering into other agreements with third parties for the benefit of the
investors of one or more series.
As a consequence, Greenwood does not expect the trust to need additional capital
resources except for the Receivables in additional Accounts or interests in
other credit card receivables pools, if applicable.
THE TRUSTEE
U.S. Bank National Association is the trustee. Greenwood and its affiliates
may enter into normal banking and trustee relationships with the trustee from
time to time. The trustee and its affiliates may own certificates in their own
names. In addition, the trustee may appoint a co-trustee or separate trustees of
all or any part of the trust to meet the legal requirements of a local
jurisdiction. If the trustee does appoint a co-trustee or separate trustee, that
separate trustee or co-trustee will be jointly subject, with the trustee, to all
rights, powers, duties and obligations conferred on the trustee by the Pooling
and Servicing Agreement or any Series Supplement. In any jurisdiction in which
the trustee is incompetent or unqualified to perform certain acts, the separate
trustee or co-trustee will be singly subject to all of these rights, powers,
duties and obligations. Any separate trustee or co-trustee will exercise and
perform those rights, powers, duties and obligations solely at the direction of
the trustee.
The trustee may resign at any time, in which event the master servicer will
be obligated to appoint a successor trustee. The master servicer may also remove
the trustee if the trustee is no longer eligible to continue as trustee under
the Pooling and Servicing Agreement or if the trustee becomes insolvent. In
those circumstances, the master servicer may be obligated to appoint a successor
trustee. Until the successor trustee accepts its appointment, the resignation or
removal of the trustee will not become effective.
INDEMNIFICATION OF THE TRUST AND THE TRUSTEE
Greenwood as seller, and any Additional Sellers, generally will indemnify
the trust and the trustee against losses arising out of the sellers' activities
in connection with the trust or the trustee. However, the sellers will not
indemnify:
- the trustee for liabilities resulting from fraud, negligence, breach of
fiduciary duty or misconduct by the trustee in performing its duties as
trustee;
- the trust or the investors for liabilities arising from actions taken by
the trustee at the investors' request; or
- the trust or the investors for any taxes, or any related interest or
penalties, required to be paid by the trust or the investors.
This indemnification will be only from the assets of the related seller and will
be subordinate to the trust's security interest in the Receivables. This
indemnification will not constitute a claim against any seller in an amount that
exceeds the lesser of:
- that seller's available assets; or
- the full amount of the claim multiplied by the percentage of the
Principal Receivables in the trust that have been transferred to the
trust by that seller.
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SALE AND ASSIGNMENT OF RECEIVABLES TO THE TRUST
On October 27, 1993 and on various subsequent dates, Greenwood sold and
transferred to the trust all of its right, title and interest in and to:
- all Receivables existing in the accounts designated as Accounts on each
such date, and
- all Receivables created in those Accounts after each such date, on a
daily basis as they arise, until the trust terminates.
In exchange for these transfers, Greenwood has received the Seller Certificate,
the right to direct the issuance of new series of certificates, and the proceeds
from the sale of each new series. See "--Formation of the Trust."
Greenwood has indicated in its computer files that it has transferred the
Receivables to the trust. In addition, Greenwood has provided to the trustee a
computer file containing a complete list of each Account identified by account
number, and will provide a similar computer file each time it designates
additional Accounts. Greenwood will not:
- deliver to the trustee any other records or agreements relating to the
Accounts and the Receivables;
- segregate the records and agreements that it maintains relating to the
Accounts and the Receivables from records and agreements relating to
other credit accounts and receivables; or
- otherwise mark these records or agreements to reflect the sale of the
Receivables to the trust, except for any electronic or other indicators
necessary to service the Accounts in accordance with the Pooling and
Servicing Agreement and any Series Supplement.
The trustee will have reasonable access to these records and agreements as
required by applicable law and to enforce the rights of investors. The trustee
filed a UCC-1 financing statement in accordance with applicable state law to
perfect the trust's interest in the Receivables, and will file continuation
statements as needed to maintain that perfection. See "Certain Legal Matters
Relating to the Receivables."
ADDITION OF ACCOUNTS
Greenwood may, in its sole discretion:
- designate credit accounts originated by Greenwood or its affiliates as
additional Accounts, and cause the receivables in those accounts to be
transferred to the trust; or
- convey interests in other credit card receivables pools to the trust.
In addition, Greenwood will be required to designate additional Accounts or
convey interests in other credit card receivables pools to the trust if the
aggregate amount of Principal Receivables in the trust on the last day of any
month is less than the Minimum Principal Receivables Balance.
Additional Accounts may consist of additional Discover Card accounts
originated by Greenwood or other credit accounts originated by Greenwood or an
affiliate of Greenwood. These Accounts may include newly originated accounts.
Greenwood may only assign additional Accounts to the trust if:
- Greenwood and the trustee execute and deliver a written assignment;
- Greenwood causes its legal counsel to deliver an opinion to the trustee
relating to the trust's security interest in the Receivables in the
additional Accounts and insolvency and related matters;
- an authorized officer of the servicer delivers a certificate regarding
the selection criteria used to select the additional Accounts; and
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- either
- each of the Rating Agencies confirms that the proposed assignment will
not cause it to lower or withdraw its ratings on any outstanding class
of any series of certificates, or
- the proposed assignment complies with any limitations established by the
Rating Agencies on Greenwood's ability to designate additional Accounts.
An assignment will comply with current Rating Agency limits, and Greenwood may
designate additional Accounts without Rating Agency approval, if:
- in any calendar year, Greenwood assigns not more than 20% of the number
of Accounts or the amount of Principal Receivables in the trust as of the
first day of the calendar year, and
- in any period of three calendar months, Greenwood assigns not more than
15% of the number of Accounts or the amount of Principal Receivables in
the trust as of the first day of the three-month period.
The servicer for any additional Accounts must select those Accounts on the
basis of selection criteria that the servicer does not believe to be materially
adverse to the interests of investors in any outstanding class of any series of
certificates or any credit enhancement provider.
The trust will receive all collections of Receivables in additional
Accounts in the same manner as it receives other collections. The servicer may,
however, estimate the amount of Finance Charge Receivables billed on the
Receivables in the additional Accounts for the month in which the Accounts were
added to the trust.
Although the Pooling and Servicing Agreement must be amended to add
interests in other pools of credit card receivables to the trust, this amendment
will not require investor consent. Greenwood may only add interests in other
pools of credit card receivables to the trust if:
- Greenwood delivers a certificate to the trustee stating that Greenwood
reasonably believes that the addition will not be materially adverse to
the interests of investors in any outstanding class of any series or any
credit enhancement provider;
- Greenwood causes its legal counsel to deliver an opinion to the trustee
relating to the trust's security interest in these added interests and
insolvency and related matters; and
- each of the Rating Agencies confirms that the proposed assignment will
not cause it to lower or withdraw its ratings on any outstanding class of
any series of certificates.
Additional Accounts or accounts underlying interests in pools of credit
card receivables:
- need not be Discover Card accounts or accounts originated by Greenwood;
- may have different terms than the terms governing the Accounts initially
included in the trust, including the possibility of lower periodic
finance charges or fees;
- may be composed entirely of newly originated accounts;
- may contain a higher percentage of newly originated accounts than the
Accounts currently included in the trust; and
- may contain accounts originated using criteria different from those
applied to the Accounts currently included in the trust.
Accordingly, we cannot assure you that any additional Accounts or accounts
underlying the added interests in pools of credit card receivables will be of
the same credit quality as the Accounts currently included in the trust or that
inclusion of these Accounts or the interests in pools of credit card receivables
will not reduce the percentage of Finance Charge Collections relative to
Principal Collections.
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REMOVAL OF ACCOUNTS
Greenwood may, but is not obligated to, designate Accounts for removal from
the trust. Any removal will be effective on the last day of the calendar month
during which Greenwood designated the Accounts to be removed.
For Greenwood to remove Accounts, it must deliver an officer's certificate
confirming that:
- the aggregate amount of Principal Receivables in the trust minus the
aggregate amount of Principal Receivables in the removed Accounts is not
less than the Minimum Principal Receivables Balance;
- Greenwood reasonably believes that removing the Accounts will not cause
an Amortization Event to occur for any outstanding series;
- Greenwood reasonably believes that removing the Accounts will not prevent
the trust from making any scheduled principal payment or deposit for any
series in full;
- Greenwood did not select the Accounts to be removed using procedures that
it believed to be materially adverse to the investors; and
- the Rating Agencies have advised Greenwood that the removal will not
cause them to lower or withdraw their ratings on any class of any
outstanding series of certificates.
TERMINATION OF THE TRUST
The trust is scheduled to terminate twenty-one years after the death of the
last survivor of Queen Elizabeth II of the United Kingdom of Great Britain and
her descendants living on October 1, 1993. In addition, the sellers may elect to
terminate the trust on the day after the distribution date on which the trust
has deposited funds into the appropriate investor accounts sufficient to pay in
full the Aggregate Investor Interest plus all accrued and unpaid interest on all
series then outstanding.
THE CERTIFICATES
This summary is not a complete description of the terms of the certificates
of a series. You should refer to the applicable prospectus supplement, the
Pooling and Servicing Agreement and the applicable Series Supplement for a more
complete description. If you write to the trustee at its principal corporate
trust office, the trustee will provide you a free copy of the Pooling and
Servicing Agreement, without exhibits or schedules, and the applicable Series
Supplement, without exhibits.
GENERAL
Each series will be issued pursuant to the Pooling and Servicing Agreement
and a Series Supplement. The Series Supplement will consist of two parts, a
series term sheet and an annex. The series term sheet will set forth the basic
terms of a series. The annex will constitute the bulk of the Series Supplement
and will contain the detailed provisions regarding allocations of collections
and payments to the investors of the series. The annex is designed to be used
for a variety of different types of series, and, accordingly, contains some
provisions that will not apply to all series. The series term sheet, in
conjunction with the annex, will set forth all of the specific terms of the
series.
Each series will consist of one or more classes of certificates. Each
certificate will represent a fractional undivided interest in the trust,
including the right to a percentage of all collections on the Receivables in the
trust. See "--Class Percentages and Seller Percentage." Each certificate of a
series will represent the right to receive interest payments on interest payment
dates, at the applicable interest rate, on the invested amount of the
certificate. If a series has a controlled liquidation period, each certificate
of that series will represent the right to receive monthly payments of principal
on scheduled principal payment dates and during the Amortization Period, if any,
for that series. If a series has an accumulation period, each certificate of
that series will represent the right to receive repayment of principal on an
applicable expected maturity date and monthly payments of principal during the
Amortization Period, if
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any, for that series. See "The Certificates--Interest Payments" and "--Principal
Payments" in this prospectus and in the related prospectus supplement.
If a series has one or more classes of subordinated certificates, the
rights of investors in each junior class to receive payments will be
subordinated to the rights of the investors in each senior class of that series
to the extent described in the related prospectus supplement. See "The
Certificates--Cash Flows--Subordination of Class B Certificates" in this
prospectus and "The Certificates--Subordination of the Class B
Certificates--Class A Credit Enhancement" in the related prospectus supplement.
Greenwood owns the interest in the Principal Receivables in the trust that
is not represented by outstanding certificates of any series at any given time.
This interest is an undivided interest in the Principal Receivables, including
the right to a varying percentage, the Seller Percentage, of all collections on
the Receivables in the trust. See "--Class Percentages and Seller Percentage."
Greenwood's interest varies based on the size of the interests of the
trust's investors and the total amount of the trust's Principal Receivables. The
amount of Principal Receivables in the trust will vary each day as cardmembers
create new Principal Receivables and pay others.
- If in any month the amount of collections of Principal Receivables and
the Charged-Off Amount exceed the amount of new Principal Receivables
created, Greenwood's interest in the trust declines.
- If in any month the amount of collections of Principal Receivables and
the Charged-Off Amount are less than the amount of new Principal
Receivables created, Greenwood's interest in the trust increases.
Greenwood's interest also declines when the trust issues additional series, and
when Greenwood causes the Receivables in designated Accounts to be removed from
the trust. Greenwood's interest also increases when the investor interest in
receivables for any series declines as principal is paid to investors or
deposited in the series principal funding account for the benefit of investors,
and when Greenwood causes the Receivables in additional Accounts to be added to
the trust.
INTEREST PAYMENTS
The trust will pay interest on the certificates of a class or series as
specified in the applicable prospectus supplement. The trust will only pay this
interest to the extent that it has allocated funds for this payment in
accordance with the cash flows for the series, as described in the applicable
prospectus supplement. In general, the trust will only use Finance Charge
Collections and certain other amounts allocated to investors in a series--and if
the cash flow provisions permit reallocations, similar funds from other series
to the extent available to the applicable series under those cash flow
provisions--to make these interest payments. If necessary, the trust may also
use credit enhancement to make these interest payments. If the interest payment
dates for a series or class occur less frequently than monthly, the trust will
allocate funds for the next interest payment on each distribution date and will
deposit these funds into the applicable series interest funding account to be
used to pay interest on the next interest payment date. If a series has more
than one class of certificates, each class may have a separate interest funding
account. The trustee will invest funds on deposit in a series interest funding
account in Permitted Investments. Except as otherwise specified in the
applicable prospectus supplement, the trustee will pay any earnings on these
investments, net of losses and investment expenses, to Greenwood or at
Greenwood's direction.
PRINCIPAL PAYMENTS
The trust will pay principal on a series on the dates and in the amounts
set forth in or determined in accordance with the applicable prospectus
supplement, and may make monthly deposits into a series principal funding
account before these principal payments begin, as described in the prospectus
supplement, in each case subject to any conditions and exceptions set forth in
the prospectus supplement. The trust will only pay or deposit this principal to
the extent that it has allocated funds for this payment or deposit in accordance
with the cash flow provisions for the series, as described in the applicable
prospectus supplement. In general, the trust will only use Principal Collections
and amounts used to reimburse
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charge-offs allocated to investors in a series--and if the cash flow provisions
permit reallocation, similar amounts reallocated from other series to the
applicable series to the extent available to the applicable series under those
cash flow provisions--to make these principal payments or deposits. Unless the
prospectus supplement for a series specifies otherwise, the trust will not
reallocate funds to make a principal payment or deposit for any series during
the Amortization Period or Early Accumulation Period for that series.
The following section describes generally how the trust pays principal
during the different periods of the series. Each series will not have all of
these periods. If an Amortization Event or an Early Accumulation Event occurs
during the revolving period, accumulation period or controlled liquidation
period for a series, that period will end and an Amortization Period or Early
Accumulation Period will begin.
Revolving Period. Unless otherwise specified in the related prospectus
supplement, the trust will not pay any principal on the certificates of a series
during the revolving period for that series.
Accumulation Period. If a series has an accumulation period, the trustee
will deposit funds into the series principal funding account for that series on
each distribution date of the accumulation period in accordance with the cash
flow provisions of that series. The trust will pay principal in a lump sum on
the expected maturity date for each class of the series, using funds from the
series principal funding account. If that account does not have sufficient funds
to pay principal of a class on the expected maturity date for that class, an
Amortization Event will occur.
Controlled Liquidation Period. If a series has a controlled liquidation
period, the trust will pay principal on certificates of that series on the dates
and in the amounts set forth in or determined in accordance with the applicable
prospectus supplement, using funds available for those principal payments in
accordance with the cash flow provisions of that series. Unless otherwise
specified in the prospectus supplement, if the trust has not fully paid the
principal on a class of certificates in a series by the expected final payment
date for that class, an Amortization Event will occur.
Early Accumulation Period. If an Early Accumulation Event occurs for a
series, the trust will deposit funds into the Series Principal Funding Account
for that series on each distribution date of the Early Accumulation Period until
the series investor interest in receivables is zero or until the Series
Termination Date. To the extent funds are available, the trust will pay
principal on the date or dates and in the amounts it otherwise would have paid
principal had the Early Accumulation Event not occurred. Under certain
circumstances, an Amortization Event may occur after an Early Accumulation
Event, in which case an Amortization Period will begin.
Amortization Period. If an Amortization Event occurs for a series, the
trust will pay principal on certificates of that series on each distribution
date of the Amortization Period, using funds available to pay that principal,
until the series invested amount has been reduced to zero or until the Series
Termination Date.
Other Periods. The trust may issue series that pay or deposit principal in
different ways than those described above, including series that require the
trust to pay or deposit principal for some period of time, after which the
series may re-enter a revolving period in which the trust does not make
principal payments or deposits. If your series has any of these additional
periods, we will describe them in the applicable prospectus supplement.
ISSUANCE OF ADDITIONAL SERIES
Greenwood may from time to time direct the trustee to issue additional
series of certificates. Each new issuance will be pursuant to the Pooling and
Servicing Agreement and a Series Supplement. Unless otherwise specified in the
related prospectus supplement, each new issuance will reduce the amount of the
Seller Interest by an amount equal to the initial investor interest in
Receivables for the new series.
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Greenwood will designate the terms of any new issuance including, but not
limited to:
- the initial series investor interest in Receivables,
- the number of classes,
- the initial investor interest in Receivables for each class,
- the interest rate for each class,
- the payment dates for each class,
- the Series Termination Date, and
- the group to which the series will belong.
The Pooling and Servicing Agreement does not require the consent of
investors of any series to issue a new series. Greenwood, any Additional
Sellers, the master servicer, the servicer and the trustee do not intend to seek
the consent of investors of any series to issue a new series.
Greenwood and any Additional Seller may offer any series for sale under a
prospectus or other disclosure document for transactions either registered under
the Securities Act of 1933, as amended, or exempt from registration. These
offerings may be direct, through one or more underwriters or placement agents,
in fixed price offerings, in negotiated transactions or otherwise.
Any series may be issued in fully registered form, in book-entry form, or
if offered outside the United States, in bearer form, in minimum denominations
determined by the sellers. Greenwood intends to offer additional series
periodically, but it is under no obligation to do so. See "Plan of
Distribution."
COLLECTIONS
The trustee has established and maintains, in the name of the trust a
Collections Account and, for each group of series, a Group Collections Account.
Each of the Collections Account and each Group Collections Account is a
segregated trust account established with the trustee or a Qualified
Institution. A Qualified Institution is a depository institution:
- organized under the laws of the United States or any individual state;
- that at all times has a short-term certificate of deposit rating of
A-1/P-1 or better from the Rating Agencies; and
- whose deposits are insured by the FDIC.
The trustee invests funds on deposit in the Collections Account or any Group
Collections Account in Permitted Investments pursuant to the Pooling and
Servicing Agreement. The master servicer has the revocable power to instruct the
trustee to make withdrawals from the Collections Account and each Group
Collections Account to carry out its duties under the Pooling and Servicing
Agreement and any Series Supplement.
Greenwood generally uses for its own benefit any collections with respect
to its Discover Card Accounts until the distribution date on which those
collections are to be allocated to investors. However, if Greenwood's short-term
debt rating falls below a specified level, Greenwood, as servicer, will be
required to deposit from collections for any day directly into the Collections
Account an amount equal to the sum of the Required Daily Deposits for each
series then outstanding. Greenwood will deposit these collections within two
business days after the date Greenwood records its receipt of those collections
on its cardmember master file. The Rating Agencies may from time to time change
the specified levels below which Greenwood will be required to make these daily
deposits.
If there are additional servicers, each additional servicer will also be
required to deposit from collections for any day directly into the Collections
Account an amount equal to the sum of its Required Daily Deposits for each
series then outstanding unless its short-term debt rating equals or exceeds the
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specified level. Each additional servicer will deposit these collections within
two business days after the date it records its receipt of those collections on
its cardmember master file. The Rating Agencies may from time to time change the
specified levels below which an additional servicer will have to make these
daily deposits.
Net Payments. Greenwood may aggregate all payments made pursuant to the
Pooling and Servicing Agreement or any Series Supplement on any Trust
Distribution Date or distribution date on which Greenwood is the master
servicer, between the master servicer or the holder of the Seller Certificate
and the investor accounts. Therefore, Greenwood, acting as master servicer and
as agent of the holder of the Seller Certificate, may make only one payment to
each account to satisfy all payments of the master servicer pursuant to the
Pooling and Servicing Agreement or any Series Supplement. Greenwood will only
make a payment to each account on each Trust Distribution Date or distribution
date to the extent that the amount of its payment obligation exceeds the amount
to be paid out of that account to the master servicer and the holder of the
Seller Certificate on that Trust Distribution Date or distribution date.
If the master servicer delivers the monthly master servicer statement and
the information required to be included in the monthly investors' statement for
each outstanding series to the trustee before the distribution date, then
allocations to investor accounts may be deemed made, and the trustee may pay the
holder of the Seller Certificate or the master servicer, on the date of
delivery.
Allocations Among Groups. On or before each distribution date for each
group, Greenwood as master servicer will direct the trustee:
- to withdraw from the Collections Account that portion of collections
allocable to the Seller Interest on that distribution date;
- to pay the amount of that withdrawal to the holder of the Seller
Certificate; and
- to withdraw all remaining collections from the Collections Account and
deposit those collections in each Group Collections Account, on or before
the distribution date for that group, in an amount equal to
- the sum of the Finance Charge Collections allocated to each series in
the group, and
- the sum of the Principal Collections allocated to each series in the
group.
Allocations Among Series. The trust will allocate collections among the
series within each group as set forth in the Series Supplements for each series
within that group. The trustee will then apply the collections for each series
in accordance with the cash flow provisions for that series.
Earnings. The trustee will pay any earnings, net of losses and investment
expenses, on funds on deposit in the Collections Account or any Group
Collections Account to the holder of the Seller Certificate.
CLASS PERCENTAGES AND SELLER PERCENTAGE
The master servicer will allocate all Finance Charge Collections, all
Principal Collections and the Charged-Off Amount among the investor interests in
Receivables for each class of each series then outstanding, the Seller Interest,
and any other interests in Receivables, such as the CCA Investor Interest for
Series 1993-3. The master servicer will make each allocation by multiplying the
amount of Finance Charge Collections, Principal Collections and the Charged-Off
Amount by the applicable Class Percentage, Seller Percentage or other
percentage.
For convenience, this prospectus refers to the Class Percentage for each
class, and certain other percentages for outstanding series, with respect to
Finance Charge Collections, Principal Collections and the Charged-Off Amount as
if those percentages will not in each case vary. The Class Percentages and other
percentages, however, may vary. The method of calculating Class Percentages and
other percentages for each series of certificates will be set forth in the
applicable prospectus supplement. The Seller
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Percentage will always equal 100% minus the sum of the Class Percentages for
each class of each series then outstanding.
SUBORDINATION
Subordinate Series. The trust may issue series of certificates that are
subordinated in right of payment, in whole or in part, to other series. Unless
otherwise specified in the related prospectus supplement, a series will not be
subordinate to any other series. Unless otherwise specified in the related
prospectus supplement, the Series Supplement for each series will provide for
the possibility that a future series may, however, be subordinate to that
existing series. The seller is under no obligation to cause the trust to issue a
subordinate series. The extent to which a subordinate series will be subordinate
to one or more series will be set forth in the Series Supplement for that
subordinate series.
Subordination of Class B Certificates. Unless otherwise specified in the
related prospectus supplement, if the trust issues a series with two classes,
the Class B certificates will be subordinate to the Class A certificates. To the
extent necessary, certain amounts originally allocable to the Class B
certificates may be reallocated to fund certain amounts for the Class A
certificates. If the Trust cannot reimburse these reallocations, the investor
interest in Receivables for the Class B certificates will be reduced. If
applicable, see "The Certificates--Subordination of the Class B
Certificates--Class A Credit Enhancement" in the related prospectus supplement.
ADJUSTMENTS TO RECEIVABLES
The aggregate amount of Receivables will increase or decrease, as
applicable, to the extent the applicable servicer adjusts any Receivable without
payment by or on behalf of a cardmember. Each servicer may adjust any Receivable
that was created as a result of a fraudulent or counterfeit charge or any
Receivable that was created in respect of merchandise returned by the
cardmember, and may otherwise adjust, increase, reduce, modify or cancel a
Receivable in accordance with its credit guidelines.
If excluding the amount of an adjustment from the calculation of the Seller
Interest would cause the Seller Interest to be an amount less than zero,
Greenwood is obligated to deposit into the Collections Account an amount equal
to the amount by which the adjustment exceeds the Seller Interest. Greenwood
must make this deposit, in immediately available funds, no later than the
business day following the last day of the calendar month during which the
adjustment is made.
In addition, under certain limited circumstances, a credit account that is
not an Account may be combined with an Account. That combination may increase or
decrease the amount of Receivables, depending on whether the Account is the
account surviving the combination. Greenwood has no reason to believe these
account combinations will have a material effect on the aggregate amount of
Receivables in the trust.
ADDITIONAL FUNDS
Greenwood may, from time to time, elect to add funds to the trust by
delivering a written notice of the election to the trustee, the master servicer
and the Rating Agencies. The written notice must specify the method of
calculating the amount of the funds to be added to the trust as of any
distribution date and the source of those funds. No election will become
effective until Standard & Poor's has advised the master servicer and Greenwood
that the election will not cause Standard & Poor's to lower or withdraw its
rating on any class of any outstanding series. During any time that additional
funds are being added to the trust, the master servicer will cause these funds
to be allocated among each outstanding series on a pro rata basis.
The trust will further allocate the amount of additional funds allocated to
each series in accordance with the provisions of each Series Supplement. Unless
otherwise specified in the related prospectus supplement, the Series Supplement
for each series specifies that any additional funds allocated to that series
will be further allocated between the classes of that series based on the
investor interest in
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Receivables of each class as of the relevant distribution date. Unless otherwise
specified in the related prospectus supplement, no additional funds have been
added to the trust as of the date the trust issues any series, and Greenwood is
under no obligation to add additional funds to the trust at any time in the
future.
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF SERIES
The final payment of principal and interest on certificates of a series
will be due and payable no later than the Series Termination Date specified in
the related prospectus supplement.
The final payment of principal and interest on any certificate will be made
only upon presentation and surrender of the certificate at the office or agency
specified in the notice from the trustee to the certificateholders regarding the
final distribution. The trustee will provide that notice to the
certificateholders not later than the tenth day of the month of the final
distribution.
Each series will terminate on the earlier of:
- the Series Termination Date for that series; and
- the day after the distribution date on which the trust makes the final
payment of principal to the investors in that series.
If, as of the distribution date in the month before the Series Termination
Date for a series, after giving effect to all transfers, withdrawals and
deposits to occur on that distribution date, the investor interest in
Receivables for the series would be greater than zero, then the trustee will
sell Receivables or interests in Receivables in an amount sufficient to yield
proceeds equal to the series investor interest in Receivables plus any accrued
but unpaid interest. However, the amount of Receivables to be sold will not
exceed:
- the aggregate amount of Receivables in the trust; multiplied by
- the series investor interest in Receivables, divided by
- the Aggregate Investor Interest,
in each case as of the distribution date in the month preceding the Series
Termination Date.
The Receivables selected to be sold will not differ materially from the
Receivables remaining in the trust as of that distribution date. The trustee
will deposit the proceeds from this sale into the applicable investor account
and pay them to the investors in the series on the distribution date immediately
following the deposit. That payment will be the final distribution for the
certificates of the series. If the proceeds of the sale are not sufficient to
pay the outstanding principal and interest on the series, the investors in that
series will suffer an investor loss, which will be borne first by investors in
the most junior class, and then by investors in each more senior class, in
reverse order of seniority.
CREDIT ENHANCEMENT
The credit enhancement for a series may include a cash collateral account,
a letter of credit, a surety bond, an insurance policy, or any other form of
credit enhancement described in the related prospectus supplement. Credit
enhancement may also be provided to a series or a class of a series by
subordination provisions that require the trust to distribute principal and/or
interest for the certificates of that series or class before it makes
distributions to one or more other series or other classes of that series.
The related prospectus supplement will describe any credit enhancement
provided for a series. The description will include such information as:
- the amount payable under the credit enhancement;
- any conditions to that payment;
- the circumstances under which the credit enhancement will be available;
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- the class or classes of the series that will receive the direct benefit
of the credit enhancement;
- the conditions, if any, under which the amount payable under the credit
enhancement may be terminated, reduced or replaced; and
- other material provisions of the related credit enhancement agreement.
REPURCHASE OF TRUST PORTFOLIO
A Trust Portfolio Repurchase Event will occur upon discovery that as of
October 27, 1993 or, for any additional Accounts, as of the date on which the
applicable seller assigned the Receivables in those additional Accounts to the
trust:
- the Pooling and Servicing Agreement or appropriate assignment, as the
case may be, does not constitute a valid and binding obligation of each
seller, subject to usual and customary exceptions relating to bankruptcy,
insolvency and general equity principles;
- the Pooling and Servicing Agreement or appropriate assignment, as the
case may be, does not constitute:
- a valid transfer and assignment to the trust of all right, title and
interest of each seller in and to the Receivables, whether then existing
or thereafter created, and the proceeds of those Receivables; or
- the grant of a perfected security interest of first priority under the
UCC as in effect in the state in which the chief executive office of the
applicable seller is located, in those Receivables and the proceeds of
those Receivables, effective as to each Receivable at the time it was or
is created;
- any seller or a person claiming through or under any seller has any claim
to or interest in any investor account, other than the interests of the
investors or the interest of any seller as a debtor for purposes of the
UCC as in effect in the state in which the chief executive office of the
applicable seller is located; or
- certain representations and warranties of any seller regarding:
- its corporate status and authority to assign Receivables and perform its
obligations under the Pooling and Servicing Agreement and any Series
Supplement; and
- the accuracy of information furnished by that seller to the trustee,
are not true and the applicable seller does not cure the breach within a
specified time period.
If a Trust Portfolio Repurchase Event occurs, either the trustee or
investors holding certificates that represent at least 51% of the Aggregate
Invested Amount, may direct Greenwood to purchase Receivables transferred to the
trust on or before the distribution date for each series then outstanding within
60 days of that notice. However, if an assignment of additional Accounts results
in a Trust Portfolio Repurchase Event, Greenwood will repurchase only the
Receivables in those additional Accounts. Greenwood will not be required to make
such a purchase, however, if, on any day during the applicable period, the Trust
Portfolio Repurchase Event does not adversely affect in any material respect the
interests of the investors as a whole. The determination of materiality referred
to above will be made by an officer of the master servicer in his or her sole
reasonable judgment.
The purchase price for each series then outstanding will equal the investor
interest in Receivables plus all accrued but unpaid interest for the series.
However, if an assignment of additional Accounts results in a Trust Portfolio
Repurchase Event, only the Receivables in those additional Accounts will be
repurchased at a price for each series equal to:
- the sum of the Class Percentages for each class of the series for
Principal Collections for the next following distribution date for the
series; multiplied by
- the amount of Receivables attributable to the additional Accounts,
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and the trustee will apply the purchase price as collections of those
Receivables in accordance with each applicable Series Supplement. The trustee
will deposit the purchase price in the Group Collections Account relating to
that series. If Greenwood's obligation to repurchase the trust portfolio is at
any time the subject of concurrent obligations of one or more other parties to
the Seller Certificate Ownership Agreement, then Greenwood's obligation to
repurchase the trust portfolio will be conditioned on Greenwood's ability to
enforce those concurrent obligations against the other parties to that
agreement.
REPURCHASE OF SPECIFIED RECEIVABLES
A Receivable Repurchase Event will occur if each Receivable that is
transferred to the trust is not, as of the time of transfer, an Eligible
Receivable, and
- this has a material adverse effect on the investors' interest in the
Receivables as a whole; and
- it is not cured within 60 days of the earlier of:
- actual knowledge of the breach by the relevant seller; or
- receipt by that seller of written notice of the breach given by the
trustee.
The determination of materiality referred to above will be made by an
officer of the master servicer in his or her sole reasonable judgment. "Eligible
Receivable" means each Receivable:
- which is payable in United States dollars;
- which was created in compliance, in all material respects, with all
requirements of law applicable to the seller and the servicer with
respect to that Receivable, and pursuant to a credit agreement that
complies, in all material respects, with all requirements of law
applicable to that seller and servicer;
- as to which, if the Receivable was created before October 27, 1993, or
the relevant addition date if the Account was added to the trust after
October 27, 1993,
- at the time the Receivable was created, the seller of the Receivable had
good and marketable title to the Receivable free and clear of all liens
arising under or through the seller, and
- at the time the seller conveyed the Receivable to the trust, the seller
had, or the trust will have, good and marketable title to the Receivable
free and clear of all liens arising under or through the seller;
- as to which, if the Receivable was created on or after October 27, 1993
or the relevant addition date if the Account was added to the trust after
October 27, 1993, at the time the Receivable was created, the trust will
have good and marketable title to the Receivable free and clear of all
liens arising under or through the seller with respect to the Receivable;
and
- which constitutes an "account" or "general intangible" under and as
defined in Article 9 of the UCC as then in effect in the state in which
the chief executive office of the seller of that Receivable is located.
Greenwood will purchase all the Receivables in each Account in which there is
any Receivable to which the Receivable Repurchase Event relates on the terms and
conditions set forth below.
Greenwood will purchase the Receivables in those Accounts by directing the
master servicer to deduct the amount of those Receivables that are Principal
Receivables from the aggregate amount of Principal Receivables in the trust. If,
however, excluding those Receivables from the calculation of the Seller Interest
would cause the Seller Interest to be an amount less than zero, then on the
following Trust Distribution Date, Greenwood will deposit into the Collections
Account in immediately available funds an amount equal to the amount by which
the Seller Interest would be reduced below zero. The deposit will be considered
a repayment in full of the Receivables, and will be treated as collections of
Principal Receivables in the preceding calendar month. If Greenwood's obligation
to repurchase Receivables is at any time the subject of concurrent obligations
of one or more other parties to the Seller Certificate
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Ownership Agreement, then Greenwood's obligation to repurchase Receivables will
be conditioned on Greenwood's ability to enforce those concurrent obligations
against the other parties to that agreement.
REPURCHASE OF A SERIES
A Series Repurchase Event for a series will occur upon discovery that, as
of the date the trust issues the series, the applicable Series Supplement does
not constitute a legal, valid and binding obligation of each seller enforceable
against each seller in accordance with its terms, subject to usual and customary
exceptions relating to bankruptcy, insolvency and general equity principles.
If a Series Repurchase Event for a series occurs, either the trustee or
investors holding certificates of that series that represent at least 51% of the
invested amount of that series, may direct Greenwood to purchase the
certificates of that series within 60 days after Greenwood receives that
direction. Greenwood will not be required to make the purchase, however, if, on
any day during the 60-day period, the Series Repurchase Event does not adversely
affect in any material respect the interests of the investors in the series as a
whole.
On the distribution date set for the purchase, Greenwood will deposit into
the applicable investor account for that series an amount equal to the sum of
the series investor interest in Receivables and all accrued but unpaid interest.
The amount on deposit in the applicable investor account will be paid to the
investors in the series when they present and surrender their certificates.
REPURCHASE OF CERTIFICATES
Sellers may become holders of certificates, and Greenwood may cancel any
certificates owned by a seller by providing notice of cancellation to the
trustee. However, Greenwood may not cancel any Class B certificates of any
series unless Greenwood has been advised by the Rating Agencies that
cancellation will not cause the Rating Agencies to lower or withdraw their
ratings of any certificates then outstanding. Simultaneously with any
cancellation of certificates of a series, the invested amount of the applicable
class of the series will be reduced, the invested amount for the series will be
reduced, and the Seller Interest will be increased by the invested amount
represented by the canceled certificates of the series. No reduction of a class
invested amount as described in the preceding sentence will result in a decrease
in any Class Percentage for the affected class if a Fixed Principal Allocation
Event for that series has previously occurred.
SALE OF SELLER INTEREST
The Seller Certificate was issued to Greenwood. Any Additional Sellers will
also become holders or owners of the Seller Certificate, as tenants-in-common
with Greenwood, and will enter into a Seller Certificate Ownership Agreement
with Greenwood. If there are Additional Sellers, all references to actions taken
by Greenwood as holder of the Seller Certificate will be deemed to be taken by
Greenwood on behalf of the holders of the Seller Certificate. Under the Pooling
and Servicing Agreement, neither Greenwood nor any Additional Seller may
transfer, assign, sell or otherwise convey, pledge or hypothecate or otherwise
grant a security interest in any portion of the Seller Interest represented by
the Seller Certificate except that:
- any seller may transfer all or part of its interest in the Seller
Certificate to an affiliate of Greenwood that is included in the same
"affiliated group" as Greenwood for United States federal income tax
purposes; and
- any seller may transfer a portion of the Seller Interest on terms
substantially similar to the terms of the Pooling and Servicing
Agreement, so long as
- the agreements and other related documentation are consistent with, and
subject to, the terms of the Pooling and Servicing Agreement and any
Series Supplement and do not require any action prohibited or prohibit
any action that is required on the part of the master servicer, any
seller,
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the trustee or any servicer by the Pooling and Servicing Agreement or
any Series Supplement or necessary to protect the interests of the
investors; and
- the Rating Agencies advise the seller that they will not lower or
withdraw the rating of any class of any outstanding series as a result
of the transfer.
Notwithstanding the above, the Rating Agencies' advice is not required if the
transfer is made to comply with certain regulatory requirements.
REALLOCATION OF SERIES AMONG GROUPS
The master servicer may elect, at any time, subject to certain conditions,
to move any series from the group of which it is then a member to any other
group, including without limitation to a new group established at that time, of
which the series to be moved is the only series. The master servicer may move a
series from one group to another group only if the following conditions are
satisfied:
- the group from which the series is moved and the group to which the
series is moved have the same distribution date;
- the master servicer has certified to the trustee that the master servicer
reasonably believes that moving the series would not delay any payment of
principal to the investors in any series then outstanding;
- the master servicer has certified to the trustee that the master servicer
reasonably believes that moving the series would not cause an
Amortization Event to occur with respect to any series then outstanding;
and
- the Rating Agencies have advised the master servicer and Greenwood that
moving the series would not cause them to lower or withdraw their ratings
of any class of any series then outstanding.
AMENDMENTS
The master servicer, the sellers, the trustee and the servicers may amend
the Pooling and Servicing Agreement and any Series Supplement from time to time
without the consent of the investors in any outstanding series, for any of the
following purposes:
- to add to the covenants and agreements contained in the Pooling and
Servicing Agreement or the Series Supplement or to surrender any right or
power in those agreements reserved to or conferred upon the sellers, the
master servicer or any servicer, provided that the amendment will not
adversely affect in any material respect the interests of the investors
in any class of any series then outstanding;
- to add provisions to or change or eliminate any of the provisions of the
Pooling and Servicing Agreement or any Series Supplement, provided that
the amendment will not adversely affect in any material respect the
interests of the investors in any class of any series then outstanding;
- to add provisions to or change any of the provisions of the Pooling and
Servicing Agreement or any Series Supplement to accommodate the addition
of interests in other pools of credit card receivables to the trust; or
- to cure any ambiguity or to correct or supplement any defective or
inconsistent provision contained in the Pooling and Servicing Agreement,
in any Series Supplement or in any amendment to the Pooling and Servicing
Agreement or any Series Supplement.
The master servicer, the sellers, the trustee and the servicers may also
amend the Pooling and Servicing Agreement and any Series Supplement for any
series from time to time with the consent of investors holding certificates that
represent at least 66 2/3% of the invested amount for each class adversely
affected by the amendment. Each amendment may add any provisions to, or change
in any manner or
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eliminate any of the provisions of the Pooling and Servicing Agreement and the
applicable Series Supplement, or modify in any manner the rights of the
investors of the series, provided that:
- the trustee will have been advised by each Rating Agency that the Rating
Agency will not lower or withdraw its ratings assigned to the
certificates of the series as a result of the amendment; and
- the amendment will not materially and adversely affect the interests of
the certificateholders of any class of the series by reducing in any
manner the amount of, or delaying the timing of, distributions that are
required to be made to them without the consent of the affected
certificateholders, or by reducing the percentage required to consent to
any such amendment, without the consent of each certificateholder of each
affected class.
For purposes of calculating whether a 66 2/3% consent has been achieved,
the trustee will calculate the applicable class invested amount or series
invested amount without taking into account the invested amount represented by
any certificates beneficially owned by any seller or any affiliate of any
seller. No seller or affiliate of a seller will be entitled to vote on any
amendment described in this paragraph. If any amendment to the Pooling and
Servicing Agreement would adversely affect the interests of any class of any
other series of certificates then outstanding, the certificateholders of each
class adversely affected by the proposed amendment will also have to consent to
the amendment. Promptly after the execution of any amendment or consent
described in this paragraph, the trustee will notify the certificateholders of
the substance of the amendment.
If the following actions are completed in accordance with the Pooling and
Servicing Agreement and/or any Series Supplement, they will not constitute an
amendment to the Pooling and Servicing Agreement or any Series Supplement for
the purposes of the preceding two paragraphs:
- the execution and delivery of any Series Supplement;
- the addition of Receivables to the trust;
- the removal of Receivables from the trust;
- the addition or removal of any seller or servicer in connection with an
addition to or removal from the trust of Receivables; or
- the replacement of any servicer, master servicer or trustee.
LIST OF CERTIFICATEHOLDERS
If the Trust has issued Definitive Certificates with respect to the
certificates of any series, then three or more certificateholders of record of
any class of that series, holding certificates that represent at least 5% of the
invested amount of that class, may request in writing access to the list of
certificateholders of that series. After the requesting certificateholders have
adequately indemnified the trustee for its costs and expenses, the trustee will
afford those certificateholders access during business hours to the current list
of certificateholders of that series to communicate with those
certificateholders about their rights under the Pooling and Servicing Agreement
and the applicable Series Supplement. See "--Definitive Certificates."
MEETINGS
The Pooling and Servicing Agreement does not provide for any annual or
other meetings of certificateholders of any series.
BOOK-ENTRY REGISTRATION
Greenwood has obtained the information in this section concerning DTC,
Clearstream Banking, and Euroclear and their book-entry systems and procedures
from sources that Greenwood and the trust believe to be reliable, but Greenwood
and the trust take no responsibility for the accuracy of the information in this
section.
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Unless otherwise provided in the applicable prospectus supplement, you may
hold your certificates through DTC, in the United States, or Clearstream Banking
or Euroclear, in Europe. The certificates will be registered in the name of the
nominee of DTC. Clearstream Banking and Euroclear will hold omnibus positions on
behalf of Clearstream Banking's customers and Euroclear's participants,
respectively, through customers' securities accounts in Clearstream Banking's
and Euroclear's names on the books of their respective depositories, which in
turn will hold those positions in customers' securities accounts in the
depositories' names on the books of DTC. Greenwood has been informed by DTC that
DTC's nominee will be Cede & Co. Accordingly, Cede is expected to be the holder
of record of the certificates. Unless otherwise provided in the applicable
prospectus supplement, you may purchase certificates in book-entry form in
minimum denominations of $1,000 and integral multiples of $1,000. You will not
be entitled to receive a certificate representing your interest in the
certificates. Unless and until the trust issues Definitive Certificates under
the limited circumstances described in this prospectus, when we refer to actions
by investors or certificateholders, we refer to actions taken by DTC upon
instructions from its participants, and when we refer to distributions and
notices to investors or certificateholders, we refer to distributions and
notices to DTC or Cede, as the registered holder of the certificates, for
distribution to investors in accordance with DTC procedures. See "--Definitive
Certificates."
DTC is:
- a limited-purpose trust company organized under the laws of the State of
New York,
- a member of the Federal Reserve System,
- a "clearing corporation" within the meaning of the New York UCC, and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934.
DTC was created to hold securities for its participating organizations, or
participants, and to facilitate the clearance and settlement of securities
transactions between its participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movements of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations, and may include other
organizations. Indirect access to the DTC system also is available to indirect
participants such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream Banking's customers and Euroclear's participants
will occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Banking's customers or Euroclear's participants, on the other hand, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its depository. However, cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures and within its established deadlines, which will
be on European time. The relevant European international clearing system will,
if the transaction meets its settlement requirements, deliver instructions to
its depository to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream Banking's customers and Euroclear's participants may not
deliver instructions directly to the depositories.
Because of time zone differences, credits of securities in Clearstream
Banking or Euroclear resulting from a transaction with a DTC participant will be
made during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and those credits or any transactions in
those securities settled during that processing will be reported to the relevant
Clearstream Banking customer or Euroclear participant on that business day. Cash
received in Clearstream Banking or
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Euroclear as a result of sales of securities by or through a Clearstream Banking
customer or a Euroclear participant to a DTC participant will be received with
value on the DTC settlement date but will be available in the relevant
Clearstream Banking or Euroclear cash account only as of the business day
following settlement in DTC. For additional information on tax documentation
procedures for the certificates, see "Federal Income Tax
Consequences--Non-United States Investors."
If you are not a participant or an indirect participant in DTC, you may
purchase, sell or otherwise transfer ownership of, or other interests in, the
certificates only through DTC participants and indirect participants. In
addition, you will receive all distributions of principal and interest from the
trustee through the participants. Under a book-entry format, you may experience
some delay in your receipt of payments, since the trustee will forward the
payments to Cede, as nominee for DTC. DTC will forward the payments to its
participants, which then will forward them to indirect participants or
beneficial owners. Greenwood anticipates that the only "certificateholder" will
be Cede, as nominee of DTC. You will not be recognized by the trustee as a
certificateholder, as that term is used in the Pooling and Servicing Agreement,
and you will only be permitted to exercise the rights of certificateholders
indirectly through the DTC participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required:
- to make book-entry transfers among participants on whose behalf it acts
with respect to the certificates; and
- to receive and transmit distributions of the principal of and interest on
the certificates.
Participants and indirect participants with which you have accounts with respect
to the certificates similarly are required to make book-entry transfers and
receive and transmit these payments on your behalf.
Because DTC can only act on behalf of its participants, who in turn act on
behalf of indirect participants and certain banks, your ability to pledge
certificates to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of those certificates, may be limited due
to the lack of a physical certificate for those certificates.
DTC has advised Greenwood that it will take any action permitted to be
taken by a certificateholder under the Pooling and Servicing Agreement or any
applicable Series Supplement only at the direction of one or more participants
to whose account with DTC the certificates are credited. DTC may take
conflicting action with respect to other undivided interests in the certificates
to the extent that those actions are taken on behalf of participants whose
holdings include those undivided interests.
Clearstream Banking holds securities for its customers and facilitates the
clearance and settlement of securities transactions by electronic book-entry
transfers between their accounts. Clearstream Banking provides various services,
including safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream Banking also deals with domestic securities markets in over 30
countries through established depository and custodial relationships.
Clearstream Banking has established an electronic bridge with Morgan Guaranty
Trust Company of New York, as the Operator of the Euroclear System in Brussels,
to facilitate settlement of trades between Clearstream Banking and Euroclear.
Clearstream Banking currently accepts over 110,000 securities issues on its
books.
Clearstream Banking's customers are worldwide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. In the U.S., Clearstream Banking's customers are
limited to securities brokers and dealers. Indirect access to Clearstream
Banking is available to other institutions that clear through or maintain a
custodial relationship with a Clearstream Banking customer.
Clearstream Banking is registered as a bank in Luxembourg, and as such is
subject to regulation by the Luxembourg Commission for the Supervision of the
Financial Sector, which supervises Luxembourg banks.
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The Euroclear System was created in 1968 to hold securities for its
participants and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and risk from lack of
simultaneous transfers of securities and cash. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office, the "Euroclear Operator," under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation. The Euroclear
Operator conducts all operations, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Euroclear cooperative corporation. The Euroclear cooperative corporation
establishes policy for the Euroclear System on behalf of Euroclear participants.
Euroclear participants include banks--including central banks--securities
brokers and dealers and other professional financial intermediaries, and may
include the underwriters of the certificates. Other firms that clear through or
maintain a custodial relationship with a Euroclear participant, either directly
or indirectly, also have indirect access to the Euroclear System.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law.
These terms, conditions and operating procedures govern:
- transfers of securities and cash within the Euroclear System;
- withdrawal of securities and cash from the Euroclear System; and
- receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under its terms, conditions and operating procedures
only on behalf of Euroclear participants and has no record of or relationship
with persons holding through Euroclear participants.
Clearstream Banking or Euroclear will credit distributions on the
certificates held through them to the cash accounts of Clearstream Banking's
customers or Euroclear's participants in accordance with the relevant system's
rules and procedures, to the extent received by its depository. These
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Federal Income Tax Consequences."
Clearstream Banking or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a certificateholder under the Pooling and
Servicing Agreement or any applicable Series Supplement on behalf of a
Clearstream Banking customer or Euroclear participant only in accordance with
its relevant rules and procedures and subject to its depository's ability to
effect those actions on its behalf through DTC.
Although DTC, Clearstream Banking and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of certificates among
participants of DTC, Clearstream Banking and Euroclear, they are under no
obligation to perform or continue to perform those procedures and they may
discontinue those procedures at any time.
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DEFINITIVE CERTIFICATES
Unless otherwise provided in the applicable prospectus supplement, the
trust will issue a class of certificates in fully registered, certificated form
to you or your nominees--"Definitive Certificates"--rather than to DTC or its
nominees, only if:
- the master servicer advises the trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository
for that class, and the trustee or the master servicer is unable to
locate a qualified successor;
- the master servicer, at its option, elects to terminate the book-entry
system through DTC; or
- after a Master Servicer Termination Event occurs, beneficial owners
representing in the aggregate at least 51% of the respective class
invested amount advise the trustee and DTC through DTC participants in
writing that continuing a book-entry system through DTC, or a successor
to DTC, is no longer in the best interest of the beneficial owners of
that class.
If any of the events described in the immediately preceding paragraph
occurs, DTC is required to notify all DTC participants that Definitive
Certificates of the class affected by the event will be available through DTC.
When DTC surrenders the applicable certificates held by it and the trustee
receives instructions for re-registration, the trustee will issue the applicable
certificates as Definitive Certificates. Thereafter the trustee will recognize
the registered holders of the Definitive Certificates as certificateholders
under the Pooling and Servicing Agreement and the applicable Series Supplement.
The trustee will distribute principal and interest on the certificates
directly to holders of Definitive Certificates in accordance with the procedures
set forth in the Pooling and Servicing Agreement and the applicable Series
Supplement. On each distribution date, the trustee will mail a check to holders
in whose names the Definitive Certificates were registered at the close of
business on the last day of the preceding calendar month, to the address of that
holder as it appears on the register maintained by the trustee. The final
payment on any certificate, whether a Definitive Certificate or one of the
certificates registered in the name of Cede representing the certificates,
however, will be made only upon presentation and surrender of the certificate at
the office or agency specified in the notice of final distribution to
certificateholders. The trustee will provide that notice to registered
certificateholders not later than the tenth day of the month of that final
payment.
You may transfer and exchange Definitive Certificates at the offices of the
trustee, or at another office that Greenwood designates. The transfer agent will
not impose a service charge to register any transfer or exchange, but the
transfer agent may require you to pay a sum sufficient to cover any tax or other
governmental charge imposed in connection with a transfer or exchange.
SERVICING
MASTER SERVICER AND SERVICER
Greenwood acts as master servicer for the trust. In addition to the master
servicer, there also may be one or more servicers of the Accounts. Greenwood is
currently the only servicer. Additional servicers may be added to the trust at a
later date if receivables in accounts other than credit accounts originated by
Greenwood are added to the trust. Each servicer will perform servicing functions
with respect to the Accounts for which it is the servicer. The master servicer
will coordinate the activities of the various servicers for the trust. The
duties of the master servicer include:
- aggregating collections from the servicers and distributing those
collections to the various investor accounts;
- directing the investment of funds on deposit in the investor accounts and
the credit enhancement accounts in Permitted Investments;
- receiving the monthly servicing fee and allocating it among the
servicers;
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- preparing reports for investors; and
- making any filings on behalf of the trust with the Securities and
Exchange Commission or other governmental agencies.
The master servicer has no duty to pay an amount in lieu of collections
from its own funds if any servicer fails to transfer collections to the master
servicer or to the trust, at the direction of the master servicer. Upon
appointment of any additional servicer, Greenwood as master servicer and
servicer and the additional servicer will enter into a master servicing
agreement, which will govern the relationship among the master servicer and the
servicers.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The master servicer is paid a monthly servicing fee, on behalf of the
certificateholders of each outstanding series and the sellers, for each calendar
month in an amount equal to no less than 2% per annum, calculated on the basis
of a 360-day year of twelve 30-day months, of the amount of Principal
Receivables in the trust on the first day of that calendar month. The monthly
servicing fee compensates the master servicer for its activities and reimburses
it for its expenses. If there is more than one servicer, the master servicer's
expenses will include the payment of a servicing fee to each servicer, pursuant
to the terms of a master servicing agreement to be entered into by Greenwood as
master servicer and servicer and any other servicer. The monthly servicing fee
is allocated among the Seller Interest and each outstanding series. The share of
each monthly servicing fee allocable to the holder of the Seller Certificate on
any Trust Distribution Date equals:
- the investor servicing fee percentage of 2% per year, divided by twelve,
unless otherwise specified in the related prospectus supplement;
multiplied by
- the amount of Principal Receivables in the trust as of the first day of
the calendar month preceding that Trust Distribution Date; multiplied by
- the amount of the Seller Interest, divided by
- the greater of
- the amount of Principal Receivables in the trust and
- the Aggregate Investor Interest.
The holder of the Seller Certificate pays this share of each monthly
servicing fee to the master servicer on or before each Trust Distribution Date.
Unless otherwise specified in the related prospectus supplement, the portion of
the fee allocated to the investor interest for each class of each series equals:
- the amount of the servicing fee for a given calendar month, multiplied by
- the class investor interest on the first day of the calendar month
divided by
- the series investor interest on the first day of the calendar month.
The servicing fee for any given calendar month for each series will be
equal to the investor servicing fee percentage divided by twelve multiplied by
the series investor interest on the first day of the calendar month, or in the
case of the first distribution date, as of the first day of the calendar month
in which the trust issued the series. The class monthly servicing fee for each
class will be funded from Finance Charge Collections allocated to that class and
may be funded from certain other sources as described in "The Certificates--Cash
Flows" and "Annex A--Cash Flows" in the related prospectus supplement. The
remainder of the monthly servicing fee will be allocated to each other
outstanding series. Neither the trustee nor the certificateholders of any series
will have any obligation to pay that portion of the monthly servicing fee that
is payable by any class of any other series issued by the trust or that is
payable by the sellers.
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The master servicer pays from its servicing compensation the servicing fees
for each servicer and certain other expenses incurred in connection with
servicing the Receivables. These include, without limitation, payment of the
fees and disbursements of the trustee and independent accountants and other fees
and expenses of the trust not expressly stated in the Pooling and Servicing
Agreement or any Series Supplement to be for the account of the
certificateholders. However, neither the master servicer nor any servicer will
be liable for any federal, state or local income or franchise tax, or any
interest or penalties with respect to any tax, assessed on the trust, the
trustee or the investors.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE SERVICERS
Neither the master servicer nor any servicer may resign from its
obligations and duties as master servicer or servicer under the Pooling and
Servicing Agreement or any Series Supplement unless it determines that it is no
longer permitted to perform its duties under applicable law or unless certain
other limited circumstances apply. The master servicer or any servicer may not
effectively resign until the trustee or a successor to the master servicer or
servicer, as applicable, has assumed the master servicer's or servicer's
responsibilities and obligations under the Pooling and Servicing Agreement and
the Series Supplements.
The master servicer or any servicer may delegate any of its duties under
the Pooling and Servicing Agreement or any Series Supplement. However, the
master servicer or the servicer will continue to be responsible and liable for
the performance of delegated duties, and will not be deemed to have resigned
under the Pooling and Servicing Agreement.
Any of the following entities will become a successor to the master
servicer or the servicer, as applicable, under the Pooling and Servicing
Agreement and the Series Supplements if it executes a supplement to the Pooling
and Servicing Agreement and each Series Supplement then outstanding:
- any corporation into which the master servicer or the servicer is merged
or consolidated in accordance with the Pooling and Servicing Agreement;
- any corporation resulting from any merger or consolidation to which the
master servicer or any servicer is a party; or
- any corporation succeeding to the business of the master servicer or any
servicer.
MASTER SERVICER TERMINATION EVENTS
If any Master Servicer Termination Event occurs, either the trustee or
holders of certificates that represent at least 51% of the invested amount for
any class of any series that is materially adversely affected by the Master
Servicer Termination Event, may terminate all of the rights and obligations of
Greenwood as master servicer under the Pooling and Servicing Agreement and any
outstanding Series Supplement. The trustee may terminate these rights and
obligations by giving written notice to Greenwood as master servicer; the
holders of the requisite amount of certificates may terminate these rights and
obligations by giving written notice to Greenwood as master servicer and to the
trustee. The trustee will appoint a successor master servicer as promptly as
possible. If the trustee has not appointed a successor master servicer who has
accepted the appointment by the time Greenwood ceases to act as master servicer,
all authority, power and obligations of Greenwood as master servicer under the
Pooling and Servicing Agreement and any Series Supplement then outstanding will
pass to and be vested in the trustee.
A Master Servicer Termination Event refers to any of the following events:
- the master servicer fails to make any payment, transfer or deposit, or to
give instructions to the trustee to make any withdrawal, on the date it
is required to do so under the Pooling and Servicing Agreement, any
Series Supplement or any master servicing agreement, or within five
business days after the date it was required to do so;
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- the master servicer fails duly to observe or perform in any material
respect any of its other covenants or agreements set forth in the Pooling
and Servicing Agreement, any Series Supplement or any master servicing
agreement, and does not cure that failure for 60 days after it receives
notice that it has failed to perform from the trustee, or for 60 days
after it and the trustee receive notice that it has failed to perform
from holders of certificates that represent at least 25% of the invested
amount for any class of any series materially adversely affected by the
failure;
- any representation, warranty or certification made by the master servicer
in the Pooling and Servicing Agreement, any Series Supplement, any master
servicing agreement or in any certificate delivered pursuant to any of
these agreements proves to have been incorrect when made, which:
- has a material adverse effect on the rights of the investors of any
class of any series then outstanding, and
- continues to be incorrect in any material respect for 60 days after
written notice of its incorrectness has been given to the master
servicer by the trustee, or to the master servicer and the trustee by
holders of certificates that represent at least 25% of the invested
amount for any class of any series materially adversely affected by the
incorrect representation, warranty or certification; or
- certain events of bankruptcy, insolvency or receivership of the master
servicer occur. However, the FDIC may have the power to prevent the
trustee or investors from effecting a transfer of servicing if the Master
Servicer Termination Event relates only to the appointment of a
conservator or receiver or the insolvency of Greenwood, or any other
FDIC-insured depository institution, as master servicer. Similarly, if a
Master Servicer Termination Event occurs with respect to a master
servicer subject to Title 11 of the United States Code, and no Master
Servicer Termination Event exists other than the filing of a bankruptcy
petition by or against the master servicer, the trustee or investors may
be prevented from effecting a transfer of servicing.
SERVICER TERMINATION EVENTS
If any Servicer Termination Event occurs with respect to any servicer,
either the trustee or holders of certificates that represent at least 51% of the
invested amount for any class of any series that is materially adversely
affected by the Servicer Termination Event, may terminate all of the rights and
obligations of that servicer under the Pooling and Servicing Agreement, any
Series Supplement and any master servicing agreement. The trustee may terminate
these rights and obligations by giving written notice to Greenwood as master
servicer and to the servicer to which the Servicer Termination Event relates;
the holders of the requisite amount of certificates may terminate these rights
and obligations by giving written notice to Greenwood as master servicer, to the
servicer to which the Servicer Termination Event relates, and to the trustee. If
the trustee has not appointed a successor servicer who has accepted the
appointment by the time the servicer ceases to act as a servicer, all authority,
power and obligations of the servicer under the Pooling and Servicing Agreement,
any Series Supplement then outstanding and any master servicing agreement will
pass to and be vested in the trustee.
A Servicer Termination Event, for any servicer, refers to any of the
following events:
- the servicer fails to make any payment, transfer or deposit on the date
it is required to do so under the Pooling and Servicing Agreement, any
Series Supplement, or any master servicing agreement, or within five
business days after the date it was required to do so;
- the servicer fails duly to observe or perform in any material respect any
of its other covenants or agreements set forth in the Pooling and
Servicing Agreement, any Series Supplement or any master servicing
agreement, and does not cure that failure for 60 days after it receives
notice that it has failed to perform from the trustee, or for 60 days
after it and the trustee receive notice that it has failed to perform
from holders of certificates that represent at least 25% of the invested
amount for any class of any series materially adversely affected by the
failure;
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- any representation, warranty or certification made by the servicer in the
Pooling and Servicing Agreement, any Series Supplement, any master
servicing agreement or in any certificate delivered pursuant to any of
these agreements proves to have been incorrect when made, which:
- has a material adverse effect on the rights of the investors of any
class of any series then outstanding, and
- continues to be incorrect in any material respect for 60 days after
written notice of its incorrectness has been given to the servicer by
the trustee, or to the servicer and the trustee by holders of
certificates that represent at least 25% of the invested amount for any
class of any series materially adversely affected by the incorrect
representation, warranty or certification; or
- certain events of bankruptcy, insolvency or receivership of the servicer
occur. However, the FDIC may have the power to prevent the trustee or
investors from effecting a transfer of servicing if the Servicer
Termination Event relates only to the appointment of a conservator or
receiver or the insolvency of Greenwood, or any other FDIC-insured
depository institution, as servicer. Similarly, if a Servicer Termination
Event occurs with respect to a servicer subject to Title 11 of the United
States Code, and no Servicer Termination Event exists other than the
filing of a bankruptcy petition by or against the servicer, the trustee
or investors may be prevented from effecting a transfer of servicing.
EVIDENCE AS TO COMPLIANCE
On or before March 15 of each calendar year, the master servicer will cause
a firm of nationally recognized independent public accountants to furnish a
report to the trustee, the master servicer and each servicer to the effect that:
- in the opinion of those accountants, each of the master servicer and each
servicer had in effect on the date of their report a system of internal
accounting controls relating to its servicing procedures that was
sufficient to prevent errors and irregularities that would be material to
the assets of the trust;
- nothing has come to the accountants' attention that would cause them to
believe that the master servicer or any servicer has failed to conduct
its servicing in compliance with the Pooling and Servicing Agreement and
any Series Supplement, except for such exceptions that the accountants
believe to be immaterial and such other exceptions as will be set forth
in their report; and
- the accountants have compared the mathematical calculations of the
amounts set forth in the master servicer's monthly certificates delivered
during the preceding fiscal year with the computer reports of the master
servicer and each servicer that generated those amounts, and confirmed
that those amounts agree, except for such exceptions that the accountants
believe to be immaterial and such other exceptions as will be set forth
in their report.
The accountants will not follow procedures that constitute an audit conducted in
accordance with generally accepted auditing standards.
The master servicer will deliver to the trustee, Greenwood on behalf of the
holder of the Seller Certificate and the Rating Agencies, on or before March 15
of each calendar year, an annual statement signed by an officer of the master
servicer stating:
- that in the course of the officer's duties as an officer of the master
servicer, the officer would normally obtain knowledge of any Master
Servicer Termination Event, and
- whether or not the officer has obtained knowledge of any Master Servicer
Termination Event during the preceding fiscal year ended November 30, and
if so, specifying each Master Servicer Termination Event of which the
signing officer has knowledge and the nature of that event.
Each servicer will deliver a similar annual statement covering the applicable
period with respect to Servicer Termination Events.
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THE SELLER
GREENWOOD
Greenwood is a wholly owned subsidiary of NOVUS Credit Services Inc. and an
indirect subsidiary of Morgan Stanley Dean Witter & Co., or MSDW. NOVUS acquired
Greenwood in January 1985. Greenwood was chartered as a banking corporation
under the laws of the State of Delaware in 1911, and its deposits are insured by
the FDIC. Greenwood is not a member of the Federal Reserve System. The executive
office of Greenwood is located at 12 Read's Way, New Castle, Delaware 19720. In
addition to the experience obtained by Greenwood in the bank card business since
1985, a majority of the senior management of the credit, operations and data
processing functions for the Discover Card at Greenwood and Discover Financial
Services, Inc., or DFS, has had extensive experience in the credit operations of
other credit card issuers. DFS performs sales and marketing activities, provides
operational support for the Discover Card program and maintains merchant
relationships.
The Competitive Equality Banking Act of 1987, or CEBA, as amended by the
Gramm-Leach-Bliley Financial Modernization Act of 1999, places certain
limitations on Greenwood. See "Risk Factors--Legislation," in the prospectus
supplement. Greenwood believes that in light of the programs it has in place,
the limitations of CEBA, as amended, will not have a material impact on the
level of the Receivables or on Greenwood's ability to service the Receivables.
Greenwood and its affiliates may own certificates in their own names.
INSOLVENCY-RELATED MATTERS
It is possible that a receiver or conservator of Greenwood may argue that
Greenwood's transfer to the trust of all of Greenwood's right, title and
interest in and to the Receivables, is a pledge of the Receivables rather than
an absolute transfer. Accordingly, Greenwood has granted to the trustee, on
behalf of the trust, a security interest in the Receivables. To the extent that
this security interest is validly perfected prior to an insolvency of Greenwood
and not taken in contemplation of that insolvency or with the intent to hinder,
delay or defraud Greenwood or its creditors, a receiver or conservator of
Greenwood should not be able to invalidate this security interest or recover
payments made in respect of the Receivables, other than payments made to
Greenwood by the trust related to Greenwood's interest in the Seller
Certificate. If, however, a receiver or conservator of Greenwood were to assert
a contrary position or were to submit a claim and complete the administrative
claims procedure established under the Federal Deposit Insurance Act, as
amended, requiring the trust to establish its right to cash collections that
Greenwood possesses as servicer or in any other capacity, the trust may be
required to delay or possibly reduce payments to you on the certificates. In
addition, if the FDIC is appointed as conservator or receiver for Greenwood, it
has the power under the Federal Deposit Insurance Act, as amended, to repudiate
contracts, including contracts of Greenwood such as the Pooling and Servicing
Agreement. The Federal Deposit Insurance Act, as amended, provides that a claim
for damages arising from the repudiation of a contract is limited to "actual
direct compensatory damages." If the FDIC were to be appointed as conservator or
receiver of Greenwood and were to repudiate the Pooling and Servicing Agreement,
then the trust may not have adequate collateral to pay you the outstanding
principal and accrued interest on your certificates. For example, the Resolution
Trust Corporation, which ceased to exist as of December 31, 1995--the FDIC has
taken over its responsibilities--repudiated certain secured zero-coupon bonds
issued by a savings association. In a 1993 case involving that repudiation, a
United States federal district court decided that "actual direct compensatory
damages" in the case of a marketable security meant the market value of the
repudiated bonds as of the date of repudiation.
Unless otherwise specified in the related prospectus supplement, Greenwood
will receive on the date it issues each series, an opinion of Latham & Watkins,
Greenwood's counsel, concluding on a reasoned basis--although there is no
precedent based on directly similar facts--that subject to certain facts,
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assumptions and qualifications specified in the opinion, including matters set
forth under "Certain Legal Matters Relating to the Receivables--Transfer of
Receivables" and "--Certain UCC Matters":
- under New York law, the law of the jurisdiction in which the debtor--in
this case, Greenwood--is located governs the perfection and the effect of
perfection or nonperfection of a security interest in the Receivables;
- if Greenwood's transfer of the Receivables to the trust constitutes an
absolute transfer, then the transfer is a transfer of all right, title
and interest of Greenwood in and to those Receivables to the trust; and
- if the transfer is deemed not to be an absolute transfer, it would be
treated as a security interest created by the Pooling and Servicing
Agreement in favor of the trust in Greenwood's right, title and interest
in and to the Receivables.
Unless otherwise specified in the related prospectus supplement, Greenwood
also will receive on the date it issues each series, an opinion of Young Conaway
Stargatt & Taylor, LLP, Greenwood's Delaware counsel, concluding on a reasoned
basis that, subject to certain facts, assumptions and qualifications specified
in the opinion, including matters set forth under "Certain Legal Matters
Relating to the Receivables--Transfer of Receivables" and "--Certain UCC
Matters":
- to the extent Delaware law applies, the security interest created by the
Pooling and Servicing Agreement in favor of the trust is a valid security
interest in all right, title and interest of Greenwood in and to the
Receivables;
- the security interest is a perfected security interest; and
- the security interest is a first priority security interest.
The above descriptions are qualified in their entirety by reference to the
forms of opinions filed as exhibits to the registration statement of which this
prospectus is a part.
CERTAIN LEGAL MATTERS RELATING TO THE RECEIVABLES
TRANSFER OF RECEIVABLES
When the trust was formed, Greenwood transferred to the trust without
recourse, all Receivables existing under the Accounts as of October 1, 1993. In
addition, Greenwood transferred to the trust all Receivables existing under
additional Accounts as of the date specified in the applicable assignment, and
may do so again in the future. Greenwood also transfers additional Receivables
generated in the Accounts to the trust on an ongoing basis. In exchange,
Greenwood received the Seller Certificate, the right to direct the trust to
issue new series and the right to receive the proceeds from the sale of new
series of certificates. Greenwood has agreed to repurchase Receivables if either
the sale of the Receivables is not a valid transfer of all right, title and
interest of Greenwood or any Additional Seller in and to the Receivables or, if
the transfer of Receivables by Greenwood or any Additional Seller to the trust
is deemed to be a pledge of Receivables, the trust does not have a first
priority perfected security interest in the Receivables. If Greenwood's
obligation to repurchase Receivables is at any time the subject of concurrent
obligations of one or more other parties to the Seller Certificate Ownership
Agreement, then Greenwood will not be obligated to repurchase Receivables unless
Greenwood is able to enforce those concurrent obligations. A tax or statutory
lien on Greenwood's property that existed before Receivables were created may
have priority over the trust's interest in those Receivables. In addition,
subject to conditions that we describe in "The Trust--Collections," each
servicer may use all or a portion of the cash collections received by it during
any given month until the applicable distribution date for those collections.
However, if any servicer becomes bankrupt or goes into receivership or
custodianship, the trust may not have a perfected interest in the collections
held by that servicer. See "The Certificates--Repurchase of the Trust
Portfolio."
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The Receivables are "accounts" or "general intangibles" as defined in
Article 9 of the UCC as in effect in the state in which the chief executive
office of the seller of that Receivable is located. To the extent the
Receivables constitute accounts, Article 9 of the UCC treats both the absolute
transfer of those Receivables and the transfer of those Receivables to secure an
obligation as creating a security interest in those Receivables. The trustee
must file financing statements to perfect the trust's security interest in those
Receivables. To the extent Receivables constitute general intangibles and the
transfer of those Receivables is deemed to be a transfer to secure an
obligation, Article 9 of the UCC applies to the same extent as it applies to
Receivables constituting accounts. The trustee has filed a financing statement,
and the trustee will file continuation statements covering the Receivables,
under the UCC as in effect in Delaware to protect the trust in the event that
Article 9 of the UCC applies to Greenwood's transfer of Receivables to the
trust. If a transfer of Receivables constituting general intangibles is deemed
to be an absolute transfer, then the UCC does not apply, and no further action
is required to perfect the trust's interest in those Receivables from
third-party claims. However, if the FDIC were appointed as receiver of
Greenwood, certain administrative expenses of the receiver might have priority
over the interest of the trust in Receivables originated by Greenwood, whether
those Receivables are accounts or general intangibles.
CERTAIN UCC MATTERS
Unless the trustee files continuation statements within the time specified
in the UCC in respect of the trust's security interest in the Receivables, the
perfection of its security interest will lapse. In addition, some sellers may
acquire the Receivables they transfer to the trust from third parties. Unless
those sellers file continuation statements within the time specified in the UCC
in respect of their security interests in the Receivables, the perfection of
their security interests will lapse.
There are also certain limited circumstances under the UCC under which
Receivables could be subject to an interest that has priority over the interest
of the sellers or the trust. Under the Pooling and Servicing Agreement, however,
Greenwood has agreed to repurchase the Receivables in any Account containing a
Receivable that has been transferred to the trust and that is not free and clear
of the lien of any third party, if the existence of those liens has a material
adverse effect on the certificateholders' interest in the Receivables as a
whole. If Greenwood's obligation to repurchase Receivables is at any time the
subject of concurrent obligations of one or more other parties to the Seller
Certificate Ownership Agreement, then Greenwood will not be obligated to
repurchase Receivables unless Greenwood is able to enforce those concurrent
obligations. See "The Certificates--Repurchase of Specified Receivables." Each
seller also will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any of the Receivables transferred by it, or any interest in
those Receivables, other than to the trust. A tax or other statutory lien on
property of a transferor also may have priority over the interest of the sellers
or the trust in the Receivables.
Because the trust's interest in the Receivables is dependent upon the
relevant seller's interest in the Receivables, any adverse change in the
priority or perfection of a seller's security interest would correspondingly
affect the trust's interest in the affected Receivables.
As set forth under "Risk Factors--Certain Legal Aspects" in the prospectus
supplement, under certain circumstances all or a portion of the cash collections
of Receivables received by each servicer may be used by that servicer before
those collections are distributed on each distribution date. If that servicer
becomes insolvent or goes into receivership or, in certain circumstances, if
certain time periods lapse, the trust may not have a perfected interest in those
cash collections.
CONSUMER PROTECTION LAWS AND DEBTOR RELIEF LAWS APPLICABLE TO THE RECEIVABLES
Federal and state consumer protection laws and regulations regulate the
relationships among credit cardmembers, credit card issuers and sellers of
merchandise and services in transactions financed by the extension of credit
under credit accounts. These laws and regulations include the Federal
Truth-in-Lending Act and Fair Credit Billing Act, and the provisions of the
Federal Reserve Board's Regulation Z issued under each of them, the Equal Credit
Opportunity Act and the provisions of the Federal Reserve Board's
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Regulation B issued under it, the Fair Credit Reporting Act and the Fair Debt
Collection Practices Act. These statutes and regulations require credit
disclosures on credit card applications and solicitations, on an initial
disclosure statement required to be provided when a credit card account is first
opened, and with each monthly billing statement. They also prohibit certain
discriminatory practices in extending credit, impose certain limitations on the
charges that may be imposed and regulate collection practices. In addition,
these laws and regulations entitle cardmembers to have payments and credits
promptly applied on credit accounts and to require billing errors to be promptly
resolved. A cardmember may be entitled to assert violations of certain of these
consumer protection laws and, in certain cases, claims against the lender or
seller, by way of set-off against his or her obligation to pay amounts owing on
his account. For example, under the Federal Truth-in-Lending Act, a credit card
issuer is subject to all claims, other than tort claims, and all defenses
arising out of transactions in which a credit card is used to purchase
merchandise or services, if certain conditions are met. These conditions include
requirements that the cardmember make a good faith attempt to obtain
satisfactory resolution of the dispute from the person honoring the credit card
and meet certain jurisdictional requirements. These jurisdictional requirements
do not apply where the seller of the goods or services is the same party as the
card issuer, or controls or is controlled by the card issuer directly or
indirectly. These laws also provide that in certain cases a cardmember's
liability may not exceed $50 with respect to charges to the credit card account
that resulted from unauthorized use of the credit card. The application of
federal and state consumer protection, bankruptcy and debtor relief laws would
affect the interests of the investors if those laws result in any Receivables
being charged off as uncollectible. Greenwood has agreed to repurchase all
Receivables in the Accounts containing a Receivable that did not comply in all
material respects with all applicable requirements of law when it was created,
if that noncompliance continues beyond a specified cure period and has a
material adverse effect on the interest of the trust in all the Receivables.
Greenwood has also agreed to indemnify the trust, among other things, for any
liability arising from these violations. For a discussion of the trust's rights
arising from the breach of these warranties, see "The Trust--Indemnification of
Trust and Trustee." See also "Risk Factors--Consumer Protection Laws and
Regulations; Litigation," in the prospectus supplement.
CLAIMS AND DEFENSES OF CARDMEMBERS AGAINST THE TRUST
The UCC provides that unless an obligor has made an enforceable agreement
not to assert defenses or claims arising out of a sale, the rights of the trust,
as assignee, are subject to all the terms of the contract between Greenwood and
the obligor and any defense or claim arising from that contract, and to any
other defense or claim of the obligor against Greenwood that accrues before the
obligor receives notification of the assignment. The UCC also states that any
obligor is authorized to continue to pay Greenwood until:
- the obligor receives notification, reasonably identifying the rights
assigned, that the amount due or to become due has been assigned and that
payment is to be made to the trustee, and
- if requested by the obligor, the trustee has furnished reasonable proof
of the assignment.
USE OF PROCEEDS
Greenwood receives the net proceeds from the sale of each series of
certificates. Unless otherwise specified in the related prospectus supplement,
Greenwood will add these proceeds to its general funds.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
This summary of the material federal income tax consequences to investors
in certificates of any series is based on the opinion of Latham & Watkins as tax
counsel to Greenwood. This summary is based on the Internal Revenue Code of
1986, as amended, or the "Code," Treasury Regulations and judicial and
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administrative rulings and decisions as of the date of this prospectus. We
cannot assure you that the Internal Revenue Service will agree with the
conclusions in this summary, and we have not sought and will not seek a ruling
from the IRS on the expected federal tax consequences described in this summary.
Subsequent legislative, judicial or administrative changes--which may or may not
be applied retroactively--could change these tax consequences.
Although we provide certain limited discussions of particular topics, in
general we have not considered your particular tax consequences in this summary
if you are subject to special treatment under the federal income tax laws
because, for example, you are:
- a life insurance company;
- a tax-exempt organization;
- a financial institution;
- a broker-dealer;
- an investor that has a functional currency other than the United States
dollar; or
- an investor that holds certificates as part of a hedge, straddle or
conversion transaction.
We also do not deal with all aspects of federal income taxation that may affect
you in light of your individual circumstances. WE RECOMMEND THAT YOU CONSULT
YOUR OWN TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX
CONSEQUENCES TO YOU OF PURCHASING, OWNING AND DISPOSING OF CERTIFICATES.
This summary assumes that your certificate:
- is issued in registered form;
- has all payments denominated in United States dollars and not determined
by reference to the value of any other currency;
- has a term that exceeds one year;
- has an interest formula that meets the requirements for "qualified stated
interest" under Treasury Regulations relating to original issue
discount--"OID"--unless Section 1272(a)(6) of the Code applies to the
certificate; and
- does not have any OID arising from any excess of its stated redemption
price at maturity--generally, its principal amount--over its issue price,
or has only a de minimis amount of OID. OID generally is de minimis if it
is less than 1/4% of the certificate's principal amount multiplied by
the number of full years until the certificate's maturity date.
If we issue certificates that do not satisfy these conditions, we will describe
additional tax considerations in the applicable prospectus supplement. This
summary assumes that you are an initial purchaser of a certificate and hold it
as a capital asset--generally property held for investment--within the meaning
of Section 1221 of the Code.
TAX TREATMENT OF THE CERTIFICATES AS DEBT
Greenwood will treat the certificates of each series as debt for federal,
state and local income and franchise tax purposes. By accepting a certificate,
you also will commit to treat your certificates as debt of Greenwood for
federal, state and local income and franchise tax purposes. However, the Pooling
and Servicing Agreement and each Series Supplement generally refer to the
transfer of the Receivables as a "sale," and Greenwood has informed its tax
counsel that:
- Greenwood uses different criteria to determine the nontax accounting
treatment of the transaction, and
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- for regulatory and financial accounting purposes, Greenwood will treat
the transfer of the Receivables under the Pooling and Servicing Agreement
and each Series Supplement as a transfer of an ownership interest in the
Receivables and not as the creation of a debt obligation.
In general, whether for federal income tax purposes a transaction
constitutes a sale and purchase or a loan secured by the transferred property is
a question of fact. This question is generally resolved based on the economic
substance of the transaction, rather than its form. In the case of the
certificates, the issue is whether the investors have loaned money to Greenwood
or have purchased Receivables from Greenwood through ownership of the
certificates. In some cases, courts have held that a taxpayer is bound by the
form of the transaction even if the substance does not comport with its form.
Although the matter is not free from doubt, Greenwood's tax counsel believes
that the rationale of those cases will not apply to this transaction, based, in
part, upon:
- Greenwood's expressed intent to treat the certificates for federal, state
and local income and franchise tax purposes as debt secured by the
Receivables and other assets held in the trust, and
- each investor's commitment, by accepting a certificate, similarly to
treat the certificate for federal, state and local income and franchise
tax purposes as debt.
Although the IRS and the courts have established several factors to be
considered in determining whether, for federal income tax purposes, a
transaction in substance constitutes a purchase and sale of property or a loan
secured by the transferred property, including the form of the transaction, it
is the opinion of Greenwood's tax counsel that the primary factor in this case
is whether the investors, through ownership of the certificates, have assumed
the benefits and burdens of ownership of the Receivables. Unless we indicate
otherwise in the applicable prospectus supplement, Greenwood's tax counsel has
concluded for federal income tax purposes that, although the matter is not free
from doubt, the benefits and burdens of ownership of the Receivables have not
been transferred to the investors through ownership of the certificates.
Unless we indicate otherwise in the applicable prospectus supplement, for
the reasons described above, Greenwood's tax counsel will advise Greenwood that,
in their opinion, under applicable law, the certificates of a series will be
treated as debt of Greenwood for federal income tax purposes, although the
matter is not free from doubt as the IRS or the courts may not agree. See
"--Possible Characterization of the Certificates" for a discussion of your
federal income tax consequences if your certificates are not treated as debt of
Greenwood for federal income tax purposes. Except for that discussion, the
following discussion assumes that your certificates will be treated as debt of
Greenwood for federal income tax purposes.
UNITED STATES INVESTORS
The rules set forth below apply to you only if you are a "United States
Person." Generally, a "United States Person" is a beneficial owner of a
certificate that is:
- a citizen or resident of the United States,
- a corporation or partnership, including an entity treated as a
corporation or partnership for federal income tax purposes, created or
organized in the United States or under the laws of the United States or
of any state,
- an estate the income of which is subject to United States federal income
taxation regardless of the source of that income, or
- a trust if a court within the United States is able to exercise primary
supervision over the trust's administration, and one or more United
States persons have the authority to control all substantial decisions of
the trust, and certain other trusts in existence on August 20, 1996 that
have validly elected to be treated as United States Persons.
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Stated Interest on Certificates. Subject to the discussion below:
- if you use the cash method of accounting for tax purposes, you generally
will be taxed on the interest on your certificate at the time it is paid
to you; or
- if you use the accrual method of accounting for tax purposes, you
generally will be taxed on the interest on your certificate at the time
it accrues.
The interest on your certificate will be treated as ordinary income and
generally will constitute "investment income" for purposes of certain
limitations of the Code concerning the deductibility of investment interest
expense.
Original Issue Discount. The certificates of a series will be issued with
OID to the extent that a certificate's stated redemption price at
maturity--generally, the certificate's principal amount--exceeds its issue price
by an amount that is equal to or greater than the product of 1/4% of your
certificate's principal amount multiplied by the number of full years until the
certificate's expected maturity date. The issue price of a certificate will be
the first price at which a substantial amount of the certificates are sold for
money, excluding sales to bond houses or brokers acting in the capacity of
underwriters, placement agents or wholesalers. If your certificates are issued
with OID, you generally will be required to include OID in income for each
accrual period before you receive the cash representing the OID. You will be
required to recognize as ordinary income the amount of OID on your certificates
as the discount accrues, in accordance with a constant yield method. If your
certificate's stated redemption price at maturity -- generally, its principal
amount -- exceeds the issue price by an amount that is less than the product
described above, then the excess will generally be includible in your gross
income when the trust pays principal on your certificate at maturity and will be
treated as gain on disposition of a certificate, subject to tax in accordance
with the rules described below in "--Dispositions of Certificates."
Under Section 1272(a)(6) of the Code, special provisions apply to debt
instruments on which payments may be accelerated due to prepayments of other
obligations securing those debt instruments or, to the extent provided in
Treasury Regulations, by reason of other events. If Section 1272(a)(6) applies,
you must compute any OID and market discount by taking into account both the
prepayment assumptions used in pricing your certificates and the actual
prepayment events. See "--Market Discount." As a result, the amount of OID on
your certificate that will accrue in any given accrual period may either
increase or decrease depending on the actual prepayment rate. Because no
Treasury Regulations have been issued interpreting Section 1272(a)(6), you
should consult your own tax advisors about the possible impact of Section
1272(a)(6) if your certificates are issued with OID.
Market Discount. In general, subject to a statutorily-defined de minimis
exception, you will acquire a certificate at a market discount if you acquire it
at a price that is less than its stated redemption price at maturity--generally,
the certificate's principal amount--and
- you acquire your certificate upon its original issue at a price that is
less than the certificate's issue price; or
- you acquire a certificate that is issued with OID at a price that is less
than the certificate's revised issue price. A certificate's revised issue
price should generally be its issue price plus the amount of OID
previously includible in income by all prior holders of the certificate.
The market discount rules generally provide that if you acquire a
certificate at a market discount and you later recognize gain upon a disposition
of the certificate, you must treat as ordinary interest income at the time of
disposition the lesser of your gain or the portion of the market discount that
accrued while you held the certificate. Similarly, if you dispose of the
certificate in certain nonrecognition transactions, such as a gift, you will be
treated for purposes of the market discount rules as realizing an amount equal
to the fair market value of the certificate and you must treat as ordinary
interest income at the time of disposition the lesser of your deemed gain or the
portion of the market discount that accrued while you held the certificate. If
you acquire a certificate with a market discount, you should contact your own
tax advisors as to the possible application of Section 1272(a)(6) of the Code
and its effect on your accrual of
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market discount. See the discussion of Section 1272(a)(6) in "--Original Issue
Discount." In addition, you may also be required to defer a portion of any
interest expense that you might otherwise be able to deduct on any debt you
incurred or maintained to purchase or carry the certificate until you dispose of
the certificate in a taxable transaction.
If you acquire a certificate at a market discount, you will generally be
required to treat as ordinary interest income the portion of any principal
payment, including a payment on maturity, attributable to accrued market
discount on your certificate. If you acquire a certificate with a market
discount that is less than a statutorily-defined de minimis amount--which amount
is generally equal to the product of 1/4% of your certificate's principal
amount multiplied by the number of full years until the certificate's maturity
date--the rules described above will not apply to you and the discount will
generally be includible in your gross income when the principal is paid on your
certificate at maturity.
If you acquire your certificate at a market discount, you may elect to
include market discount in income as the discount accrues, either on a ratable
basis or, if you elect, on a constant interest rate basis. Once you make this
election, it applies to all market discount obligations that you acquire on or
after the first day of the first taxable year to which your election applies,
and you may not revoke the election without the consent of the IRS. If you make
this election, you will not recognize ordinary income on sales, principal
payments and certain other dispositions of the certificates and you will not
have to defer interest deductions on debt related to the certificates.
The Clinton Administration has proposed legislation that would require you,
if you are an accrual method taxpayer that acquires a certificate at a market
discount, to include the discount in income as it accrues, subject to certain
limitations. As proposed, this provision would apply to certificates that you
acquire on or after the date of enactment. Greenwood cannot predict whether this
legislation will be enacted, or if enacted, what its ultimate form or effective
date will be.
Amortizable Bond Premium. Generally, if the price you pay for your
certificate or your tax basis in your certificate exceeds the sum of all amounts
payable on the certificate after your acquisition date other than payments of
qualified stated interest -- generally, the principal amount of the
certificate -- the excess may constitute amortizable bond premium that you may
elect to amortize under the constant interest rate method over the period from
your acquisition date to the certificate's maturity date. If your certificates
are subject to Section 1272(a)(6) of the Code, the application of the
amortizable bond premium rules is unclear, as the amortizable bond premium
Treasury Regulations specifically exclude from their application instruments
subject to Section 1272(a)(6). Because no Treasury Regulations have been issued
interpreting Section 1272(a)(6), you should consult your own tax advisors about
the possible application of these rules. See the discussion of Section
1272(a)(6) in "--Original Issue Discount." You may generally treat amortizable
bond premium as an offset to interest income on the certificate, rather than as
a separate interest deduction item subject to the investment interest
limitations of the Code. If you elect to amortize bond premium, you must
generally reduce your tax basis in the related certificate by the amount of bond
premium used to offset interest income.
Dispositions of Certificates. In general, you will recognize gain or loss
upon the sale, exchange, redemption or other taxable disposition of your
certificate measured by the difference between:
- the amount of cash and the fair market value of any property received for
the certificate, other than the amount attributable to, and taxable as,
accrued but unpaid interest, and
- your tax basis in the certificate, as increased by any OID or market
discount, including de minimis amounts, that you previously included in
income, and decreased by any deductions previously allowed to you for
amortizable bond premium and by any payments reflecting principal or OID
that you received with respect to the certificate.
Subject to the OID and market discount rules discussed above, if you hold
your certificate for more than one year before its taxable disposition, any gain
or loss generally will be long-term capital gain or loss. The deductibility of
capital losses may be subject to limitation. The excess of net long-term capital
gains
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over net short-term capital losses may be taxed at a lower rate than ordinary
income for individuals, estates and trusts.
FOREIGN INVESTORS
The following summary of the United States federal income and estate tax
consequences of the purchase, ownership, sale or other disposition of a
certificate applies to you only if you are a "Non-U.S. Holder." You are
generally a "Non-U.S. Holder" if, for United States federal income tax purposes,
you are a beneficial owner of a certificate and you are:
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- a foreign estate or trust,
as each term is defined in the Code. Some Non-U.S. Holders, including certain
residents of certain United States possessions or territories, may be subject to
special rules not discussed in this summary.
Interest, including OID, if any, paid to you on your certificate will not
be subject to withholding of United States federal income tax, provided that:
- you are not a "10 percent shareholder" of Greenwood or a "controlled
foreign corporation" with respect to which Greenwood is a "related
person" within the meaning of the Code, and either
- you represent that you are not a United States Person and provide your
name and address to Greenwood or its paying agent on a properly executed
IRS Form W-8BEN, or, for payments made before January 1, 2001, you may
instead provide a properly executed IRS Form W-8, in either case signed
under penalties of perjury; or
- a securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its business
holds your certificate on your behalf, certifies to Greenwood or its
paying agent under penalties of perjury that it has received the
appropriate certification form from you or from another qualifying
financial institution intermediary, and provides a copy to Greenwood or
its paying agent; or
- these interest payments are effectively connected with your conduct of a
trade or business within the United States and you provide a properly
executed IRS Form W-8ECI, or, for payments made before January 1, 2001,
you may instead provide a properly executed IRS Form 4224.
If these exceptions do not apply to you, interest, including OID, if any, paid
to you generally will be subject to withholding of United States federal income
tax at a 30% rate, unless reduced by an applicable tax treaty.
You generally will not be subject to United States federal income tax on
gain realized on the disposition of your certificate, including gain
attributable to accrued interest or OID, as addressed in the preceding
paragraph, provided that
- the gain is not effectively connected with your conduct of a trade or
business within the United States, and
- if you are an individual,
- you have not been present in the United States for 183 days or more in
the taxable year of the disposition, or
- you do not have a "tax home" in the United States and the gain is not
attributable to an office or other fixed place of business that you
maintain in the United States.
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If the interest or gain on your certificate is effectively connected with
your conduct of a trade or business within the United States, then although you
will be exempt from the withholding of tax previously discussed if you provide
an appropriate certification form, you generally will be subject to United
States federal income tax on the interest, including OID, if any, or gain at
regular federal income tax rates in a similar fashion to a United States Person.
See "--United States Investors." In addition, if you are a foreign corporation,
you may be subject to a branch profits tax equal to 30% of your "effectively
connected earnings and profits" within the meaning of the Code for the taxable
year, as adjusted for certain items, unless you qualify for a lower rate under
an applicable tax treaty.
If you are an individual and are not a citizen or resident of the United
States at the time of your death, your certificates will generally not be
subject to United States federal estate tax as a result of your death if,
immediately before death,
- you were not a "10 percent shareholder" of Greenwood, and
- your interest on the certificate was not effectively connected with your
conduct of a trade or business within the United States.
THE ABOVE DESCRIPTION OF THE POTENTIAL UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS IS NECESSARILY INCOMPLETE. WE URGE
YOU TO CONSULT YOUR OWN TAX ADVISORS ABOUT THESE MATTERS.
BACKUP WITHHOLDING AND INFORMATION REPORTING
If you are a United States Person but not a corporation, financial
institution or certain other type of entity, information reporting requirements
will apply to certain payments of principal and interest, including accrued OID,
if any, on a certificate and to proceeds of certain sales before maturity. In
addition, if you do not provide a correct taxpayer identification number and
other information, or do not comply with certain other requirements or otherwise
establish an exemption, Greenwood, a paying agent, or a broker, as the case may
be, will be required to withhold from such payments to you a tax equal to 31% of
each payment.
If you are a Non-United States Holder, backup withholding and information
reporting will not apply to payments of principal and interest, including
accrued OID, if any, on a certificate to you if you certify under penalties of
perjury that you are not a United States Person or otherwise establish an
exemption, provided that neither Greenwood nor its paying agents has actual
knowledge that you are a United States Person or that the conditions of any
other exemption are not in fact satisfied. Certain information reporting
requirements will apply to payments of the proceeds of your sale of a
certificate to or through a foreign office of a United States broker or foreign
brokers with certain types of relationships to the United States, unless:
- you are an exempt recipient; or
- the broker has evidence in its records that you are not a United States
Person and no actual knowledge that the evidence is false, and certain
other conditions are met.
After December 31, 2000, these payments may be subject to backup withholding
unless they are exempt from information reporting. Information reporting and
backup withholding will apply to payments of the proceeds of your sale of a
certificate to or through the United States office of a broker unless:
- you provide your name and address and certify under penalties of perjury
as to your status as a non-United States Person and certain other
qualifications, and no agent of the broker who is responsible for
receiving or reviewing your statement has actual knowledge that it is
incorrect, or
- you otherwise establish an exemption.
If you provide the IRS with the information it requires, you will receive a
refund or a credit against your United States federal income tax liability for
any amounts withheld from your payments under the backup withholding rules.
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The Treasury Department has promulgated final regulations regarding certain
withholding and information reporting rules discussed above that are generally
effective for payments made after December 31, 2000, subject to certain
transition rules. In general, these new withholding regulations do not
significantly alter the substantive withholding and information reporting
requirements but unify current certification procedures and forms and clarify
standards relied upon by withholding agents. Special rules apply that permit the
shifting of primary responsibility for withholding to certain financial
intermediaries acting on behalf of beneficial owners.
THE ABOVE SUMMARY OF THE NEW WITHHOLDING REGULATIONS IS NECESSARILY
INCOMPLETE. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS TO DETERMINE HOW THE
NEW WITHHOLDING REGULATIONS WILL AFFECT YOUR PARTICULAR CIRCUMSTANCES.
POSSIBLE CHARACTERIZATION OF THE CERTIFICATES
The above discussion assumes that the certificates of a series will be
treated as debt of Greenwood for federal income tax purposes. However, although
Greenwood's tax counsel will render an opinion to that effect with respect to
each series of certificates, the matter is not free from doubt, and we cannot
assure you that the IRS or the courts will agree with the opinion of Greenwood's
tax counsel. If the IRS were to contend successfully that the certificates of a
series are not debt of Greenwood for federal income tax purposes, it could find
that the arrangement created by the Pooling and Servicing Agreement and the
related Series Supplement should be classified as a "publicly traded
partnership" taxable as a corporation or as a partnership that is not taxable as
a corporation.
If your certificates were treated as interests in a partnership, the
partnership in all likelihood would be treated as a "publicly-traded
partnership" taxable as a corporation, in which case the income from the assets
of the trust would be subject to federal income tax and tax imposed by certain
states where the entity would be considered to have operations at corporate
rates, which would reduce the amounts available for distribution to you. See
"State Tax Consequences." Under these circumstances, your certificates may be
treated as debt of an entity taxable as a corporation or, alternatively, as
equity of such an entity, in which latter case interest payments to you could be
treated as dividends and, if you are a Non-U.S. Holder, could be subject to
United States federal income tax and withholding at a rate of 30%, unless
reduced by an applicable tax treaty.
Alternatively, if the partnership were nevertheless not taxable as a
corporation--for example, because of an exception for a "publicly traded
partnership" whose income is interest that is not derived in the conduct of a
financial business--the partnership would not be subject to federal income tax.
Rather, you would be required to include in income your share of the income and
deductions generated by the assets of the trust, as determined under partnership
tax accounting rules. In that event, the amount, timing and character of the
income required to be included in your income could differ materially from the
amount, timing and character of income if your certificates were characterized
as debt of Greenwood. It also is possible that such a partnership could be
subject to tax in certain states where the partnership is considered to be
engaged in business, and that you, as a partner in such a partnership, could be
taxed on your share of the partnership's income in those states.
In addition, if such a partnership is considered to be engaged in a trade
or business within the United States, the partnership would be subject to a
withholding tax on distributions to Non-U.S. Holders or, at its election, income
allocable to Non-U.S. Holders, and each Non-U.S. Holder would be credited for
the Non-U.S. Holder's share of the withholding tax paid by the partnership.
Moreover, the Non-U.S. Holder generally would be subject to United States
federal income tax at regular federal income tax rates, and possibly a branch
profits tax, in the case of a corporate Non-U.S. Holder, as previously
described. See "--Foreign Investors." Further, even if the partnership is not
considered to be engaged in a trade or business within the United States, it
appears that partnership withholding would be required in the case of any
Non-U.S. Holder that is engaged in a trade or business within the United States
to which the certificate income is effectively connected. Although there may be
arguments to the contrary, it appears that if such a partnership is not
considered to be engaged in a trade or business within the United States
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and if income with respect to a certificate is not otherwise effectively
connected with the conduct of a trade or business within the United States by a
Non-U.S. Holder, the Non-U.S. Holder would be subject to United States federal
income tax and withholding at a rate of 30%, unless reduced by an applicable
treaty, on the Non-U.S. Holder's distributive share of the partnership's
interest income.
Finally, with respect to a series having a class of subordinated
certificates, the IRS might contend that even though the Class A certificates
are properly classified as debt for federal income tax purposes, the Class B
certificates are not properly classified as debt. Under this approach, the Class
B certificates might be viewed as equity interests in an entity--such as
Greenwood or a joint venture consisting of Greenwood and the Class B
investors--with the Class A certificates treated as debt obligations of that
entity. If that entity were characterized as a partnership not taxable as a
corporation, the entity would not be subject to federal income tax, although the
Class B investors would be subject to the tax consequences previously described
with respect to interests in a partnership that is not taxable as a corporation.
Alternatively, if such an entity were characterized as a "publicly traded
partnership" taxable as a corporation, the tax liability on the income of the
entity might, in certain circumstances, reduce distributions on both the Class A
certificates and the Class B certificates, and the Class B investors would be
subject to the tax consequences previously described with respect to interests
in a "publicly traded partnership" taxable as a corporation. In addition, any
Non-U.S. Holder of a Class A certificate who is the actual or constructive owner
of 10% or more of the outstanding principal amount of the Class B certificates
may be treated as a "10 percent shareholder." See "--Foreign Investors."
Based on the advice of Greenwood's tax counsel as to the likely treatment
of the certificates for federal income tax purposes, Greenwood and the trust
will not attempt to cause the arrangement created by the Pooling and Servicing
Agreement and the Series Supplement for a series to comply with the federal or
state income tax reporting requirements applicable to partnerships or
corporations. If this arrangement were later held to constitute a partnership or
corporation for tax purposes, it is not clear how the arrangement would comply
with applicable reporting requirements.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS AS TO THE RISK THAT THE
CERTIFICATES WILL NOT BE TREATED AS DEBT OF GREENWOOD, AND THE POSSIBLE TAX
CONSEQUENCES OF POTENTIAL ALTERNATIVE TREATMENTS.
STATE TAX CONSEQUENCES
This summary of the material state tax consequences to investors in
certificates of any series is based on the opinion of Greenwood's tax counsel.
The summary is based upon currently applicable tax laws of certain states as of
the date of this prospectus. We cannot assure you that the taxing authorities of
any state will agree with the conclusions in this summary, and we have not
sought and will not seek a ruling from the taxing authorities of those states on
the expected state tax consequences described in this summary. Subsequent
legislative, judicial or administrative changes--which may or may not be applied
retroactively--could change these tax consequences. Except as discussed below,
this discussion of state tax consequences assumes that the certificates of a
series will be treated as debt of Greenwood for federal tax purposes.
Your state tax consequences will depend upon the provisions of the state
tax laws to which you are subject. Most states modify or adjust the taxpayer's
federal taxable income to arrive at the amount of income potentially subject to
state tax. Resident individuals usually pay state tax on 100% of the state-
modified income, while corporations and other taxpayers generally pay state tax
only on that portion of state-modified income assigned to the taxing state under
the state's own apportionment and allocation rules. Because each state's tax
laws vary, it is impossible to predict the tax consequences to investors in all
of the state taxing jurisdictions in which they are already subject to tax.
Greenwood's headquarters are located in Delaware and that is where
Greenwood originates and owns the Accounts and services the Receivables pursuant
to the Pooling and Servicing Agreement. Unless otherwise specified in the
related prospectus supplement, Greenwood's tax counsel will advise Greenwood
with respect to a series, that, in their opinion, although the matter is not
free from doubt, the certificates
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of the series will be treated as debt of Greenwood for purposes of the Delaware
income tax. Accordingly, although the matter is not free from doubt, if the
certificates of a series are treated as debt of Greenwood in Delaware and if you
are not otherwise subject to taxation in Delaware, you will not become subject
to the Delaware income tax solely because you own certificates.
Generally, you are required to pay, in states in which you are already
subject to state tax, additional state tax as a result of interest earned on
your investment in certificates. Moreover, a state could claim that the trust
has undertaken activities within that state and therefore the trust is subject
to taxation by that state. Were any state to make and sustain that claim, the
treatment of the certificates would be determined under that state's tax laws,
and it is possible that the certificates would not be treated as debt of
Greenwood for purposes of that state taxation.
If your certificates were treated as interests in a partnership or a
corporation, your state tax consequences could be materially different,
especially in states that may be considered to have a business connection with
the Receivables. See "Federal Income Tax Consequences--Possible Characterization
of the Certificates."
THE ABOVE DESCRIPTION OF THE POTENTIAL STATE TAX CONSEQUENCES IS NECESSARILY
INCOMPLETE. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS ABOUT THESE MATTERS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, or ERISA,
and the Code impose certain requirements on employee benefit plans, including
Individual Retirement Accounts and Individual Retirement Annuities--collectively
"IRAs"--to which they apply and on fiduciaries of those plans. In accordance
with ERISA's general fiduciary standards, before investing in certificates, a
plan fiduciary should determine whether the governing plan instruments permit
the investment. Additionally, the plan fiduciary should determine if the
certificates are appropriate for the plan in view of the risks associated with
the investment, the plan's overall investment policy and the composition and
diversification of its portfolio. ERISA and the Code prohibit certain
transactions involving the assets of a plan and persons who have certain
specified relationships to the plan--"parties in interest" within the meaning of
ERISA or "disqualified persons" within the meaning of the Code. Prohibited
transactions may generate excise taxes and other liabilities. Prohibited
transactions involving IRAs may result in the disqualification of the IRAs.
Thus, a plan fiduciary considering an investment in certificates should also
consider whether the investment might constitute or give rise to a prohibited
transaction under ERISA or the Code.
Certain transactions involved in operating the trust might be deemed to
constitute prohibited transactions under ERISA and the Code, if assets of the
trust were deemed to be assets of an investing plan. ERISA and the Code do not
define "plan assets." The U.S. Department of Labor, or the DOL, has published a
regulation that defines when a plan's investment in an entity will be deemed to
include an interest in the underlying assets of that entity, such as the trust,
for purposes of the provisions of ERISA and the Code. Unless the plan's
investment is an "equity interest," the underlying assets of the entity will not
be considered assets of the plan under the DOL regulation. Under the DOL
regulation, a beneficial ownership in a trust is deemed to be an equity
interest. The DOL has ruled in an opinion letter, which is not binding upon
Greenwood, the trustee or any underwriter, that similar "pass through"
certificates in a trust constituted equity interests.
Greenwood has received an administrative exemption from the DOL, which we
discuss below under "--Greenwood's Prohibited Transaction Exemption," that, if
applicable, would exempt certain transactions from the prohibited transaction
rules in connection with a plan's acquisition of Class A certificates. In
addition, certain transactions concerning plans holding either Class A
certificates or Class B certificates would not be prohibited transactions, if,
under the DOL regulation, assets of the trust were not considered assets of
plans holding certificates.
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GREENWOOD'S PROHIBITED TRANSACTION EXEMPTION
The DOL has granted to Greenwood an administrative exemption that, if
applicable, excludes certain transactions relating to the trust and the Class A
certificates from the prohibited transaction rules. See approval of individual
prohibited transaction relief for Greenwood Trust Company, Final Authorization
Number (FAN) 2000-05E (February 12, 2000) pursuant to Prohibited Transaction
Exemption No. 96-62 (the "Exemption"). If the conditions of the Exemption are
satisfied, the Exemption applies to the acquisition, holding and disposition of
Class A certificates by a plan, as well as to transactions relating to Class A
certificates in connection with servicing, managing and operating the trust. We
cannot assure you, however, that even if the conditions of the Exemption are
satisfied, the Exemption will exclude all transactions involving the trust and
the Class A certificates from the prohibited transaction rules. Moreover, the
Exemption applies in only a limited fashion to a plan sponsored by any member of
the "Restricted Group," which includes Greenwood, the trustee, the master
servicer or any servicer, or, with respect to any particular series, an
underwriter, a party providing credit support, or the counterparty on an
interest rate swap or cap with respect to the series, or any of their
affiliates.
A number of the requirements of the Exemption relate to the general
structure and operation of the trust, such as the trustee, the assets of the
trust, Greenwood's interest in the trust, transfers of Receivables into and out
of the trust, and the operation of the trust in accordance with the Pooling and
Servicing Agreement. Greenwood believes that the trust satisfies these
conditions.
Other requirements of the Exemption relate to the terms and conditions of
the particular Class A certificates to be acquired by plans. These requirements
include the requirements that:
- the Class A certificates cannot be subordinated to any other similar
interests in the trust,
- the Class A certificates must be rated, at the time a plan acquires them,
in one of the two highest rating categories by at least one rating
agency, or, if they have a maturity of one year or less, they must have
the highest short-term rating,
- the Class A certificates must have specified levels of credit support,
- certain other rating agency conditions must be satisfied,
- the certificates must be subject to early amortization or cash
accumulation under certain circumstances,
- any interest rate swaps and caps must meet certain conditions,
- the Class A certificates must be sold initially in an underwriting or
private placement, including a placement by underwriters or dealers on
behalf of the trust,
- the initial sale must be by an entity that received an individual
"Underwriter Exemption" from the DOL, an affiliate of such an entity, or
a member of a selling group of which such an entity or affiliate is a
manager or co-manager, and
- the trustee cannot be affiliated with any underwriter or member of the
selling group for the Class A certificates, any provider of credit
support for the Class A certificates, or any swap counterparty for the
Class A certificates.
If Greenwood believes that the conditions of the Exemption relating to the
terms and conditions of the Class A certificates of a series will be satisfied
at the time of initial issuance of the certificates of that series, the
prospectus supplement will state that plans are generally permitted to purchase
Class A certificates of that series.
However, even if the terms and conditions of the Class A certificates of a
particular series satisfy the requirements of the Exemption, the purchase of the
Class A certificates by a particular plan will be eligible for the benefits of
the Exemption only if certain other conditions are satisfied. The fiduciary of
the
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plan must itself determine whether these conditions are satisfied. These
conditions include but are not limited to the following:
- The acquisition of Class A certificates must be on terms, including
price, that are at least as favorable to the plan as those terms would be
in an arm's-length transaction with an unrelated party.
- Amounts retained by underwriters or selling agents for selling or placing
the Class A certificates must be reasonable in amount, the servicing fee
must be reasonable in amount, and the amounts received by Greenwood upon
the sale of Receivables to the trust cannot exceed the fair market value
of the Receivables.
- The plan must be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D under the Securities Act of 1933, as amended.
- If the particular Class A certificates are supported by one or more
interest rate swaps or caps, the decision to acquire the Class A
certificates must be made by an independent fiduciary that is qualified
to analyze and understand the terms of the swaps or caps and any
resulting effect on the credit rating of the Class A certificates.
Moreover, the fiduciary must be either a "QPAM" or "INHAM" as described
in the applicable DOL Prohibited Transaction Exemptions, or a plan
fiduciary with at least $100 million of total assets under management.
- In order for an acquisition of Class A certificates by a plan to be
exempt from certain of the prohibited transaction rules concerning
"self-dealing"--i.e., Section 406(b)(1) and (2) of ERISA and Section
4975(c)(1)(E) of the Code--the Exemption imposes additional requirements
relating to the particular plan. See Section I.B. of the Exemption. Plans
investing in Class A certificates should carefully consider whether or
not they need to rely on these particular provisions of the Exemption
and, if so, whether they satisfy these requirements of Section I.B.
More generally, before investing in Class A certificates in reliance on the
Exemption, a fiduciary of a plan should carefully consider the terms of the
Exemption, the terms of the Class A certificates, the eligibility of the Class A
certificates for the Exemption in light of, among other factors, the identity of
the particular plan, and whether the Exemption will protect against all
potential prohibited transactions.
THE DOL REGULATION
The DOL Regulation contains an exception that provides that if a plan
acquires a publicly-offered security, then the assets of the issuer of the
security will not be deemed to be plan assets. A publicly-offered security is a
security that is
- freely transferable,
- part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another by the conclusion of the
offering and
- either is
- part of a class of securities registered under section 12(b) or 12(g) of
the Securities Exchange Act of 1934, or
- sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act
of 1933 and the class of securities of which such security is a part is
registered under the Securities Exchange Act of 1934 within 120 days, or
such later time as may be allowed by the Securities and Exchange
Commission, after the end of the fiscal year of the issuer during which
the offering of the securities to the public occurred.
If Greenwood expects the certificates of a series to meet the criteria of
publicly-offered securities, that information will be set forth in the related
prospectus supplement. If the certificates of a series do meet
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the criteria of publicly-offered securities, certain prohibited transactions
would not arise even if the Exemption did not apply.
If the certificates are deemed to be debt and not equity interests for
ERISA purposes, the purchase of the certificates by a plan with respect to which
Greenwood or one of its affiliates is a "party in interest" or "disqualified
person" might be considered a prohibited transaction under Section 406 of ERISA
and Section 4975 of the Code, unless an exemption applies. There are at least
five prohibited transaction class exemptions issued by the DOL that might apply,
depending in part on who decided to acquire the certificates for the plan:
- DOL Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for
Plan Asset Transactions determined by Independent Qualified Professional
Asset Managers);
- PTE 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds);
- PTE 90-1 (Class Exemption for Certain Transactions Involving Insurance
Company Pooled Separate Accounts);
- PTE 95-60 (Class Exemption for Certain Transactions Involving Insurance
Company General Accounts); and
- PTE 96-23 (Class Exemption for Plan Asset Transactions Determined by
In-House Asset Managers).
Moreover, whether the certificates are debt or equity for ERISA purposes, a
possible violation of the prohibited transaction rules could occur if a
fiduciary purchased certificates during the offering with assets of a plan and
Greenwood, the trustee, any underwriter or any of their affiliates was a
fiduciary for that plan. Under ERISA and the Code, a person is a fiduciary for a
plan to the extent
- that person exercises any discretionary authority or discretionary
control respecting management of the plan or exercises any authority or
control respecting management or disposition of its assets,
- that person renders investment advice for a fee or other compensation,
direct or indirect, with respect to any moneys or other property of the
plan, or has any authority or responsibility to do so, or
- that person has any discretionary authority or discretionary
responsibility in the administration of the plan.
Accordingly, the fiduciaries of any plan should not purchase the certificates
during the offering with assets of any plan if Greenwood, the trustee, the
underwriters or any of their affiliates is a fiduciary for the plan.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF PLANS CONSIDERING THE PURCHASE OF
CERTIFICATES SHOULD CONSULT THEIR OWN BENEFITS COUNSEL OR OTHER APPROPRIATE
COUNSEL ABOUT HOW ERISA AND THE CODE WILL APPLY TO THEIR PURCHASE OF
CERTIFICATES.
In addition, based on the reasoning of the United States Supreme Court's
decision in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S.
86 (1993), under certain circumstances assets in the general account of an
insurance company may be deemed to be plan assets for certain purposes, and
under that reasoning a purchase of certificates with assets of an insurance
company's general account might be subject to the prohibited transaction rules
described above. Insurance companies investing assets of their general accounts
should also consider the potential effects of the enactment of section 401(c) of
ERISA, Prohibited Transaction Exemption 95-60, Labor Department Regulation 29
CFR sec. 2550.401c-1, and the fact that the Exemption has been designated by the
Department of Labor as an "Underwriter Exemption" for purposes of Section V(h)
of Prohibited Transaction Exemption 95-60.
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PLAN OF DISTRIBUTION
Greenwood may sell certificates:
- through underwriters or dealers;
- directly to one or more purchasers; or
- through agents.
These underwriters, dealers or agents in the United States may include
Morgan Stanley & Co. Incorporated, Morgan Stanley International Limited or Dean
Witter Reynolds Inc. The related prospectus supplement will set forth the terms
of the offering of certificates, including
- the name or names of any underwriters,
- the purchase price of the certificates,
- the proceeds to Greenwood from the sale,
- any underwriting discounts and other items constituting underwriters'
compensation,
- any initial offering price,
- any discounts or concessions allowed or reallowed or paid to dealers and
- any securities exchanges on which the certificates may be listed.
Only underwriters so named in the related prospectus supplement will be deemed
to be underwriters in connection with the certificates offered pursuant to that
prospectus supplement.
Morgan Stanley & Co. Incorporated, Morgan Stanley International Limited and
Dean Witter Reynolds Inc. are affiliates of Greenwood. Following the initial
distribution of a series of certificates, they and other affiliates of Greenwood
may offer and sell previously issued certificates in the course of their
businesses as broker-dealers. Morgan Stanley & Co. Incorporated, Morgan Stanley
International Limited, Dean Witter Reynolds Inc. and those other affiliates may
act as a principal or agent in those transactions, and they may use this
prospectus and the accompanying prospectus supplement in connection with those
transactions. Those sales, if any, will be made at varying prices relating to
market prices prevailing at the time of sale.
If Greenwood uses underwriters to sell the certificates, the underwriters
will acquire the certificates for their own account and may resell them from
time to time in one or more transactions, including negotiated transactions, at
a fixed price or at varying prices determined at the time of sale or at
negotiated prices. These underwriters may offer the certificates to the public
without a syndicate, or they may offer them to the public through underwriting
syndicates represented by managing underwriters. The underwriters will only be
obligated to purchase the certificates if certain conditions precedent are
satisfied, and they will be obligated to purchase all the certificates of the
series offered by the related prospectus supplement if they purchase any of
those certificates. The underwriters may, from time to time, change any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.
Greenwood or agents designated by Greenwood may also sell certificates
directly from time to time. Greenwood will name any agent involved in the
offering and sale of the certificates, and any commissions payable by Greenwood
to that agent, in the related prospectus supplement. Unless otherwise specified
in the related prospectus supplement, any such agent is acting solely as an
agent for the period of its appointment.
If so indicated in the related prospectus supplement, Greenwood will
authorize agents, underwriters or dealers to solicit offers by certain
institutional investors to purchase certificates providing for payment for
delivery on a future date specified in the related prospectus supplement. There
may be limitations on the minimum amount that may be purchased by any
institutional investor or on the portion of the aggregate principal amount of
the particular certificates that may be sold pursuant to those arrangements.
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Institutional investors to which these offers may be made, when authorized,
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions that Greenwood may approve. Unless otherwise specified in the
related prospectus supplement, the obligations of any purchasers pursuant to
delayed delivery and payment arrangements will not be subject to any conditions
except:
- the institution shall not, at the time of delivery, be prohibited from
purchasing the certificates under the laws of any jurisdiction of the
United States to which the institution is subject, and
- if Greenwood is selling the certificates to underwriters, Greenwood will
have sold to those underwriters the total principal amount of the
applicable certificates minus the principal amount of those certificates
covered by delayed delivery and payment arrangements.
Underwriters will not have any responsibility for the validity of those
arrangements or the performance of Greenwood or the institutional investors
under those arrangements.
Underwriters, dealers and agents that participate in the distribution of
the certificates may be deemed to be underwriters, and any discounts or
commissions received by them from Greenwood and any profit on the resale of the
certificates by them may be deemed to be underwriting discounts and commissions,
under the Securities Act of 1933. Greenwood may agree to indemnify underwriters,
dealers and agents that participate in the distribution of certificates against
certain civil liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments that the underwriters, dealers or agents may
be required to make with respect to those liabilities. Underwriters, dealers and
agents may engage in transactions with, or perform services for, Greenwood in
the ordinary course of their respective businesses.
The certificates may or may not be listed on a national securities
exchange. Greenwood cannot predict whether a secondary market will develop for
the certificates or, if it does develop, whether it will continue.
The distribution of certificates will conform to the requirements set forth
in Rule 2720 of the National Association of Securities Dealers, Inc.
LEGAL MATTERS
Unless otherwise specified in the related prospectus supplement, Latham &
Watkins will give opinions on the legality of the certificates, the tax
consequences of the issuance of the certificates and certain creditors' rights
matters for Greenwood. Young Conaway Stargatt & Taylor, LLP will also give
opinions on certain creditors' rights matters for Greenwood. Unless otherwise
specified in the related prospectus supplement, Cadwalader, Wickersham & Taft
will also give opinions on the legality of the certificates for any
underwriters.
GLOSSARY OF TERMS
The certificates will be issued pursuant to the Pooling and Servicing
Agreement and the applicable Series Supplement. The following glossary of terms
is not complete. You should also refer to the prospectus supplement, the Pooling
and Servicing Agreement and the applicable Series Supplement for additional
definitions. If you send a written request to the trustee at its corporate trust
office, the trustee will provide to you without charge a copy of the Pooling and
Servicing Agreement, without exhibits and schedules, and the applicable Series
Supplement, without exhibits.
"ACCOUNT" will mean:
- a Discover Card account established pursuant to a credit agreement
between Greenwood and any person, receivables under which are transferred
to the trust by Greenwood pursuant to either the Pooling and Servicing
Agreement or an Assignment of Additional Accounts;
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- a Discover Card account established pursuant to a credit agreement
between an Additional Seller and any person, receivables under which are
transferred to the trust by the Additional Seller pursuant to an
Assignment of Additional Accounts; and
- a credit account that is not a Discover Card account, established
pursuant to a credit agreement between Greenwood or an Additional Seller
and any person, receivables under which are transferred to the trust by
Greenwood or the Additional Seller pursuant to an Assignment of
Additional Accounts.
No Account will be a Charged-Off Account as of the date the Account is selected
to be added to the trust. The definition of an Account will include the
surviving credit account of a combination of credit accounts if:
- an Account or another credit account is combined with an Account pursuant
to the credit guidelines for the Account; and
- the surviving credit account was an Account before the accounts were
combined.
The term "Account" will be deemed to refer to an additional Account only from
and after the addition date for that additional Account. The definition of
Account will not include any Account removed from the trust after it has been
reassigned to the holder of the Seller Certificate.
"ADDITIONAL SELLER" will mean an affiliate of Greenwood that is included in
the same "affiliated group" as Greenwood for United States federal income tax
purposes and that transfers Receivables in additional Accounts to the trust.
"AGGREGATE INVESTED AMOUNT" will mean at any time the sum of the invested
amounts of all series of certificates then issued and outstanding.
"AGGREGATE INVESTOR INTEREST" will mean at any time the sum of the investor
interests of all series of certificates then issued and outstanding.
"AGGREGATE INVESTOR PERCENTAGE" will mean the sum of the allocation
percentages for all series of certificates then issued and outstanding.
"AMORTIZATION EVENT" will mean an event that may adversely affect the trust
and your investment in the certificates, and that may cause the trust to begin
to repay the certificates. We describe these events in more detail in "The
Certificates--Amortization Events," in the prospectus supplement.
"AMORTIZATION PERIOD" will mean, for any series, the period beginning when
an Amortization Event occurs for that series and continuing until the trust has
fully paid the principal of the applicable series or until the Series
Termination Date for that series. The first distribution date of the
Amortization Period will be the distribution date in the calendar month
following the date on which the Amortization Event occurred.
"ASSIGNMENT OF ADDITIONAL ACCOUNTS" will mean an assignment entered into
between Greenwood, the trustee, and if applicable an Additional Seller, pursuant
to which additional accounts are designated as Accounts for the trust.
"CCA INVESTOR INTEREST" means, with respect to Series 1993-3, a collateral
interest in receivables arising under certain circumstances relating to the
credit enhancement for that series.
"CHARGED-OFF ACCOUNT" will mean each Account with respect to which the
servicer has charged off the Receivables in the Account as uncollectible.
"CHARGED-OFF AMOUNT" will mean, for any distribution date or Trust
Distribution Date, the total amount of Receivables in Accounts that became
Charged-Off Accounts in the previous calendar month minus:
- the cumulative, uncollected amount previously billed by the servicers to
Accounts that became Charged-Off Accounts during the prior calendar month
with respect to finance charges, cash
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advance fees, annual membership fees, if any, fees for transactions that
exceed the credit limit on the Account, late payment charges, and any
other type of charges that the servicer has designated as "Finance Charge
Receivables" for Accounts that are not Charged-Off Accounts, and
- the full amount of any Receivables in these Charged-Off Accounts that
Greenwood repurchased.
"CLASS PERCENTAGE" will mean, for any class of any series, with respect to
any distribution date or any Trust Distribution Date, as applicable, the
allocation percentages by which the trust allocates Finance Charge Collections,
Principal Collections and the Charged-Off Amount to that class. The allocation
percentage for a class may vary for each of these items. We describe the Class
Percentage for each class of your series in more detail in the glossary of terms
in the applicable prospectus supplement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTIONS ACCOUNT" will mean the non-interest bearing segregated trust
account for collections established and maintained by the trustee with an office
or branch of the trustee or a Qualified Institution for the benefit of the
investors in the trust.
"DEFINITIVE CERTIFICATE" will mean any certificate issued to an investor in
fully registered, certificated form, rather than to DTC or its nominees.
"DFS" will mean Discover Financial Services, Inc.
"DOL" means the U.S. Department of Labor.
"EARLY ACCUMULATION EVENT," if applicable for any series, will mean an
event that is designed to protect investors from certain events that may
adversely affect the trust and that will obligate the trust to accumulate
Principal Collections and similar amounts allocated to the series on a monthly
basis in the series principal funding account. If your series could have an
Early Accumulation Event, we will describe those events in more detail in the
related prospectus supplement.
"EARLY ACCUMULATION PERIOD," if applicable for any series, will mean the
period beginning when an Early Accumulation Event occurs and continuing until an
Amortization Event occurs, the trust has fully paid the principal of the
applicable series or the Series Termination Date for the applicable series.
"ELIGIBLE RECEIVABLE" will mean each Receivable which is eligible to be
transferred to the trust by a seller. We describe the eligibility criteria for
an Eligible Receivable in "The Certificates--Repurchase of Specified
Receivables."
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EUROCLEAR OPERATOR" means Morgan Guaranty Trust Company of New York,
Brussels, Belgium office.
"EXEMPTION" means the approval of individual prohibited transaction relief
for Greenwood Trust Company, Final Authorization Number (FAN) 2000-05E (February
12, 2000) pursuant to Prohibit Transaction Exemption No. 96-62.
"FINANCE CHARGE COLLECTIONS" for any calendar month will mean the sum of:
(a) the lesser of:
- the aggregate amount of Finance Charge Receivables for the preceding
calendar month and
- collections actually received in the applicable calendar month; and
(b) all amounts received during the calendar month with respect to
Receivables in the trust that have previously been charged-off as uncollectible,
including all proceeds from sales of those receivables by the trust to third
parties pursuant to the Pooling and Servicing Agreement.
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"FINANCE CHARGE RECEIVABLES" will mean, for any Account for any calendar
month,
- the net amount billed by the servicer during that month as periodic
finance charges on the Account and cash advance fees, annual membership
fees, if any, fees for transactions that exceed the credit limit on the
Account, late payment charges billed during that month to the Account and
any other charges that the servicer may designate as "Finance Charge
Receivables" from time to time, provided that the servicer will not
designate amounts owing for the payment of goods and services or cash
advances as "Finance Charge Receivables," minus
- if the Account becomes a Charged-Off Account during that month, the
cumulative, uncollected amount previously billed by the servicer to the
Account as periodic finance charges, cash advance fees, annual membership
fees, if any, fees for transactions that exceed the credit limit on the
Account, late payment charges and any other type of charges that the
servicer has designated as "Finance Charge Receivables" with respect to
Accounts that are not Charged-Off Accounts.
"FIXED PRINCIPAL ALLOCATION EVENT" will mean an event that causes the trust
to allocate principal collections to a series based on a previous investor
interest in Receivables for that series. We will describe the Fixed Principal
Allocation Events for your series in "The Certificates--Class Principal
Collections" and the glossary of terms in the applicable prospectus supplement.
"GROUP COLLECTIONS ACCOUNT" will mean the non-interest bearing segregated
trust account for collections allocated to 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 investors in each series that is a member of that group.
"HIGHEST RATING" will mean, for purposes of the definition of Permitted
Investments, with respect to Moody's, P-1 or Aaa, and, with respect to Standard
& Poor's, A-1+ or AAA, or with respect to either Standard & Poor's or Moody's,
any rating category that will not cause the Rating Agency to reduce or withdraw
its rating on any class of any series then outstanding, as confirmed in writing
by the applicable Rating Agency.
"IRA" means any Individual Retirement Account or Individual Retirement
Annuity.
"MASTER SERVICER TERMINATION EVENT" will mean an event that will give
either the trustee or investors holding certificates representing at least 51%
of the class invested amount for any class of any series then outstanding that
is materially adversely affected by the event the right to:
- terminate the master servicer's rights and obligations under the Pooling
and Servicing Agreement and any Series Supplement then outstanding, and
- cause the trustee to appoint a successor master servicer.
These events include certain breaches of representations, warranties or
covenants, or certain events of insolvency with respect to the master servicer.
We describe these events in more detail under "Servicing--Master Servicer
Termination Events."
"MINIMUM PRINCIPAL RECEIVABLES BALANCE" will mean, on any date of
determination, an amount equal to the sum of the series minimum principal
receivables balances for each series then outstanding.
"MSDW" means Morgan Stanley Dean Witter & Co.
"NON-U.S. HOLDER" means the beneficial owner of a certificate that, for
United States federal income tax purposes, is
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- a foreign estate or trust,
as those terms are defined in the Code.
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"OID" means original issue discount.
"PERMITTED INVESTMENTS" will mean:
(i) negotiable instruments or securities represented by instruments in
bearer or registered form which evidence:
(a) obligations issued or fully guaranteed, as to timely payment, by
the United States of America or any instrumentality or agency of
the United States of America, when those obligations are backed by
the full faith and credit of the United States of America;
(b) time deposits in, or bankers' acceptances issued by, any depository
institution or trust company:
- incorporated under the laws of the United States of America or
any state of the United States, or which is a domestic branch of
a foreign bank,
- subject to supervision and examination by federal or state
banking or depository institution authorities; and
- that has, at the time the trust invests or contractually commits
to invest in its time deposits or bankers' acceptances, the
Highest Rating on its short-term deposits or commercial paper or,
if its short-term deposits or commercial paper are unrated, the
Highest Rating on its long-term unsecured debt obligations;
(c) commercial paper or other short-term obligations having the Highest
Rating at the time the trust invests or contractually commits to
invest in that commercial paper or other short-term obligations; or
(d) investments in money market funds having the Highest Rating;
(ii) demand deposits in the name of the trust or the trustee in any
depository institution or trust company referred to in clause (i)(b)
above;
(iii) shares of an open end diversified investment company that is
registered under the Investment Company Act of 1940, as amended, and
that:
(a) invests its assets exclusively in obligations of or guaranteed by
the United States of America or any instrumentality or agency of
the United States of America, having in each instance a final
maturity date of less than one year from their date of purchase, or
other Permitted Investments;
(b) seeks to maintain a constant net asset value per share; and
(c) has aggregate net assets of not less than $100,000,000 on the date
the trust purchases those shares.
These securities will not be represented by an instrument, will be
registered in the name of the trustee upon books maintained for that
purpose by or on behalf of the issuer of these securities and will be
identified on books maintained for that purpose by the trustee as held
for the benefit of the trust or the investors. The trust may only invest
in these securities if they will not result in a reduction or withdrawal
of the rating of any class of any series then outstanding, as confirmed
in writing by the Rating Agencies;
(iv) a guaranteed investment contract--guaranteed as to timely payment--the
terms of which meet the criteria of the Rating Agencies and with an
entity whose credit standards meet the criteria of the Rating Agencies
necessary to preserve the rating of each class of each series then
outstanding; and
(v) repurchase agreements transacted with either
58
<PAGE> 136
(a) an entity subject to the United States federal bankruptcy code,
provided that:
(1) the term of the repurchase agreement is consistent with the
requirements set forth in Section 4.02(c) of the Pooling and
Servicing Agreement with regard to the maturity of Permitted
Investments or is due on demand,
(2) the trustee or a third party acting solely as agent for the
trustee has possession of the collateral,
(3) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the trustee, the trustee on behalf
of the trust has a perfected first priority security interest
in the collateral,
(4) the market value of the collateral is maintained at the
requisite collateral percentage of the obligation in accordance
with the standards of the Rating Agencies,
(5) the failure to maintain the requisite collateral level will
obligate the trustee to liquidate the collateral immediately,
(6) the securities subject to the repurchase agreement are
certificates of deposit, bankers acceptances or obligations of,
or fully guaranteed as to principal and interest by, the United
States of America or an agency of the United States of America,
(7) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the Trustee, the securities
subject to the repurchase agreement are free and clear of any
third party lien or claim; or
(b) a financial institution insured by the FDIC, or any broker-dealer
with "retail customers" that is under the jurisdiction of the
Securities Investors Protection Corp., or SIPC, provided that:
(1) the market value of the collateral is maintained at the
requisite collateral percentage of the obligation in accordance
with the standards of the Rating Agencies,
(2) the trustee or a third party acting solely as agent for the
trustee has possession of the collateral,
(3) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the trustee, the trustee on behalf
of the trust has a perfected first priority security interest
in the collateral,
(4) as evidenced by a certificate of a servicing officer of the
master servicer delivered to the trustee, the collateral is
free and clear of third party liens; and, in the case of an
SIPC broker, was not acquired pursuant to a repurchase or
reverse repurchase agreement and
(5) failure to maintain the requisite collateral percentage will
obligate the trustee to liquidate the collateral.
At the time the trust invests or contractually commits to invest in any
repurchase agreement, the entity or institution must have the Highest
Rating on its short-term deposits or commercial paper or, if its
short-term deposits or commercial paper are unrated, the Highest Rating
on its long-term unsecured debt obligations. Permitted Investments will
include, without limitation, securities of Greenwood or any of its
affiliates which otherwise qualify as a Permitted Investment under
clause (i), (ii), (iii), (iv) or (v) above.
"POOLING AND SERVICING AGREEMENT" will mean the Pooling and Servicing
Agreement dated as of October 1, 1993, by and between Greenwood Trust Company,
as master servicer, servicer and seller, and U.S. Bank National Association,
formerly First Bank National Association, successor trustee to Bank of
59
<PAGE> 137
America Illinois, formerly Continental Bank, National Association, as trustee,
as that agreement may be amended or supplemented from time to time.
"PRINCIPAL COLLECTIONS" will mean, for any calendar month, all collections
other than Finance Charge Collections.
"PRINCIPAL RECEIVABLE" will mean each Receivable other than Finance Charge
Receivables.
"QUALIFIED INSTITUTION" will mean a depository institution organized under
the laws of the United States of America or any one of the states of the United
States of America that at all times has a short-term certificate of deposit
rating of A-1 or better by Standard & Poor's and P-1 or better by Moody's, and
whose deposits are insured by the FDIC.
"RATING AGENCY" will mean Moody's or Standard & Poor's, and "Rating
Agencies" will mean Moody's and Standard & Poor's.
"PTE" means a Department of Labor Prohibited Transaction Exemption.
"RECEIVABLE" will mean any amounts owing by the obligor under an Account
from time to time, including, without limitation, amounts owing for the payment
of goods and services, cash advances, finance charges and other charges, if any.
A Receivable will be deemed to have been created at the end of the day on the
date the servicer first records the transaction on the cardmember master file of
the accounts maintained by the servicer or on the servicer's behalf, without
regard to the effective date of recordation. A Receivable will not include any
amount owing under a Charged-Off Account or an Account the Receivables in which
have been repurchased pursuant to the Pooling and Servicing Agreement. Reference
to a "receivable" will include any amount owing by an obligor under a
Charged-Off Account or an Account in which the Receivables have been repurchased
pursuant to the Pooling and Servicing Agreement.
"RECEIVABLE REPURCHASE EVENT" means the failure of any Receivable to be an
Eligible Receivable at the time the seller transfers it to the trust, if that
failure has a material adverse effect on the investors' interest in the
Receivables as a whole and the seller does not cure that failure within 60 days
of:
- the relevant seller's actual knowledge of the breach, or
- the relevant seller's receipt of written notice of the event from the
trustee.
See "The Certificates--Repurchase of Specified Receivables."
"REQUIRED DAILY DEPOSIT" will mean, for any series, for any servicer that
is required during any month to deposit collections into the Collections Account
on a daily basis pursuant to the Pooling and Servicing Agreement, amounts that
will be available to pay interest and principal, as applicable, under the cash
flows for the applicable series, up to that servicer's proportionate share of
the interest and principal expected to be paid to investors in that series on
the related distribution date, as more fully specified in the applicable Series
Supplement.
"RESTRICTED GROUP" means, for purposes of ERISA, Greenwood, the trustee,
the master servicer or any servicer, or, with respect to any particular series,
an underwriter, a party providing credit support, or the counterparty on an
interest rate swap or cap for the series, or any affiliate of any of them.
"SELLER CERTIFICATE" will mean:
- if a seller elects to evidence its interest in the trust in certificated
form pursuant to the Pooling and Servicing Agreement, the certificate
executed by Greenwood and authenticated by the trustee, or
- an uncertificated interest in the trust as evidenced by a recording in
the books and records of the trustee,
in each case representing a residual interest in the assets of the trust not
represented by the certificates of any series.
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<PAGE> 138
"SELLER CERTIFICATE OWNERSHIP AGREEMENT" will mean, if applicable, the
agreement entered into by Greenwood, as seller, and any Additional Seller, as
that agreement may be amended or supplemented from time to time.
"SELLER INTEREST" will mean, for any trust distribution date or
distribution date, the aggregate amount of Principal Receivables in the trust at
the end of the previous calendar month minus the Aggregate Investor Interest at
the end of that day; provided, however, that the Seller Interest will not be
less than zero.
"SELLER PERCENTAGE" will mean, on any date of determination, for any
specified category, an amount equal to 100% minus the applicable Aggregate
Investor Percentage for that category.
"SERIES REPURCHASE EVENT" means the discovery that as of the date the trust
issues a series, the applicable Series Supplement does not constitute a legal,
valid and binding obligation of each seller, enforceable against each seller in
accordance with its terms, subject to usual and customary exceptions relating to
bankruptcy, insolvency and general equity principles. See "The
Certificates--Repurchase of a Series."
"SERIES SUPPLEMENT" will mean the Series Supplement to the Pooling and
Servicing Agreement, dated as of the date the trust issues a series of
certificates, between Greenwood and the trustee, that establishes each series of
certificates.
"SERIES TERMINATION DATE" will mean, for any series, the last date on which
the trust will pay principal or interest to the investors of that series.
"SERVICER TERMINATION EVENT" will mean an event that will give either the
trustee or investors holding certificates representing at least 51% of the
invested amount for any class of any series then outstanding that is materially
adversely affected by the event the right to:
- terminate the servicer's rights and obligations under the Pooling and
Servicing Agreement and any Series Supplement then outstanding, and
- cause the trustee to appoint a successor servicer.
These events include certain breaches of representations, warranties or
covenants, or certain events of insolvency with respect to the servicer. We
describe these events in more detail under "Servicing--Servicer Termination
Events."
"TRUST DISTRIBUTION DATE" will mean November 10, 1993 and the tenth day of
each calendar month thereafter, or, if that tenth day is not a business day, the
next succeeding business day.
"TRUST PORTFOLIO REPURCHASE EVENT" means the discovery that as of October
1, 1993, or with respect to any additional Accounts, as of the date the
applicable seller assigned the Receivables in those Accounts to the trust,
- certain legal defects existed under the Pooling and Servicing Agreement
or the assignments,
- certain defects existed in the trust's rights in the Receivables, or
- certain representations and warranties of any seller were not true and
the breach is not cured within a specified time period.
For more information about these events and their consequences, see "The
Certificates--Repurchase of Trust Portfolio."
"UNITED STATES PERSON" means, generally, a beneficial owner of a
certificate that is:
- a citizen or resident of the United States,
- a corporation or partnership, including an entity treated as a
corporation or partnership for federal income tax purposes, created or
organized in the United States or under the laws of the United States or
of any state,
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<PAGE> 139
- an estate the income of which is subject to United States federal income
taxation regardless of the source of that income, or
- a trust if a court within the United States is able to exercise primary
supervision over the trust's administration, and one or more United
States persons have the authority to control all substantial decisions of
the trust, and certain other trusts in existence on August 20, 1996 that
have validly elected to be treated as United States Persons.
62
<PAGE> 140
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee............................................ $ 2,640,000
Printing and Engraving*..................................... 800,000
Trustee's Fees*............................................. 836,000
Legal Fees and Expenses*.................................... 1,450,000
Blue Sky Fees and Expenses*................................. 190,000
Accountants' Fees and Expenses*............................. 884,000
Rating Agency Fees*......................................... 5,850,000
Miscellaneous Fees*......................................... 160,000
-----------
Total*................................................. $12,810,000
===========
</TABLE>
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Greenwood is a Delaware banking corporation and its affiliate, Morgan
Stanley Dean Witter & Co. ("MSDW") is a Delaware corporation. Section 145 of the
General Corporation Law of the State of Delaware ("GCL") provides that a
Delaware corporation has the power to indemnify its officers and directors in
certain circumstances.
Subsection (a) of Section 145 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding provided that such director or officer acted in good faith in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no reasonable cause to believe his or
her conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director or officer acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action was brought shall determine that
despite the adjudication of liability such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he or she shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him or her or incurred by him or her in any such capacity or arising out of his
or her status as such whether or not the corporation would have the power to
indemnify him or her against such liabilities under Section 145.
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<PAGE> 141
Article IV of Greenwood's by-laws provides that Greenwood shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil or
criminal, and whether judicial, legislative, or administrative (other than an
action by or in the right of Greenwood) by reason of the fact that such person
is or was a director, officer or employee (or is or was serving at the request
of Greenwood as a director, officer, and/or employee of or in a similar capacity
in another corporation, partnership, joint venture, trust or other enterprise)
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such proceeding if such person acted in good faith and in a manner not clearly
opposed to any written policy of Greenwood, or which such person reasonably
believed to be in the best interests of Greenwood, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. Indemnification in connection with an action or proceeding
by or in the right of Greenwood to procure a judgment in its favor is limited to
payment of amounts paid in settlement and expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action or proceeding. No indemnification in connection with an action or
proceeding by or in the right of Greenwood to procure a judgment in Greenwood's
favor may be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in the
performance of such person's duty to Greenwood unless and only to the extent
that the court in which such action or suit is brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Article VIII of the Amended and Restated Certificate of Incorporation of
MSDW ("Certificate of Incorporation") and Section 6.07 of the Amended and
Restated By-Laws of MSDW ("By-Laws"), each as amended to date, provide for the
indemnification of directors and officers. The Certificate of Incorporation
provides that any person who is a director or officer of MSDW shall be
indemnified by MSDW to the fullest extent permitted from time to time by
applicable law. In addition, the By-Laws provide that each person who was or is
made a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director
or officer of MSDW or a director or elected officer of a corporation a majority
of the capital stock (other than directors' qualifying shares) of which is owned
directly or indirectly by MSDW (a "Subsidiary") shall be indemnified by MSDW to
the fullest extent permitted by applicable law. The right to indemnification
under the By-Laws includes the right to be paid the expenses incurred in
connection with any proceeding in advance of its final disposition upon receipt
(unless MSDW upon authorization of the Board of Directors waives said
requirement to the extent permitted by applicable law) of an undertaking by or
on behalf of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by MSDW.
MSDW's By-Laws also provide that MSDW may, to the extent authorized from
time to time by its Board of Directors, provide rights to indemnification, and
rights to be paid by MSDW the expenses incurred in defending any proceeding in
advance of its final disposition, to any person who is or was an employee or
agent (other than a director or officer) of MSDW or a Subsidiary and to any
person who is or was serving at the request of MSDW or a Subsidiary as a
director, officer, partner, member, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other enterprise
at the request of MSDW or a Subsidiary, to the same scope and effect as the
foregoing indemnification of directors and officers of MSDW.
Under the By-Laws, MSDW has the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, member, employee or
agent of MSDW or a Subsidiary, or of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise, against any
expense, liability or loss whether or not MSDW or a Subsidiary would have the
power to indemnify him or her against such expense, liability or loss under the
provisions of applicable law.
MSDW has in effect insurance policies in the amount of $125 million for
general officers' and directors' liability insurance and $25 million for
fiduciary liability insurance covering all of MSDW's directors and officers in
certain instances where by law they may not be indemnified by MSDW.
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<PAGE> 142
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
4.1 Pooling and Servicing Agreement between Greenwood Trust
Company as Master Servicer, Servicer and Seller and U.S.
Bank National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association), as
Trustee, dated as of October 1, 1998, incorporated by
reference to the Trust's Registration Statement on Form S-3
(Registration No. 333-62263).
4.2 First Amendment to Pooling and Servicing Agreement, dated as
of August 15, 1994, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Registration
Statement on Form S-3 (Registration No. 333-62263).
4.3 Second Amendment to Pooling and Servicing Agreement, dated
as of February 29, 1996, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Current Report on
Form 8-K, dated April 30, 1996.
4.4 Third Amendment to Pooling and Servicing Agreement, dated as
of March 30, 1998, between Greenwood Trust Company as Master
Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Registration
Statement on Form 8-A, dated April 13, 1998.
4.5 Fourth Amendment to Pooling and Servicing Agreement, dated
as of November 30, 1998 between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Current Report on
Form 8-K, dated November 30, 1998.
*4.6 Form of Series Supplement between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
including form of Class A Certificate and form of Class B
Certificate.
*4.7 Form of Agreement among Greenwood Trust Company, U.S. Bank
National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association) as Trustee
and The Depository Trust Company, with respect to Discover
Card Master Trust I.
*4.8 Form of Credit Enhancement Agreement among U.S. Bank
National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association) as Trustee
for Discover Card Master Trust I, Greenwood Trust Company as
Master Servicer, Servicer and Seller with respect to the
Discover Card Master Trust I and Discover Receivables
Financing Corporation as Credit Enhancement Provider.
*5.1 Opinion of Latham & Watkins.
*5.2 Form of opinion of Latham & Watkins as to certain creditors'
rights matters relating to Greenwood Trust Company.
*5.3 Form of opinion of Young, Conaway, Stargatt & Taylor, LLP as
to certain creditors' rights matters relating to Greenwood
Trust Company.
*8.1 Opinion of Latham & Watkins as to certain federal tax
matters concerning the certificates.
*23.1 Consent of Latham & Watkins (included in Exhibit 5.1).
*23.2 Consent of Young Conaway Stargatt & Taylor, LLP.
*24.1 Powers of Attorney of the directors and officers of
Greenwood Trust Company.
</TABLE>
- -------------------------
* Filed herewith
II-3
<PAGE> 143
ITEM 17. UNDERTAKINGS
Each undersigned Registrant hereby undertakes as follows:
(a) Each undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of each such registrant's annual report pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of each such Registrant pursuant to the foregoing
provisions, or otherwise, each such Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by each such Registrant of expenses
incurred or paid by a director, officer or controlling person of each such
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, each such Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(c) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be a part
of this Registration Statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(e) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (e)(1)(i) and (e)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with
II-4
<PAGE> 144
or furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE> 145
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New Castle, County of New Castle, State of Delaware,
on May 12, 2000.
GREENWOOD TRUST COMPANY,
as originator of the Trust
(Registrant)
By /s/ JOHN J. COANE
------------------------------------
John J. Coane
Vice President, Chief Accounting
Officer,
Treasurer and Assistant Secretary
DISCOVER CARD MASTER TRUST I,
(Registrant)
By: Greenwood Trust Company,
as Master Servicer
By /s/ JOHN J. COANE
------------------------------------
John J. Coane
Vice President, Chief Accounting
Officer,
Treasurer and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
DAVID W. NELMS* Chairman, Investment Officer and Loan Officer
(Principal Executive Officer)
JOHN J. COANE* Vice President, Chief Accounting Officer,
Treasurer and Assistant Secretary (Principal
Financial Officer and Principal Accounting
Officer)
ALEXANDER C. FRANK* Director
J. NATHAN HILL* Director
CHARLES F. MORAN* Director
FRANK K. REILLY* Director
JOSEPH A. YOB* Director
</TABLE>
*By /s/ JOHN J. COANE , individually and as Attorney-in-fact
-----------------------------------
John J. Coane
May 12, 2000
II-6
<PAGE> 146
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
*1.1 Form of Underwriting Agreement. ............................
4.1 Pooling and Servicing Agreement between Greenwood Trust
Company as Master Servicer, Servicer and Seller and U.S.
Bank National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association), as
Trustee, dated as of October 1, 1993, incorporated by
reference to the Trust's Registration Statement on Form S-3
(Registration No. 333-62263). ..............................
4.2 First Amendment to Pooling and Servicing Agreement, dated as
of August 15, 1994, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Registration
Statement on Form S-3 (Registration No. 333-62263). ........
4.3 Second Amendment to Pooling and Servicing Agreement, dated
as of February 29, 1996, between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Current Report on
Form 8-K, dated April 30, 1996. ............................
4.4 Third Amendment to Pooling and Servicing Agreement, dated as
of March 30, 1998, between Greenwood Trust Company as Master
Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Registration
Statement on Form 8-A, dated April 13, 1998. ...............
4.5 Fourth Amendment to Pooling and Servicing Agreement, dated
as of November 30, 1998 between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
incorporated by reference to the Trust's Current Report on
Form 8-K, dated November 30, 1998.
*4.6 Form of Series Supplement between Greenwood Trust Company as
Master Servicer, Servicer and Seller and U.S. Bank National
Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), as Trustee,
including form of Class A Certificate and form of Class B
Certificate. ...............................................
*4.7 Form of Agreement among Greenwood Trust Company, U.S. Bank
National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association), as Trustee
and The Depository Trust Company, with respect to Discover
Card Master Trust I. .......................................
*4.8 Form of Credit Enhancement Agreement among U.S. Bank
National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association) as Trustee
for Discover Card Master Trust I, Greenwood Trust Company as
Master Servicer, Servicer and Seller with respect to the
Discover Card Master Trust I and Discover Receivables
Financing Corporation as Credit Enhancement Provider.
*5.1 Opinion of Latham & Watkins. ...............................
</TABLE>
<PAGE> 147
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
*5.2 Form of opinion of Latham & Watkins as to certain creditors'
rights matters relating to Greenwood Trust Company. ........
*5.3 Form of opinion of Young, Conaway, Stargatt & Taylor, LLP as
to certain creditors' rights matters relating to Greenwood
Trust Company. .............................................
*8.1 Opinion of Latham & Watkins as to certain federal tax
matters concerning the certificates. .......................
*23.1 Consent of Latham & Watkins (included in Exhibit 5.1). .....
*23.2 Consent of Young, Conaway, Stargatt & Taylor, LLP. .........
*24.1 Powers of Attorney of the directors and officers of the
Greenwood Trust Company. ...................................
</TABLE>
- -------------------------
* Filed herewith
<PAGE> 1
EXHIBIT 1.1
DISCOVER CARD MASTER TRUST I
Credit Card Pass-Through Certificates
-------------------------------------
Underwriting Agreement
(Standard Terms)
[ ]
MORGAN STANLEY & CO. INCORPORATED
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Greenwood Trust Company ("Greenwood"), as originator of
Discover Card Master Trust I (the "Trust"), proposes, subject to the terms and
conditions stated herein, to cause to be issued and sold from time to time
Credit Card Pass-Through Certificates (the "Certificates") in one or more series
(each, a "Series"). The Certificates of each Series will consist of one or more
Classes (each, a "Class") of Certificates of such Series. Each Certificate will
evidence a fractional, undivided percentage interest or beneficial interest in
the Trust. The Certificates will be issued by the Trust pursuant to a Pooling
and Servicing Agreement, dated as of October 1, 1993, as amended, and as
supplemented by a Series Supplement relating to the specific Series of
Certificates issued thereunder (the Pooling and Servicing Agreement, as so
supplemented, the "Pooling and Servicing Agreement"), between Greenwood as
Master Servicer, Servicer and Seller and U.S. Bank National Association
(formerly First Bank National Association, successor trustee to Bank of America
Illinois, formerly Continental Bank, National Association), as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Pooling and Servicing Agreement.
Each offering of each Class of each Series of Certificates to
which this Agreement applies (the "Securities") made pursuant to the
Registration Statement (as defined herein) will be
<PAGE> 2
made through you or through you and other underwriters for whom you are acting
as representatives or through an underwriting syndicate managed by you. Whenever
Greenwood determines to make such an offering of Securities to which this
Agreement shall apply, Greenwood and one or more Underwriters (as defined
herein) will enter into an agreement (the "Terms Agreement") providing for the
sale of the Securities to, and the purchase and offering thereof by, (i) you,
(ii) you and such other underwriters who execute the Terms Agreement and agree
thereby to become obligated to purchase the Securities from Greenwood, or (iii)
you and such other underwriters, if any, selected by you as have authorized you
to enter into such Terms Agreement on their behalf (in each case, the
"Underwriters"). Such Terms Agreement shall specify the initial principal amount
of the Securities to be issued and their terms not otherwise specified in this
Agreement, the price at which such Securities are to be purchased by the
Underwriters from Greenwood, the aggregate amount of Securities to be purchased
by you and any other Underwriter that is a party to such Terms Agreement and the
initial public offering price or the method by which the price at which such
Securities are to be sold will be determined. The Terms Agreement ("Terms
Agreement"), which shall be substantially in the form attached hereto, may take
the form of an exchange of any standard form of written communication between or
among the Underwriters and Greenwood. Each such offering of the Securities for
which a Terms Agreement is entered into will be governed by this Agreement, as
supplemented by the applicable Terms Agreement, and this Agreement and such
Terms Agreement shall inure to the benefit of and be binding upon the
Underwriters participating in the offering of such Securities.
1. Greenwood represents and warrants to, and agrees with you,
as of the date hereof, and to each Underwriter named in the Terms Agreement as
of the date thereof, that:
-2-
<PAGE> 3
(a) A registration statement on Form S-3 (Registration
Statement No. [_______________]) including a prospectus and such amendments
thereto as may have been required to the date hereof, relating to the
Certificates and the offering thereof from time to time in accordance with Rule
415 under the Securities Act of 1933, as amended (the "Act"), in the form
heretofore delivered to you has been filed with the Securities and Exchange
Commission (the "Commission") (which may have included one or more preliminary
prospectuses and prospectus supplements (each, a "Preliminary Prospectus")
meeting the requirements of Rule 430 of the Act) and such registration
statement, as amended, has become effective; such registration statement, as
amended, and the prospectus and prospectus supplement relating to the sale of
the Securities offered thereby constituting a part thereof, as from time to time
amended or supplemented (including any prospectus and prospectus supplement
filed with the Commission pursuant to Rule 424(b) of the Act) are respectively
referred to herein as the "Registration Statement," the "Basic Prospectus" and
the "Prospectus Supplement" and the Basic Prospectus together with the
Prospectus Supplement relating to the Securities is hereinafter referred to as
the "Prospectus"; the conditions of Rule 415 under the Act have been satisfied
with respect to the Registration Statement; and no other amendment to the
Registration Statement will be filed which shall be reasonably disapproved by
you promptly after reasonable notice thereof.
(b) There is no request by the Commission for any further
amendment of the Registration Statement or the Prospectus or for any additional
information; the Commission has not issued any stop order suspending the
effectiveness of the Registration Statement and Greenwood is not aware of any
proceeding for that purpose having been instituted or threatened; and there has
been no notification with respect to the suspension of the qualification for
sale of the Certificates for sale in any jurisdiction or any proceeding for such
purpose having been instituted or threatened.
-3-
<PAGE> 4
(c) As of the date of the Terms Agreement, when the
Registration Statement became effective, when the Prospectus Supplement is first
filed pursuant to Rule 424(b) under the Act, when any other amendment to the
Registration Statement becomes effective, and when any supplement to the
Prospectus Supplement is filed with the Commission, and at the Time of Delivery
(as defined in Section 4), the Registration Statement and the Prospectus (i)
conformed, and any amendments or supplements thereto will conform, in all
material respects to the requirements of the Act and the rules and regulations
of the Commission thereunder and (ii) will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
Greenwood by an Underwriter through you expressly for use therein.
(d) Upon payment therefor as provided herein and in the Terms
Agreement, the Securities will have been duly and validly authorized and
(assuming their due authentication by the Trustee) will have been duly and
validly issued and will conform in all material respects to the description
thereof in the Prospectus and will be entitled to the benefits of the Pooling
and Servicing Agreement.
(e) The issue and sale of the Securities and the compliance by
Greenwood with all of the provisions of the Securities, the Pooling and
Servicing Agreement, this Agreement and the Terms Agreement have been or will
have been duly authorized by Greenwood by all necessary corporate action; and
will not conflict with or result in any breach which would constitute a material
default under, or, except as contemplated by the Pooling and Servicing
Agreement, result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Greenwood or NOVUS Credit
Services Inc. ("NOVUS"),
-4-
<PAGE> 5
material to Greenwood and NOVUS (whether or not consolidated) considered as a
whole, pursuant to the terms of, any indenture, loan agreement or other
agreement or instrument for borrowed money to which Greenwood or NOVUS is a
party or by which Greenwood or NOVUS may be bound or to which any of the
property or assets of Greenwood or NOVUS, material to Greenwood and NOVUS
(whether or not consolidated) considered as a whole, is subject, nor will such
action result in any material violation of the provisions of the Certificate of
Incorporation or By-Laws of Greenwood or, to the best of Greenwood's knowledge,
any statute or any order, rule or regulation applicable to Greenwood of any
court or any Federal, State or other regulatory authority or other governmental
body having jurisdiction over Greenwood, and no consent, approval, authorization
or other order of, or filing with, any court or any such regulatory authority or
other governmental body is required for the issue and sale of the Securities
except as may be required under the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and securities laws of the various states and
other jurisdictions which are applicable to the issue and sale of the Securities
and except for the filing of any financing or continuation statement required to
perfect or continue the Trust's interest in the Receivables.
(f) The Principal Receivables conveyed by Greenwood to the
Trust under the Pooling and Servicing Agreement had an aggregate outstanding
balance determined as of the date stated in the Terms Agreement of not less than
the amount set forth in the Terms Agreement; and
(g) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the Trust is not required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
-5-
<PAGE> 6
2. Subject to the terms and conditions herein set forth,
Greenwood agrees to cause to be issued and sold to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from
Greenwood, at the purchase price specified in the Terms Agreement, the principal
amount of Securities set forth in the Terms Agreement.
3. (a) From time to time, after the Registration Statement
becomes effective, the several Underwriters propose to offer the Securities for
sale upon the terms and conditions set forth in the Prospectus.
(b) Each Underwriter severally represents and agrees that it
will not offer or sell or deliver any of the Securities in any jurisdiction
except under circumstances that will result in compliance with the applicable
laws thereof, and without limiting the foregoing, each Underwriter severally
represents and agrees that (i) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom; (ii) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or who is a person to whom the document may otherwise lawfully be issued or
passed on; (iii) if it is an authorized person under Chapter III of Part I of
the Financial Services Act 1986, it has only promoted and will only promote (as
that term is defined in Regulation 1.02 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991) to any person in the United Kingdom the
scheme described in the 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 1991; and (iv) it is a person of a kind described
-6-
<PAGE> 7
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996.
(c) Each Underwriter, severally, represents that it will not,
at any time that such Underwriter is acting as an "underwriter" (as defined in
Section 2(11) of the Act) with respect to the Securities, transfer, deposit or
otherwise convey any Securities into a trust or other type of special purpose
vehicle that issues securities or other instruments backed in whole or in part
by, or that represents interests in, such Securities without the prior written
consent of Greenwood.
4. Securities to be purchased by each Underwriter hereunder
and under the Terms Agreement shall be delivered by or on behalf of Greenwood to
you for the account of such Underwriter, against payment by such Underwriter or
on its behalf of the purchase price thereof in immediately available funds.
Unless otherwise specified in the Terms Agreement, such delivery shall occur at
the office of Latham & Watkins, Chicago, Illinois or such other place as you and
Greenwood may agree upon in writing. The time and date of such delivery shall be
set forth in the Terms Agreement or at such other time and date as you and
Greenwood may agree upon in writing, such time and date being herein called the
"Time of Delivery." Unless otherwise specified in the Terms Agreement, the
Securities shall be represented by definitive certificates, registered in the
name of Cede & Co., as nominee for The Depository Trust Company. Such definitive
certificates will be made available for inspection at least twenty-four hours
prior to the Time of Delivery at the office of the Trustee, 111 East Wacker
Drive, Chicago, Illinois 60601.
5. Greenwood agrees with each of the Underwriters:
(a) Immediately following the execution of each Terms
Agreement, Greenwood will prepare a Prospectus Supplement setting forth the
amount of Securities covered
-7-
<PAGE> 8
thereby and the terms thereof not otherwise specified in the Basic Prospectus,
the price at which such Securities are to be purchased by the Underwriters from
Greenwood, either the initial public offering price or the method by which the
price at which such Securities are to be sold will be determined, the selling
concessions and allowances, if any, and such other information as Greenwood
deems appropriate in connection with the offering of such Securities, and
Greenwood will not make any further amendment or any supplement to the
Registration Statement or Prospectus without first having furnished you with a
copy of the proposed form thereof and given you a reasonable opportunity to
review the same; to advise you promptly after it receives notice of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you with copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of the Prospectus, of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and
in the event of the issuance of any such stop order or of any such order
preventing or suspending the use of such Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Securities, provided that in connection therewith Greenwood
-8-
<PAGE> 9
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus
in such quantities as you may from time to time reasonably request, and if at
any time the delivery of a Prospectus is required by law in connection with the
offering or sale of the Securities, and if at such time any event shall have
occurred as a result of which the Prospectus would include an untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or, if for any other reason it shall be necessary during
such same period to amend or supplement the Prospectus in order to comply with
the Act, to notify you and to prepare and furnish without charge to each
Underwriter and to any dealer in the Securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance and in case any Underwriter is required to deliver a Prospectus in
connection with sales of any Securities at any time nine months or more after
the effective date of the Registration Statement, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as many
copies as you may reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To cause the Trust to make generally available to holders
of the Securities, in accordance with Rule 158 under the Act or otherwise, as
soon as practicable, but in any event not later than forty-five days after the
end of the fourth full fiscal quarter (ninety days in the case of the last
fiscal quarter in any fiscal year) following the fiscal quarter ending after the
effective date of the Registration Statement, an earning statement of the Trust
(which need not be
-9-
<PAGE> 10
audited) complying with Section 11(a) of the Act and covering a period of at
least twelve consecutive months beginning after the effective date of such
Registration Statement;
(e) To pay or cause to be paid all expenses incident to the
performance of its obligations hereunder, including the cost of all
qualifications of the Securities under state securities laws (including
reasonable fees of counsel to the Underwriters in connection with such
qualifications and in connection with legal investment surveys) and the cost of
printing this Agreement and any blue sky and legal investment memoranda.
Greenwood agrees with each of the Underwriters during the period
beginning from the date of the Terms Agreement and continuing to and including
the earlier of (i) the termination of trading restrictions on the Securities, of
which termination you agree to give Greenwood prompt notice confirmed in
writing, and (ii) the Time of Delivery, not to offer, sell, contract to sell or
otherwise dispose of any securities of Greenwood or any other affiliate thereof
or any other trust for which Greenwood or any other affiliate thereof is
depositor, which represent participation interests in Discover Card receivables,
without your prior written consent, which consent shall not be unreasonably
withheld.
6. The obligations of the several Underwriters hereunder shall be
subject, in their discretion, to the condition that all representations and
warranties and other statements of Greenwood herein are, at and as of the Time
of Delivery, true and correct, the condition that Greenwood shall have performed
all of its obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) All actions required to be taken and all filings required
to be made by Greenwood under the Act prior to the Time of Delivery for the
Securities shall have been duly taken or made; and prior to the applicable Time
of Delivery, no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no
-10-
<PAGE> 11
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the Commission's satisfaction.
(b) All corporate proceedings and related matters in
connection with the organization of Greenwood, the validity of the Pooling and
Servicing Agreement and the registration, authorization, issue, sale and
delivery of the Securities shall have been satisfactory to counsel to the
Underwriters, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this subdivision (b).
(c) Counsel to Greenwood (which for purposes of the opinions
described in clauses (i)-(iii) and the opinions as to the due authorization,
execution and delivery of the Pooling and Servicing Agreement and the due
authorization, execution, issuance and delivery of the Securities in clause (iv)
may be in-house counsel to Greenwood) shall have furnished to you their written
opinion, dated the Time of Delivery, in form and substance satisfactory to you
in your reasonable judgment, to the effect that:
(i) Greenwood is validly existing as a banking corporation in
good standing under the laws of the State of Delaware;
(ii) This Agreement and the Terms Agreement have been duly
authorized, executed and delivered on the part of Greenwood;
(iii) The compliance by Greenwood with all of the provisions
of this Agreement, the Terms Agreement and the Pooling and Servicing Agreement
will not conflict with or result in any breach which would constitute a material
default under, or, except to the extent contemplated in the Pooling and
Servicing Agreement, result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Greenwood or NOVUS,
-11-
<PAGE> 12
material to Greenwood and NOVUS (whether or not consolidated) considered as a
whole, pursuant to the terms of, any indenture, loan agreement or other
agreement or instrument for borrowed money known to such counsel to which
Greenwood or NOVUS is a party or by which Greenwood or NOVUS may be bound or to
which any of the property or assets of Greenwood or NOVUS, material to Greenwood
and NOVUS (whether or not consolidated) considered as a whole, is subject, nor
will such action result in any material violation of the provisions of the
Certificate of Incorporation or the By-Laws of Greenwood, or to the best
knowledge of such counsel, any statute or any order, rule or regulation
applicable to Greenwood of any court or any Federal, State or other regulatory
authority or other governmental body having jurisdiction over Greenwood other
than the Act, the Exchange Act, the Trust Indenture Act and the Investment
Company Act and the rules and regulations under each of such acts and other than
the securities laws of the various states or other jurisdictions which are
applicable to the issue and sale of the Securities and other state laws relating
to the perfection of security interests; and, to the best knowledge of such
counsel, no consent, approval, authorization or other order of, or filing with,
any court or any such regulatory authority or other governmental body is
required for the issue and sale of the Securities except as may be required
under the Act, the Exchange Act, the Trust Indenture Act and the Investment
Company Act and securities laws of the various states or other jurisdictions
which are applicable to the issue and sale of the Securities and except for the
filing of any financing or continuation statement required to perfect or
continue the Trust's interest in the Receivables;
(iv) The Pooling and Servicing Agreement has been duly
authorized, executed and delivered on the part of Greenwood and as to Greenwood
is a valid and binding instrument enforceable in accordance with its terms
except as the foregoing may be limited by insolvency, bankruptcy,
reorganization, moratorium or other laws relating to or affecting the
-12-
<PAGE> 13
enforcement of creditors' rights or by general equity principles; the Pooling
and Servicing Agreement is not required to be qualified under the Trust
Indenture Act; the Trust is not required to be registered under the Investment
Company Act; and the Securities have been duly authorized and (assuming their
due authentication by the Trustee) have been duly executed, issued and delivered
and constitute valid and binding obligations of the Trust in accordance with
their terms, entitled to the benefits of the Pooling and Servicing Agreement,
except as the foregoing may be limited by insolvency, bankruptcy, reorganization
or other laws relating to or affecting the enforcement of creditors' rights or
by general equity principles; and
(v) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by Greenwood prior to the Time
of Delivery (other than financial, statistical and accounting data therein as to
which such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder.
In rendering such opinion, counsel may rely to the extent they deem
appropriate upon certificates of officers or other executives of Greenwood and
their affiliates and of public officials as to factual matters and upon opinions
of other counsel. Such counsel shall also state that nothing has come to their
attention which has caused them to believe that the Registration Statement as of
its effective date or the Prospectus as of the date thereof and as of the
applicable Time of Delivery (other than financial, statistical and accounting
data therein, as to which such counsel need express no belief) contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
-13-
<PAGE> 14
(d) At the Time of Delivery, Deloitte & Touche LLP shall have
furnished to you a letter or letters, dated the respective date of delivery
thereof, in form and substance satisfactory to you;
(e) (i) Greenwood and its affiliates (whether or not
consolidated) considered as a whole, shall not have sustained, since the date of
the latest audited financial statement previously delivered to you, any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree and (ii) since the date of the
Terms Agreement there shall not have been any material change in the capital
stock accounts or long-term debt of Greenwood or any material adverse change in
the general affairs, financial position, shareholders' equity or results of
operations of Greenwood and its affiliates (whether or not consolidated)
considered as a whole, the effect of which in any such case described in clause
(i) or (ii), in your judgment renders it inadvisable to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus as amended or supplemented;
(f) Subsequent to the date of the Terms Agreement none of (i)
the United States shall have become engaged in the outbreak or escalation of
hostilities involving the United States or there has been a declaration by the
United States of a national emergency or a declaration of war, (ii) a banking
moratorium shall have been declared by either Federal or New York State
authorities, or (iii) trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established by such Exchange, any of which events, in your judgment, renders it
inadvisable to proceed with the public offering or the delivery of the
Securities;
-14-
<PAGE> 15
(g) At or prior to the Time of Delivery, the Certificates
shall be assigned the ratings by Moody's Investors Service, Inc. ("Moody's") and
by Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies Inc.
("Standard & Poor's") set forth in the Terms Agreement;
(h) Greenwood shall have furnished or caused to be furnished
to you at the Time of Delivery certificates satisfactory to you as to the
accuracy at and as of such Time of Delivery of the representations and
warranties of Greenwood herein and as to the performance by Greenwood of all its
obligations hereunder to be performed at or prior to the Time of Delivery and
Greenwood shall have also furnished you similar certificates satisfactory to you
as to the matters set forth in subdivision (a) of this Section 6.
(i) The Underwriters shall be entitled to rely on the opinions
of an outside counsel acceptable to the Underwriters as special counsel to
Greenwood as delivered to Moody's and Standard & Poor's in connection with the
rating of the Securities.
7. (a) Greenwood will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto furnished by Greenwood, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or (in the case of the Registration Statement or the Prospectus, or any
amendment or supplement thereto) necessary to make the statements therein not
misleading or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and will reimburse
each Underwriter for any legal or other expenses
-15-
<PAGE> 16
reasonably incurred by such Underwriter in connection with investigating or
defending any such action or claim; provided, however, that Greenwood shall not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to
Greenwood by any Underwriter through you expressly for use therein; and
provided, further, that Greenwood shall not be liable to any Underwriter or any
person controlling such Underwriter under the indemnity agreement in this
subdivision (a) with respect to the Preliminary Prospectus or the Prospectus, as
the case may be, to the extent that any such loss, claim, damage or liability of
such Underwriter or controlling person results solely from the fact that such
Underwriter sold Securities to a person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the Prospectus or
of the Prospectus as then amended or supplemented if Greenwood had previously
furnished copies thereof to such Underwriter.
(b) Each Underwriter will indemnify and hold harmless
Greenwood against any losses, claims, damages or liabilities to which Greenwood
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or (in the case of the Registration Statement or the
Prospectus, or any amendment or supplement thereto) necessary to make the
statements therein not misleading or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
-16-
<PAGE> 17
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement, or the Prospectus, or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to Greenwood by such Underwriter through you expressly for
use therein; and will reimburse Greenwood for any legal or other expenses
reasonably incurred by Greenwood in connection with investigating or defending
any such action or claim.
(c) Within a reasonable period after receipt by an indemnified
party under subdivision (a) or (b) above of notice of the commencement of any
action with respect to which indemnification is sought under such subdivision or
contribution may be sought under subdivision (d) below, such indemnified party
shall notify the indemnifying party in writing of the commencement thereof. In
case any such action shall be brought against any indemnified party, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under subdivision (a) or (b) above in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) (i) in such
proportion as is
-17-
<PAGE> 18
appropriate to reflect the relative benefits received by Greenwood on the one
hand and the Underwriters on the other from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
Greenwood on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by Greenwood on the one
hand and such Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by Greenwood bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth on the cover
page of the Prospectus Supplement. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by Greenwood on the one hand and the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission of
Greenwood on the one hand and the Underwriters, directly or through you, on the
other hand. With respect to any Underwriter, such relative fault shall also be
determined by reference to the extent (if any) to which such losses, claims,
damages or liabilities (or actions in respect thereof) with respect to any
Preliminary Prospectus result from the fact that such Underwriter sold the
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Prospectus or of the Prospectus
as then amended or supplemented if Greenwood had previously furnished copies
thereof to such Underwriter. Greenwood and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this subdivision (d) were
determined by per capita
-18-
<PAGE> 19
allocation among the indemnifying parties (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
subdivision (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subdivision (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Underwriters in this subdivision (d)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of Greenwood under this Section 7 shall be
in addition to any liability which Greenwood may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 7 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of Greenwood and to each
person, if any, who controls Greenwood within the meaning of the Act.
8. (a) If any Underwriter shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder and under the
Terms Agreement, you may
-19-
<PAGE> 20
in your discretion arrange for yourselves or another party or other parties to
purchase such Securities on the terms contained herein. If within thirty-six
hours after such default by any Underwriter you do not arrange for the purchase
of such Securities, then Greenwood shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties to
purchase such Securities on such terms. In the event that, within the respective
prescribed periods, you notify Greenwood that you have so arranged for the
purchase of such Securities, or Greenwood notifies you that it has so arranged
for the purchase of such Securities, you or Greenwood shall have the right to
postpone the Time of Delivery for such Securities for a period of not more than
seven days, in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus as amended or supplemented, or in
any other documents or arrangements, and Greenwood agrees to file promptly any
amendments or supplements to the Registration Statement or the Prospectus which
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters by you
and Greenwood as provided in subdivision (a) above, the aggregate principal
amount of such Securities which remains unpurchased does not exceed one-eleventh
of the aggregate principal amount of all the Securities, then Greenwood shall
have the right to require each non-defaulting Underwriter to purchase the
principal amount of Securities which such Underwriter agreed to purchase
hereunder and under the Terms Agreement and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
principal amount of the Securities which such Underwriter agreed to purchase
hereunder and under the Terms Agreement) of the
-20-
<PAGE> 21
Securities of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters by you
and Greenwood as provided in subdivision (a) above, the aggregate principal
amount of Securities which remains unpurchased exceeds one-eleventh of the
aggregate principal amount of all the Securities, as referred to in subdivision
(b) above, or if Greenwood shall not exercise the right described in subdivision
(b) above to require non-defaulting Underwriters to purchase Securities of a
defaulting Underwriter or Underwriters, then the Terms Agreement relating to the
Securities shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or Greenwood, except for the expenses to be borne by
Greenwood as provided in Section 5(e) hereof and the indemnity and contribution
agreements in Section 7 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
9. The respective indemnities, agreements, representations,
warranties and other statements of Greenwood and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or
Greenwood or any officer or director or controlling person of Greenwood, and
shall survive delivery of and payment for the Securities. Anything herein to the
contrary notwithstanding, the indemnity agreement of Greenwood in subdivisions
(a) and (e) of Section 7 hereof, the representations and warranties in
subdivisions (b) and (c) of Section 1 hereof and any representation or warranty
as to the accuracy of the Registration Statement or the Prospectus as amended or
supplemented contained in any certificate furnished by Greenwood pursuant to
subdivision (i) of Section 6
-21-
<PAGE> 22
hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by Greenwood of expenses incurred or paid in the
successful defense of any action, suit or proceeding) arising under the Act,
shall not extend to the extent of any interest therein of an Underwriter or a
controlling person of an Underwriter if a director, officer or controlling
person of Greenwood when the Registration Statement becomes effective or a
person who, with his consent, is named in the Registration Statement as being
about to become a director of Greenwood, is a controlling person of such
Underwriter, except in each case to the extent that an interest of such
character shall have been determined by a court of appropriate jurisdiction as
not against public policy as expressed in the Act. Unless in the opinion of
counsel for Greenwood the matter has been settled by controlling precedent,
Greenwood will, if a claim for such indemnification is asserted, submit to a
court of appropriate jurisdiction the question whether such interest is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
10. If the Terms Agreement shall be terminated pursuant to
Section 8 hereof, Greenwood shall not then be under any liability to any
Underwriter with respect to the Securities subject to such Terms Agreement
except as provided in Section 5(e) and Section 7 hereof; but, if for any other
reason the Securities are not delivered by or on behalf of Greenwood as provided
herein, Greenwood will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities, but
Greenwood shall not then be under any further liability to any Underwriter with
respect to the Securities except as provided in Section 5(e) and Section 7
hereof.
11. In all dealings hereunder, you shall act on behalf of each
of the Underwriters and the parties hereto shall be entitled to act and rely
upon any statement, request,
-22-
<PAGE> 23
notice or agreement on behalf of any Underwriter made or given by you, or by
Morgan Stanley & Co. Incorporated on behalf of you. All statements, requests,
notices and agreements hereunder shall be in writing or by telegram if promptly
confirmed in writing and if to the Underwriters shall be sufficient in all
respects, if delivered or sent by registered mail to you jointly in care of
Morgan Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036,
Attention: Asset Finance Group and if to Greenwood shall be sufficient in all
respects if delivered or sent by registered mail to Greenwood at 12 Read's Way,
New Castle, Delaware 19720, Attention: President.
12. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, Greenwood and, to the extent provided in Section 7
and Section 9 hereof, the officers and directors of Greenwood and each person
who controls Greenwood or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Securities from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.
13. Time shall be of the essence of this Agreement.
14. This Agreement shall be construed in accordance with the laws
of the State of New York. "Business day" as used herein shall mean any day when
the Commission's office in Washington, D.C. is normally open for business.
15. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such respective counterparts shall together constitute
one and the same instrument.
If the foregoing is in accordance with your under-standing, please sign
and return two counterparts hereof and upon the acceptance hereof by you, on
behalf of each of the
-23-
<PAGE> 24
Underwriters, this letter and such acceptance hereof shall constitute a binding
agreement between each of the Underwriters and Greenwood.
Very truly yours,
GREENWOOD TRUST COMPANY
By:
--------------------------------
Accepted as of the date hereof:
MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------
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<PAGE> 25
DISCOVER CARD MASTER TRUST I
CREDIT CARD PASS-THROUGH CERTIFICATES
TERMS AGREEMENT
Dated: ________, 200_
To: Greenwood Trust Company, as Seller under the Pooling and Servicing
Agreement, as amended, dated as of October 1, 1993.
Re: Underwriting Agreement dated ___________ __, 200_
Title: Discover Card Master Trust I, Series 200_-__, Credit Card Pass-Through
Certificates, Class A and Class B.
Initial Principal Amount of Certificates: $_________________
Series and Class Designation Schedule: Discover Card Master Trust I, Series
200_-__ $___________________ Floating Rate Class A Credit Card Pass-Through
Certificates.
Discover Card Master Trust I, Series 200_-__ $__________ Floating Rate Class B
Credit Card Pass-Through Certificates.
Series Cut-Off Date: ___________, 200_
Certificate Rating: Moody's Investors Standard & Poor's
Service, Inc. Ratings Services
Class A --- ---
Class B --- ---
Aggregate outstanding balance of Principal Receivables as of ____________, 200_:
$________________________.
Date of Series Supplement: __________, 200_.
Certificate Rate: Class A: _________% per annum; and Class B: _________% per
annum.
Terms of Sale: The purchase price for the Certificates to the Underwriters will
be ____% of the aggregate principal amount of the Class A Certificates and ___%
of the aggregate principal amount of the Class B Certificates as of _________,
200_. The Underwriters will offer the Certificates to the public at a price
equal to ____% of the aggregate principal amount of the Class A Certificates and
____% of the aggregate principal amount of the Class B Certificates.
<PAGE> 26
Time of Delivery: 9:00 A.M., Chicago, Illinois Time, on _________, 200_, or at
such other time as may be agreed upon in writing.
<PAGE> 27
Notwithstanding anything in the Agreement or in this Terms
Agreement to the contrary, the Agreement and this Terms Agreement constitute the
entire agreement and understanding among the parties hereto with respect to the
purchase and sale of the Series 200_-_ Certificates. This Terms Agreement may be
amended only by written agreement of the parties hereto.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
As Representative of the
Underwriters named in
Schedule I hereto
By:
--------------------------------
Accepted:
GREENWOOD TRUST COMPANY
By:
------------------------------
<PAGE> 28
SCHEDULE I
UNDERWRITERS
$___________ Floating Rate Class A Credit Card Pass-Through Certificates, Series
200_-__
<TABLE>
<CAPTION>
Principal Amount
----------------
<S> <C>
Morgan Stanley & Co. Incorporated $____________
$____________
$____________
$____________
$____________
Total $____________
===== =============
</TABLE>
$_________ Floating Rate Class B Credit Card Pass-Through Certificates, Series
200_-__
<TABLE>
<CAPTION>
Principal Amount
----------------
<S> <C>
Morgan Stanley & Co. Incorporated $____________
</TABLE>
<PAGE> 1
Exhibit 4.6
GREENWOOD TRUST COMPANY
Master Servicer, Servicer and Seller
and
U.S. BANK NATIONAL ASSOCIATION
Trustee
on behalf of the Certificateholders
________________
SERIES SUPPLEMENT
Dated as of , 200
to
POOLING AND SERVICING AGREEMENT
Dated as of October 1, 1993
________________
$ Class A Certificates
$ Class B Certificates
DISCOVER CARD MASTER TRUST I
SERIES 200 - - CERTIFICATES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SERIES TERM SHEET.......................................................................................................1
ANNEX...................................................................................................................1
SECTION 1. Definitions................................................................................1
SECTION 2. Subordination.............................................................................25
SECTION 3. Representations and Warranties of the Sellers.............................................26
SECTION 4. Representations and Warranties of Greenwood as Master Servicer and
Servicer................................................................................26
SECTION 5. Representations and Warranties of Other Servicers.........................................26
SECTION 6. Representations and Warranties of the Trustee.............................................27
SECTION 7. Authentication of Certificates............................................................27
SECTION 8. Establishment and Administration of Investor Accounts and the Credit
Enhancement Account.....................................................................27
SECTION 9. Allocations of Collections................................................................31
SECTION 10. Payments..................................................................................43
SECTION 11. Credit Enhancement........................................................................46
SECTION 12. Alternative Credit Support Election.......................................................48
SECTION 13. Calculation of Investor Losses............................................................49
SECTION 14. Servicing Compensation....................................................................50
SECTION 15. Class Interest Rate Caps..................................................................50
SECTION 16. Class Interest Rate Swaps.................................................................52
SECTION 17. Investor Certificateholders' Monthly Statement............................................52
SECTION 18. Master Servicer's Monthly Certificate.....................................................52
SECTION 19. Notices...................................................................................52
SECTION 20. Additional Amortization Events............................................................52
SECTION 21. Early Accumulation Events; Additional Amortization Events.................................53
SECTION 22. Purchase of Investor Certificates and Series Termination..................................54
SECTION 23. Variable Accumulation Period..............................................................54
SECTION 24. Optional Accumulation Period Commencement.................................................55
SECTION 25. Series Yield Factor.......................................................................55
SECTION 26. Ratification of Pooling and Servicing Agreement...........................................56
SECTION 27. Counterparts..............................................................................56
SECTION 28. Governing Law.............................................................................56
</TABLE>
<PAGE> 3
EXHIBITS
EXHIBIT A:........ Form of Investors Certificates
EXHIBIT B:........ Form of Certificateholders' Monthly Statement
EXHIBIT C:........ Form of Master Servicer's Monthly Certificate
2
<PAGE> 4
DISCOVER CARD MASTER TRUST I
SERIES 200 - CERTIFICATES
This Series of Master Trust Certificates is established pursuant to Section
6.06 of that certain Pooling and Servicing Agreement, dated as of October 1,
1993, as amended, by and between GREENWOOD TRUST COMPANY, a Delaware banking
corporation ("Greenwood"), as Master Servicer, Servicer and Seller and U.S. BANK
NATIONAL ASSOCIATION (formerly First Bank National Association, successor
trustee to Bank of America Illinois, formerly Continental Bank, National
Association) (the "Trustee"), as Trustee (the "Pooling and Servicing
Agreement"). This SERIES TERM SHEET and the ANNEX attached hereto, by and among
the Master Servicer, the Servicers, the Sellers and the Trustee, constitute the
SERIES SUPPLEMENT (the "Series Supplement"). The Pooling and Servicing Agreement
and this Series Supplement together establish the Series of Master Trust
Certificates to be known as the DISCOVER CARD MASTER TRUST I, SERIES 200 -
CERTIFICATES.
SERIES TERM SHEET
<TABLE>
<S> <C>
Date of Series Term Sheet , 200 .
Group One.
Series Initial Investor Interest $
Class Initial Investor Interest of each Class of Investor Certificates Class A - $ .
Class B - $ .
Class A Expected Final Payment Date The Distribution Date in 200 .
Class B Expected Final Payment Date The Distribution Date in 200 .
Type of Structure Bullet Maturity.
Certificate Rates Class A - LIBOR plus % per annum, calculated on the
basis of the actual number of days elapsed and a
360-day year.
Class B - LIBOR plus % per annum, calculated on the
basis of the actual number of days elapsed and a
360-day year.
Monthly Amortization Rate Not applicable.
Prepayment Calculation Table Not applicable.
Prepayment Determination Date Not applicable.
Class Cap Rate Not applicable.
Class Maximum Rate Not applicable.
</TABLE>
1
<PAGE> 5
<TABLE>
<S> <C>
Class Interest Rate Swap Class A - Not applicable.
Class B - Not applicable.
Interest Rate Swap Counterparty Not applicable.
LIBOR Determination Date The second LIBOR Business Day immediately preceding
the commencement of an Interest Accrual Period.
Series Yield Factor Initially zero, but may be increased pursuant to
Section 25.
Series Cut-Off Date , 200 .
Series Closing Date , 200 .
Date from which Interest for First Interest Payment Date Shall Accrue Series Closing Date.
Distribution Dates , 200 and the 15th day of each
calendar month thereafter (or, if such day is not
a Business Day, the next succeeding Business Day).
Interest Payment Dates The 15th day of each month (or, if such day is not
a Business Day, the next succeeding Business Day),
commencing in 200.
Statement Dates Each Distribution Date, commencing in 200.
Principal Payment Date Not applicable.
Interest Calculation Dates Not applicable.
Accumulation Commencement Date Not applicable.
Accumulation Period Unless an Amortization Event shall have occurred
prior thereto, the period commencing on the
Principal Commencement Date and ending on the
earliest to occur of (x) the payment in full of
the Series Invested Amount, (y) the Amortization
Commencement Date, and (z) the Series Termination
Date.
Accumulation Amount (a) Through the Class A Expected Final Payment
Date, the greater of (i) $ and (ii) if the Master
Servicer elects to delay commencement of the
Accumulation Period in accordance with Section 23,
the Class A Initial
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
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, $ .
Principal Commencement Date The first day of the Due Period related to the
200 Distribution Date (or such later
as the Master Servicer may elect in accordance with
Distribution Date Section 23).
Revolving Period From the Series Cut-Off Date to but excluding the
earlier to occur of (i) the Principal Commencement
Date, and (ii) the Amortization Commencement Date.
Controlled Liquidation Period Not applicable.
Early Accumulation Period Not applicable.
Type of Credit Enhancement Cash collateral account.
Stated Shared Credit Enhancement Amount There shall be no Shared Credit Enhancement.
Stated Class A Credit Enhancement Amount There shall be no Class A Cash Collateral Credit
Enhancement.
Stated Class B Credit Enhancement Amount $ .
Credit Enhancement Provider Collectively, the one or more lenders making a loan
in order to provide the initial funds on deposit in
the Credit Enhancement Account, or any successor
provider of the Credit Enhancement.
Maximum Shared Credit Enhancement Amount There shall be no Shared Credit Enhancement.
Maximum Class A Credit Enhancement Amount There shall be no Class A Cash Collateral Credit
Enhancement.
Maximum Class B Credit Enhancement Amount On any Distribution Date (a) prior to the making of
an Effective Alternative Credit Support Election,
the greater of (i) $ and (ii) (x) if a Supplemental
Credit Enhancement Event has not occurred, an
amount equal to % of the Series Investor Interest
as of the last day of the related Due Period, or (y)
if a Supplemental Credit Enhancement Event has
occurred, an amount equal to % of the Series
Investor Interest as of the last day of the
related Due Period or (b) subsequent to the making
of an
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Effective Alternative Credit Support Election,
the greater of (i) $ and (ii) an amount equal to %
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
established hereby occurs, the Maximum Class B
Credit Enhancement Amount for each Distribution Date
thereafter shall 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 shall be the Maximum Class B Credit
Enhancement Amount as of the date of such Credit
Enhancement Drawing.
Total Maximum Credit Enhancement Amount On any Distribution Date, the Maximum Class B Credit
Enhancement Amount for such Distribution Date.
Additional Credit Support Amount The lesser of (x)(i) $ prior to the
occurrence of a Supplemental Credit Enhancement
Event or (ii) $ following the occurrence of a
Supplemental Credit Enhancement Event and (y) the
difference between the Maximum Class B Credit
Enhancement Amount (after giving effect to an
Alternative Credit Support Election) and the
Available Class B Credit Enhancement Amount
(immediately before giving effect to the Alternative
Credit Support Election).
Supplemental Credit Enhancement Amount The lesser of (x)(i) $ prior to the occurrence of an
Alternative Credit Support Election or (ii)
zero following the occurrence of an Alternative
Credit Support Election and (y) the difference
between the Maximum Class B Credit Enhancement
Amount (after giving effect to the occurrence of a
Supplemental Credit Enhancement Event)and the
Available Class B Credit Enhancement Amount
(immediately before giving effect to the occurrence
of a Supplemental Credit Enhancement Event).
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
Initial Subordinated Amount $ .
Additional Subordinated Amount $ prior to the occurrence of a Supplemental
Credit Enhancement Event and $ following the
occurrence of a Supplemental Credit Enhancement
Event.
Supplemental Subordinated Amount $ prior to the effectiveness of an Alternative
Credit Support Election and zero following the
effectiveness of an Alternative Credit Support
Election.
Series Buffer Amount Zero.
Group Buffer Amount Zero.
Investor Servicing Fee Percentage 2.0% per annum calculated on the basis of a 360-day
year of twelve 30-day months.
Supplemental Servicing Fee Percentage Zero.
Amount of Additional Funds Initially, zero.
Eligible for Reallocations to and from Other Series in Group Yes.
Series Termination Date The first Business Day following the Distribution
Date in .
Estimated Investment Shortfall 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 On any date of determination, the
Portfolio Yield for the immediately preceding Due
Period less 2.00%.
Classes, if any, subject to Regulation S restrictions Not applicable.
Classes, if any, subject to ERISA restrictions Class B.
Bearer Certificates Not applicable.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
Registered Certificates Class A and Class B Certificates.
Class A Certificate Each certificate executed by the Sellers and
authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-1.
Class B Certificate Each certificate executed by the Sellers and
authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-2.
Principal Paying Agent Class A - Not applicable.
Class B - Not applicable.
Paying Agents Class A and Class B - the Corporate Trust Office of
the Trustee.
</TABLE>
6
<PAGE> 10
IN WITNESS WHEREOF, the Sellers, the Master Servicer, the Servicers and
the Trustee have caused this Series Supplement to be duly executed by their
respective officers thereunto duly authorized as of the date and year first
above written.
GREENWOOD TRUST COMPANY,
as Seller, Master Servicer and Servicer
-------------------------------------------
[Name]
[Title]
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
-------------------------------------------
[Name]
[Title]
<PAGE> 11
ANNEX
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and for the benefit of
the Certificateholders:
SECTION 1. Definitions
(a)......Capitalized terms not otherwise defined in this Series Supplement
(including the Series Term Sheet) shall have the meanings ascribed to them in
the Pooling and Servicing Agreement. Capitalized terms that refer to a Series or
a Class refer to the Series established hereby or a Class of the Series
established hereby, as applicable, unless the context otherwise clearly
requires.
(b)......The following terms have the definitions set forth below with
respect to the Series established hereby, unless the context otherwise clearly
requires:
"Accumulation Amount," if applicable, shall have the meaning set forth in
the Series Term Sheet; provided, however, that such amount may be adjusted
pursuant to Section 23 or 24.
"Accumulation Commencement Date," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Accumulation Period," if applicable, shall have the meaning set forth in
the Series Term Sheet.
"Additional Credit Support Amount" shall have the meaning set forth in the
Series Term Sheet.
"Additional Subordinated Amount" shall have the meaning set forth in the
Series Term Sheet.
"Alternative Credit Support Election" shall mean an election made by the
Sellers pursuant to Section 12.
"Amortization Commencement Date" shall mean the date on which an
Amortization Event is deemed to occur pursuant to Section 20 hereof.
"Amortization Event" shall mean any event specified in Section 9.01 of the
Pooling and Servicing Agreement or in Section 20 hereof.
"Amortization Period" shall mean the period from, and including, the
Amortization Commencement Date to, and including, the earlier of (i) the date of
the final distribution to Investor Certificateholders of the Series established
hereby and (ii) the Series Termination Date. The first Distribution Date of the
Amortization Period shall be the Distribution Date in the calendar month
following the Amortization Commencement Date.
<PAGE> 12
"Available Class A Credit Enhancement Amount," if applicable, shall have
the meaning set forth in the Series Term Sheet.
"Available Class B Credit Enhancement Amount" shall mean, with respect to
the first Distribution Date, the Stated Class B Credit Enhancement Amount, and,
thereafter, shall mean the amount available to be drawn under the Credit
Enhancement with respect to the Available Class B Credit Enhancement Amount from
time to time, which on any date of determination shall 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, 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 Section 9 plus, following an Effective
Alternative Credit Support Election, the Additional Credit Support Amount and,
plus, following a Supplemental Credit Enhancement Event, the Supplemental Credit
Enhancement Amount; provided, however, that from and after the Fully Funded
Date, if any, the Available Class B Credit Enhancement Amount shall equal zero.
"Available Shared Credit Enhancement Amount," if applicable, shall mean,
with respect to the first Distribution Date, the Stated Shared Credit
Enhancement Amount, and, thereafter, shall mean the amount available to be drawn
under the Credit Enhancement with respect to the Available Shared Credit
Enhancement Amount from time to time, which on any date of determination shall
be equal to the Available Shared Credit Enhancement Amount for the immediately
preceding Distribution Date minus the amount of all Credit Enhancement Drawings
with respect to the Available Shared Credit Enhancement Amount on or since such
immediately preceding Distribution Date, and plus the amounts of all payments
made to the Trustee as administrator of the Credit Enhancement with respect to
the Available Shared Credit Enhancement Amount pursuant to Section 9.
"Available Subordinated Amount," if there is a Subordinate Class with
respect to Class A, shall mean, on a Distribution Date, the sum of
(a) (i) with respect to the first Distribution Date, the Initial
Subordinated Amount or (ii) with respect to any other Distribution Date,
the Available Subordinated Amount after giving effect to all adjustments on
the prior Distribution Date; and
(b) the amount of Series Excess Servicing;
as such amount may be (x) reduced pursuant to the provisions of Section 9 to
take into account (i) the amount of Class A and Class B Excess Servicing used to
reimburse the Class A Cumulative Investor Charged-Off Amount, (ii) the amount of
Class B Excess Servicing used to reduce the Class A Required Amount Shortfall,
(iii) the amount of the Class B Subordinated Payment and (iv) the amount of any
reduction in the Class B Investor Interest resulting from the reimbursement of
the Class A Cumulative Investor Charged-Off Amount, in each case for such
Distribution Date, and (y) increased pursuant to the provisions of Section 9 to
take into account the application of amounts on deposit in the Group Finance
Charge Collections Reallocation Account (i) to reduce the Class B Required
Amount Shortfall, (ii) to reduce the Class B Cumulative Investor Charged-
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<PAGE> 13
Off Amount and (iii) to increase the Available Class B Credit Enhancement
Amount, in each case for such Distribution Date; provided, however, that from
and after the Fully Funded Date, if any, the Available Subordinated Amount will
equal zero.
Upon the occurrence of a Supplemental Credit Enhancement Event, the Available
Subordinated Amount will be increased by the Supplemental Subordinated Amount.
In addition, on the first Distribution Date following an Effective Alternative
Credit Support Election, the Available Subordinated Amount shall be increased by
the Additional Subordinated Amount. In no event, however, shall the Available
Subordinated Amount exceed (i) through the last Distribution Date preceding an
Effective Alternative Credit Support Election, the Initial Subordinated Amount
plus the Supplemental Subordinated Amount and (ii) thereafter, the sum of the
Initial Subordinated Amount, the Supplemental Subordinated Amount and the
Additional Subordinated Amount.
"Calculation Period," if applicable, shall have the meaning specified in
the applicable interest rate cap agreement.
"Cedel" shall mean Clearstream Banking.
"Certificate Interest" shall mean, for any Class for any Interest Payment
Date, the product of (a) the Class Invested Amount for such Class for such
Interest Payment Date and (b) a fraction the numerator of which is (1) with
respect to each Class that has no Subclasses, the Certificate Rate for such
Class or (2) with respect to each Class that has two or more Subclasses, the
Class Weighted Average Certificate Rate, and the denominator of which is (x) if
the relevant Certificate Rate is to be calculated on the basis of the actual
number of days elapsed and a 360-day year, 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 or (y) if the
relevant Certificate Rate is to be calculated on the basis of a 360-day year of
twelve 30-day months, twelve divided by the number of Distribution Dates from
and including the preceding Interest Payment Date to but excluding the current
Interest Payment Date (or, in the case of the first Interest Payment Date, 360
divided by the number of days from and including the Series Closing Date to but
excluding the 15th day of the month in which current Interest Payment Date
occurs, assuming 30-day months).
"Certificate Principal" shall mean, with respect to each Class, the
principal payable in respect of such Class of Investor Certificates.
"Certificate Rate," with respect to any Class or Subclass, shall mean the
certificate rate set forth in the Series Term Sheet with respect to such Class
or Subclass, as such rate may be adjusted as of the beginning of each Interest
Accrual Period, if applicable; provided, however, that the Certificate Rate for
any Class or Subclass that does not have a fixed Certificate Rate shall not
exceed the Class Cap Rate or Class Maximum Rate, as applicable, for such Class
or Subclass; and provided, further, that any interest on the Investor
Certificates (including any interest accrued with respect to any Class
Deficiency Amount) shall be payable or distributed to the Investor
Certificateholders only to the extent permitted by applicable law.
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<PAGE> 14
"Class A Cash Collateral Credit Enhancement" shall mean Credit Enhancement
available in the Credit Enhancement Account for the benefit of the Class A
Investor Certificates.
"Class Additional Funds," if applicable, shall mean, with respect to any
Class for any Distribution Date, an amount equal to the product of (i) a
fraction the numerator of which is the Class Investor Interest and the
denominator of which is the sum of the Class Investor Interests for each Class
of the Series established hereby and (ii) the amount of Series Additional
Investor Funds, in each case for such Distribution Date.
"Class Alternative Deficiency Amount" shall mean, with respect to each
Class, 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" shall mean, if there is a Subordinated
Class with respect to Class A, 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" shall mean, if there is a
Subordinate Class with respect to Class A, with respect to any Distribution
Date, an amount equal to the sum of Class B Finance Charge Collections, Class B
Yield Collections, if any, Class B Investment Income, if any, for the related
Due Period and Class B Additional Funds for such Distribution Date (less Class B
Excess Servicing).
"Class Cap Rate," if applicable, shall mean, with respect to a Class or
Subclass that does not have a fixed or maximum Certificate Rate, the rate that
is specified as such in the Series Term Sheet and in the Class Interest Rate Cap
with respect to such Class or Subclass.
"Class Charge-Off Reimbursement Amount" shall mean, with respect to any
Class with respect to any Distribution Date, the total amount by which the Class
Cumulative Investor Charged-Off Amount for such Class is reduced on such
Distribution Date pursuant to Section 9.
"Class Cumulative Investor Charged-Off Amount" with respect to each Class
for any Distribution Date, shall mean the sum of the Class Investor Charged-Off
Amounts for such Class for all preceding Due Periods that have not been
reimbursed pursuant to Section 9 prior to such Distribution Date, plus the Class
Investor Charged-Off Amount for such Class for the Due Period related to such
Distribution Date, as adjusted pursuant to Section 9 on such Distribution Date.
The Class Cumulative Investor Charged-Off Amount with respect to each Class
initially shall be zero.
"Class Deficiency Amount" shall mean, with respect to each Class, on any
Payment Date, the amount, if any, by which (a) the sum of (i) Certificate
Interest for such Class accrued since the immediately preceding Payment Date,
(ii) if, since the immediately preceding Payment Date and prior to the current
Payment 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 Investor Losses for such Class equalled zero and (B)
the Reimbursed Loss Interest Gross-up Amount for each previous Distribution Date
since the last Distribution Date on which the
4
<PAGE> 15
aggregate amount of unreimbursed Investor Losses for such Class equalled zero,
(iii) the Class Deficiency Amount on the immediately preceding Payment Date, and
(iv) the Class Deficiency Amount on the immediately preceding Payment Date
multiplied by the product of (A) a fraction the numerator of which is the
weighted average of the Certificate Rates or of the Class Weighted Average
Certificate Rates, as applicable, for such Class for the relevant Due Periods
and the denominator of which is (x) if the relevant Certificate Rate is to be
calculated on the basis of the actual number of days elapsed and a 360-day year,
360 divided by the actual number of days from and including the immediately
preceding Distribution Date to but excluding the current Distribution Date or
(y) if the relevant Certificate Rate is to be calculated on the basis of a
360-day year of twelve 30-day months, twelve and (B) the number of Distribution
Dates from and including the preceding Payment Date to but excluding the current
Payment Date exceeds (b) the amount deposited since the immediately preceding
Payment Date into the Series Interest Funding Account pursuant to Section
10(a)(2)(A).
"Class Excess Servicing" shall mean, with respect to each Class, on any
Distribution Date, the positive difference, if any, between (i) the sum of Class
Finance Charge Collections for the related Due Period, Class Yield Collections
for the related Due Period, if any, Class Investment Income for the related Due
Period, if any, and Class Additional Funds for such Distribution Date, if any,
and (ii) the Class Required Amount.
"Class Expected Final Payment Date" with respect to each Class, if
applicable, shall mean the date designated as such in the Series Term Sheet.
"Class Final Maturity Date" with respect to each Class, if applicable,
shall mean the date designated as such in the Series Term Sheet.
"Class Finance Charge Collections" shall mean, with respect to any Class,
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 shall 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
on behalf of the Holder of the Seller Certificate 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 shall not, with respect to any such day, Distribution Date or
Trust Distribution Date during the Accumulation Period or the Early 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 or the
Early 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.
5
<PAGE> 16
"Class Initial Investor Interest" shall mean, with respect to each Class,
the aggregate face amount of Investor Certificates of such Class as specified in
the Series Term Sheet.
"Class Interest Rate Cap," if applicable, shall mean, with respect to a
Class or Subclass that does not have a fixed or maximum Certificate Rate, the
interest rate cap agreement or other interest rate protection for the benefit of
the Investor Certificateholders of such Class or Subclass, dated on or before
the Series Closing Date, between the Trustee, acting on behalf of the Trust, and
the Interest Rate Cap Provider, or any Replacement Interest Rate Cap or
Qualified Substitute Cap Arrangement.
"Class Interest Rate Cap Payment" shall mean, with respect to a Class or
Subclass that does not have a fixed or maximum Certificate Rate, with respect to
any Interest Payment Date, any payment required to be made on such Interest
Payment Date by the Interest Rate Cap Provider with respect to the Class
Interest Rate Cap for such Class or Subclass.
"Class Interest Rate Swap," if applicable, shall mean, with respect to a
Class or Subclass, the interest rate swap agreement or other interest rate
protection agreement with respect to any Class or Subclass, dated on the Series
Closing Date, between the Trust and the Swap Counterparty and any replacement or
successor interest rate swap agreement or interest rate protection agreement.
"Class Invested Amount" shall mean, with respect to any Class for any
Distribution Date, an amount equal to the Class Initial Investor Interest minus
the sum of (a)(i) with respect to a Class that is subject to a Class Currency
Swap, the aggregate amount of payments of Certificate Principal (in Dollars)
deposited into the Currency Swap Dollar Escrow Account for payment to the
Currency Swap Counterparty for the benefit of such Class, or, in the event of a
Currency Swap Termination, converted into Foreign Currency by the Trustee at the
then prevailing spot exchange rate in New York for payment to the Investor
Certificateholders of such Class or (ii) with respect to a Class that is not
subject to a Class Currency Swap, the aggregate amount of payments of
Certificate Principal paid to such Class of Investor Certificateholders, in each
case prior to such Distribution Date, (b) the aggregate amount of Investor
Losses of such Class not reimbursed prior to such Distribution Date and (c) 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" shall 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 or the Early Accumulation
Period, if applicable, shall mean an amount equal to the positive difference, if
any, between (i) one-twelfth of the product of (a) (x) with respect to each
Class that has no Subclasses, the Certificate Rate, or (y) with respect to each
Class that has two or more Subclasses, the Class Weighted Average Certificate
Rate, in each case for the related Due Period, 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.
6
<PAGE> 17
"Class Investor Charged-Off Amount" shall mean, with respect to each Class
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 Charged-Off Amount and (ii) if there is a Subordinate Class
with respect to Class A, with respect to Class B only, 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 for the related
Due Period 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 pursuant to Section 9.
"Class Investor Interest" shall mean, with respect to any Class for any
Distribution Date, an amount equal to the Class Invested Amount for such Class
for such Distribution Date minus, if applicable, the aggregate amount on deposit
in the Series Principal Funding Account for the benefit of such Class in respect
of Principal Collections.
"Class Maximum Rate," if applicable, shall have the meaning set forth in
the Series Term Sheet with respect to any Class or Subclass.
"Class Modified Required Amount" with respect to any Class on any
Distribution Date, shall mean the Class Required Amount for such Distribution
Date minus the sum of all accrued but unpaid Class Monthly Servicing Fees.
"Class Monthly Deficiency Amount" with respect to any Class on any
Distribution Date, shall have the meaning set forth in Section 10(a)(2)(A). The
Class Monthly Deficiency Amount for each Class initially shall be zero.
"Class Monthly Servicing Fee" with respect to any Class for any
Distribution Date, shall mean an amount equal to the product of (x) a fraction
the numerator of which shall be the Class Investor Interest and the denominator
of which shall be the Series Investor Interest, in each case on the first day of
the related Due Period and (y) the amount of the Investor Servicing Fee for the
related Due Period.
"Class Percentage" shall mean, with respect to any Class with respect to
any Distribution Date or any Trust Distribution Date, as applicable:
(a) when used with respect to the Charged-Off Amount, the percentage
equivalent of a fraction the numerator of which shall be the amount of the
Class Investor Interest and the denominator of which shall be the greater
of (i) the amount of Principal Receivables in the Trust and (ii) the
Aggregate Investor Interest, in each case on the first day of the related
Due Period; or
(b) 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 shall be the amount of the Class
Investor Interest on the first day of the related Due Period and the
denominator of which shall be 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 Principal Collections for each Series
then
7
<PAGE> 18
outstanding (including the Series established hereby) as of such
Distribution Date or Trust Distribution Date, as applicable; or
(c) 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 shall 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 shall be
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
Principal Collections for each Series then outstanding (including the
Series established hereby) as of such Distribution Date or Trust
Distribution Date, as applicable; provided, however, that from and after
the Fully Funded Date, if any, the Class Percentage with respect to
Principal Collections will equal zero; or
(d) when used with respect to Finance Charge Collections during the
Revolving Period and the Accumulation Period or the Controlled Liquidation
Period, as applicable, and provided that an Effective Alternative Credit
Support Election has been made, during the Early Accumulation Period or the
Amortization Period, the percentage equivalent of a fraction the numerator
of which shall be the amount of the Class Investor Interest on the first
day of the related Due Period and the denominator of which shall be 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 Distribution Date or Trust
Distribution Date, as applicable; provided, however, that from and after
the Fully Funded Date, if any, the Class Percentage with respect to Finance
Charge Collections will equal zero; or
(e) when used with respect to Finance Charge Collections during the
Early Accumulation Period or 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 shall be the
amount of the Class Investor Interest on the last day of the Due Period
prior to the occurrence of an Early Accumulation Event or an Amortization
Event, and the denominator of which shall be 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 Distribution Date or Trust Distribution
Date, as applicable; provided, however, that from and after the Fully
Funded Date, if any, the Class Percentage with respect to Finance Charge
Collections will equal zero.
"Class Principal Collections" shall mean, with respect to any Class with
respect to any day or any Distribution Date or Trust Distribution Date, as
applicable, an amount equal to the
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<PAGE> 19
product of (x) the Class Percentage with respect to Principal Collections for
the related Distribution Date and (y) the amount of Principal Collections for
such day or for the related Due Period, as applicable.
"Class Required Amount" with respect to any Class on any Distribution Date,
shall mean the sum of (i) the product of (a) the Class Invested Amount with
respect to such Class for such Distribution Date and (b) a fraction, the
numerator of which is the Certificate Rate for such Class, and the denominator
of which is (x) if the relevant Certificate Rate is to be calculated on the
basis of the actual number of days elapsed and a 360-day year, (A) if each
Interest Payment Date is also a Distribution Date, 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 or (B) if each
Interest Payment Date is not also a Distribution Date, 360 divided by the actual
number of days from and including the immediately preceding Interest Calculation
Date (or in the case of the first Distribution Date, from and including the
Series Closing Date) to but excluding the Interest Calculation Date following
the current Distribution Date or (y) if the relevant Certificate Rate is to be
calculated on the basis of a 360-day year of twelve 30-day months, twelve (or in
the case of the first Distribution Date, 360 divided by the number of days from
and including the Series Closing Date to but excluding the current Distribution
Date (if each Interest Payment Date is also a Distribution Date) or the Interest
Calculation Date following the current Distribution Date (if each Interest
Payment Date is not also a Distribution Date), assuming each month has 30 days),
(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
weighted average of the Certificate Rates or of the Class Weighted Average
Certificate Rates, as applicable, for such Class for each Due Period subsequent
to the immediately preceding Payment Date plus 2.00% per annum and the
denominator of which is (x) if the relevant Certificate Rate is to be calculated
on the basis of the actual number of days elapsed and a 360-day year, 360
divided by the actual number of days from and including the immediately
preceding Distribution Date to but excluding the current Distribution Date or
(y) if the relevant Certificate Rate is to be calculated on the basis of a
360-day year of twelve 30-day months, twelve, (iv) if on the immediately
preceding Distribution Date a Reimbursed Loss Event 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 such 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 such 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 Required Amount Shortfall" with respect to any Class on any
Distribution Date, shall have the meaning set forth in Section 9.
"Class Subordinated Payment" shall mean, if there is a Subordinate Class
with respect to Class A, 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 pursuant to Section 9 on such Distribution
Date.
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<PAGE> 20
"Class Weighted Average Certificate Rate," if applicable, shall mean, for
any Class composed of two or more Subclasses, for any Distribution Date, the
percentage equivalent of a fraction the numerator of which is the sum of, for
each Subclass of such Class, the product of the Class Invested Amount for such
Subclass and the Certificate Rate for such Subclass for such Distribution Date,
and the denominator of which is the Class Invested Amount for such Class.
"Class Yield Collections" shall mean, with respect to any Class, with
respect to any day or any Distribution Date, as applicable, an amount equal to
the product of the Class Yield Percentage for such Class and the amount of
Series Yield Collections for such day or the related Due Period, as applicable.
"Class Yield Percentage" shall mean, with respect to any Class on any
Distribution Date (i) during the Revolving Period and the Accumulation Period or
the Controlled Liquidation Period, as applicable, and, provided that an
Effective Alternative Credit Support Election has been made, during the Early
Accumulation Period or the Amortization Period, the percentage equivalent of a
fraction the numerator of which shall be the Class Investor Interest for such
Class and the denominator of which shall be the Series Investor Interest, in
each case as of the first day of the related Due Period; or (ii) during the
Early Accumulation Period or 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 shall be the amount of the Class Investor
Interest on the last day of the Due Period prior to the occurrence of an Early
Accumulation Event or Amortization Event and the denominator of which shall be
the sum of the Class Yield Percentages for each Class of the Series established
hereby as of such Distribution Date.
"Commercial Paper Determination Date," if applicable, shall have the
meaning set forth in the Series Term Sheet.
"Commercial Paper Rate," if applicable, shall mean, with respect to any
Commercial Paper Determination Date, the rate equal to the Money Market Yield on
such Commercial Paper Determination Date of the rate for commercial paper having
a maturity of 30 days as published by the Board of Governors of the Federal
Reserve System in "Statistical Release H.15 (519), Selected Interest Rates," or
any successor publication, under the heading "Commercial Paper." In the event
that such rate is not published on such date, then the Commercial Paper Rate
will be the Money Market Yield on such date of the rate for Commercial Paper
having a maturity of 30 days as published by the Federal Reserve Bank of New
York in the daily statistical release "Composite 3:30 p.m. Quotations for U.S.
Government Securities" ("Composite Quotations") under the heading "Commercial
Paper." If on such date the rate for commercial paper is not yet published in
either H.15 (519) or Composite Quotations, the Commercial Paper Rate for such
date shall be calculated by the Trustee and shall be the Money Market Yield of
the arithmetic mean (rounded to the nearest one-hundredth of a percent, with
five hundred one-thousandths of a percent rounded upward) of the offered rates,
as of 11:00 a.m., New York City time, of three leading dealers of commercial
paper in New York City selected by the Trustee on such date, for commercial
paper having a maturity of 30 days placed for an industrial issuer whose bond
rating is "AA" or the equivalent, from either Rating Agency. In the event that
such rates are not available on such date, then the Commercial Paper Rate shall
be the Money Market Yield of the rate for
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<PAGE> 21
commercial paper so provided in a comparable source. The Commercial Paper Rate
shall be determined by the Trustee.
"Controlled Accumulation Amount" shall have the meaning set forth in the
Series Term Sheet.
"Controlled Liquidation Amount," if applicable, with respect to any
Distribution Date related to the Controlled Liquidation Period, the Accumulation
Period or the Early Accumulation Period shall mean, if applicable, an amount
equal to the sum of the Liquidation Amount and any existing Deficit Liquidation
Amount; provided, however, that the Controlled Liquidation Amount shall not be
less than zero and shall not exceed an amount equal to the Series Invested
Amount.
"Controlled Liquidation Period," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Credit Enhancement" shall mean any credit enhancement obtained by the
Master Servicer in accordance with Section 11.
"Credit Enhancement Account," if applicable, shall have the meaning set
forth in Section 8.
"Credit Enhancement Agreement" shall mean the Agreement among the Sellers,
the Master Servicer, the Trustee and the Credit Enhancement Provider with
respect to the Credit Enhancement.
"Credit Enhancement Drawing" shall mean any drawing made under the Credit
Enhancement.
"Credit Enhancement Fee" shall 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.
"Credit Enhancement Provider" shall have the meaning set forth in the
Series Term Sheet.
"Deficit Accumulation Amount" shall 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 into the Series Principal Funding Account on the preceding
Distribution Date is less than the Controlled Accumulation Amount for such
preceding Distribution Date.
"Deficit Liquidation Amount" shall mean, with respect to the first
Distribution Date relating to the Due Period commencing on the Principal
Commencement Date, zero, and with respect to any subsequent Distribution Date,
the amount, if any, by which the amount of Certificate Principal paid to the
Investor Certificateholders on the preceding Distribution Date is less than the
Controlled Liquidation Amount for such preceding Distribution Date.
"Distribution Date" shall have the meaning set forth in the Series Term
Sheet.
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<PAGE> 22
"Dollars" or "U.S.$" or "$" shall mean the lawful currency of the United
States of America.
"Drawing Date" shall mean the first Business Day preceding each
Distribution Date.
"Early Accumulation Commencement Date," if applicable, shall mean the date
on which an Early Accumulation Event is deemed to occur.
"Early Accumulation Event," if applicable, shall mean any event specified
in Section 21 hereof.
"Early Accumulation Period," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Effective Alternative Credit Support Election" shall have the meaning
specified in Section 12.
"Estimated Investment Shortfall," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Estimated Principal Distribution Amount," if applicable, shall mean, with
respect to any date of determination during the Early Accumulation Period, an
amount equal to the Series Principal Collections for the prior Distribution
Date; provided, however, that such amount shall not exceed the Series Investor
Interest as of such prior Distribution Date.
"Estimated Yield," if applicable, shall have the meaning specified in the
Series Term Sheet.
"Excess Income" on any Distribution Date shall mean an amount equal to the
excess, if any, of (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 over (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 or the Class Weighted Average Certificate Rate, as
applicable, 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 (x) if the relevant Certificate Rate is to be calculated
on the basis of the actual number of days elapsed and a 360-day year, 360
divided by the actual number of days from and including the immediately
preceding Distribution Date to but excluding the current Distribution Date or
(y) if the relevant Certificate Rate is to be calculated on the basis of a
360-day year of twelve 30-day months, twelve.
"Fixed Principal Allocation Event" shall mean the earliest of (a) the
beginning of the Due Period immediately following the Due Period related to the
first Distribution Date during the Controlled Liquidation Period or the
Accumulation Period, as applicable, with respect to the Series established
hereby on which the Series Available Principal Amount is less than zero; (b) the
date on which an Early Accumulation Event or an Amortization Event with respect
to the Series established hereby 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 shall provide notification of such date to Greenwood on
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<PAGE> 23
behalf of the Holder of the Seller Certificate, the Trustee, the Credit
Enhancement Provider and the Rating Agencies no later than two Business Days
prior to such date.
"Fully Funded Date," if applicable, shall mean the first Distribution Date
on which the amount of funds on deposit in the Series Principal Funding Account
(after giving effect to all deposits made on such date pursuant to Section 9)
equals the Series Invested Amount for such Distribution Date (prior to any
payments of principal on such date pursuant to Section 10); provided, however,
that the Fully Funded Date shall only occur during the Early Accumulation
Period.
"Funded Credit Enhancement" shall 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 the Series
established hereby, including, without limitation, a reserve account or a cash
collateral account.
"Group Available Principal Amount" shall mean, with respect to each
Distribution Date, the amount remaining on deposit in the Group Principal
Collections Reallocation Account on such Distribution Date after all withdrawals
have been made from such account for the benefit of any Series in the same Group
as the Series established hereby (including the Series established hereby), but
before such amount is withdrawn from the Group Principal Collections
Reallocation Account and deposited into the Collections Account pursuant to
Section 9(b)(35)).
"Group Buffer Amount," if applicable, shall have the meaning set forth in
the Series Term Sheet.
"Group Excess Spread" shall mean, for any Distribution Date, the sum of the
Series Excess Spreads for each Series (including the Series established hereby)
that is a member of the same Group as the Series established hereby, in each
case for such Distribution Date.
"Group Finance Charge Collections Reallocation Account" shall have the
meaning specified in Section 8.
"Group Principal Allocation Event" shall 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 the
same Group as the Series established hereby (including the Series established
hereby) that is not in its Early Accumulation Period or its Amortization Period
is less than (ii) the Group Required Principal Amount for such Distribution
Date.
"Group Principal Collections Reallocation Account" shall have the meaning
specified in Section 8.
"Group Required Principal Amount" shall mean, with respect to the Group of
which the Series established hereby is a member, for any Distribution Date, the
Series Required Principal Amount for such Distribution Date plus, for each
Series that is a member of such Group, the Series Required Principal Amount for
such Series for such Distribution Date.
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<PAGE> 24
"Initial Credit Enhancement" shall mean the Credit Enhancement first
obtained by the Master Servicer pursuant to Section 11.
"Initial Subordinated Amount," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Interest Accrual Period" shall 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 Calculation Date," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Interest Payment Date" shall mean each date designated as such in the
Series Term Sheet.
"Interest Period" shall mean each period from and including a given
Distribution Date to but excluding the next following Distribution Date
commencing with the earlier to occur of (i) the first Distribution Date of the
Early Accumulation Period or (ii) the first Distribution Date of the
Accumulation Period.
"Interest Rate Cap Provider," if any, shall mean the entity listed as the
Interest Rate Cap Provider in the Series Term Sheet, in its capacity as obligor
under the Class Interest Rate Caps, or if any Replacement Class Interest Rate
Caps or Qualified Substitute Cap Arrangements are obtained pursuant to Section
15, the obligor with respect to such Replacement Class Interest Rate Caps or
Qualified Substitute Cap Arrangements.
"Interest Rate Swap Counterparty," if applicable, shall have the meaning
set forth in the Series Term Sheet.
"Investor Accounts" shall mean, in addition to Investor Accounts
established pursuant to the Pooling and Servicing Agreement, the Series
Collections Account, the Series Principal Collections Account, the Series
Principal Funding Account, the Series Interest Funding Account, the Series
Distribution Account, the Group Finance Charge Collections Reallocation Account
and the Group Principal Collections Reallocation Account.
"Investor Charge-Off Loss" shall have the meaning set forth in Section
13(b).
"Investor Loss" with respect to each Class, shall mean (i) the amount of
any reduction in the Class Invested Amount with respect to such Class pursuant
to Section 13(b), (ii) in the event the Receivables are sold pursuant to Section
12.01(b) of the Pooling and Servicing Agreement, the amount, if any, by which
the Class Investor Interest (determined immediately prior to such sale) exceeds
the product of (x) a fraction, the numerator of which is the Class Investor
Interest and the denominator of which is the Aggregate Investor Interest and (y)
the net proceeds of such sale and (iii) in the event Receivables are sold
pursuant to Section 12.02(c) of the Pooling and Servicing Agreement, the amount,
if any, by which the Class Investor Interest (determined immediately prior to
such sale) exceeds the product of (x) a fraction, the numerator of which is
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<PAGE> 25
the Class Investor Interest and the denominator of which is the Series Investor
Interest and (y) the net proceeds of such sale.
"Investor Servicing Fee" shall mean, with respect to any Distribution Date,
an amount equal to the product of the Investor Servicing Fee Percentage and the
Series Investor Interest on the first day of the Due Period related to such
Distribution Date (or in the case of the first Distribution Date for the Series
established hereby, the Series Initial Investor Interest).
"Investor Servicing Fee Percentage" shall mean the percentage identified as
such in the Series Term Sheet.
"LIBOR," if applicable, shall 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 such 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 such 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," if applicable, shall 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," if applicable, shall have the meaning set forth
in the Series Term Sheet.
"Liquidation Amount," if applicable, shall have the meaning set forth in
the Series Term Sheet.
"Maximum Class A Credit Enhancement Amount," if applicable, shall have the
meaning set forth in the Series Term Sheet.
"Maximum Class B Credit Enhancement Amount," if applicable, shall have the
meaning set forth in the Series Term Sheet.
"Maximum Shared Credit Enhancement Amount," if applicable, shall have the
meaning set forth in the Series Term Sheet.
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<PAGE> 26
"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.
"Monthly Amortization Rate," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Net Swap Payment," if applicable, shall mean, with respect to any Class
that is sub ject to a Class Interest Rate Swap, on any Distribution Date, the
positive difference, if any, between (i) the amount owed by the Trust to the
Interest Rate Swap Counterparty under the Class Interest Rate Swap on such
Distribution Date and (ii) the amount owed by the Interest Rate Swap
Counterparty to the Trust under the Class Interest Rate Swap on such
Distribution Date.
"Net Swap Receipt," if applicable, shall mean, with respect to any Class
that is subject to a Class Interest Rate Swap, on any Distribution Date, the
positive difference, if any, between (i) the amount owed by the Interest Rate
Swap Counterparty to the Trust under the Class Interest Rate Swap on such
Distribution Date and (ii) the amount owed by the Trust to the Interest Rate
Swap Counterparty under the Class Interest Rate Swap on such Distribution Date.
"Non-U.S. Holder," shall mean any person who, as to the United States, is a
non-resident alien individual, a foreign corporation, a foreign estate, a
foreign trust or a foreign partnership, as such terms are defined in the
Internal Revenue Code of 1986, as amended.
"Payment Date" shall mean any Interest Payment Date and any Class Expected
Final Payment Date.
"Portfolio Yield" shall mean, with respect to any Due Period, the
annualized percentage equivalent of a fraction, the numerator of which shall 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 for such Due Period and (iii) the amount of Series Additional Funds
for each Series then outstanding for such Due Period, and the denominator of
which shall be the total amount of Principal Receivables in the Trust as of the
first day of such Due Period.
"Prepayment Calculation Table," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Prepayment Determination Date," if applicable, shall have the meaning set
forth in the Series Term Sheet.
"Principal Commencement Date" shall mean the date designated as such in the
Series Term Sheet.
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<PAGE> 27
"Principal Distribution Amount" shall mean, with respect to any
Distribution Date occurring in (i) the Accumulation Period, the Controlled
Accumulation Amount, (ii) the Controlled Liquidation Period, the Controlled
Liquidation Amount, (iii) the Early Accumulation Period, the Series Investor
Interest, or (iv) in the Amortization Period, the Series Investor Interest.
"Principal Distribution Amount Shortfall" with respect to any Distribution
Date in the Accumulation Period, the Controlled Liquidation Period or the
Amortization Period, as applicable, shall have the meaning set forth in Section
9.
"Principal Payment Date" shall mean, if applicable, each date designated as
such in the Series Term Sheet.
"Qualified Credit Enhancement Provider" shall mean, (i) if the Credit
Enhancement is not Funded Credit Enhancement, an institution that meets the
Qualified Credit Enhancement Provider Rating Requirements established by each
Rating Agency, which requirements are set forth in the Series Term Sheet if the
Initial Credit Enhancement is not Funded Credit Enhancement, or (ii) if the
Initial Credit Enhancement is Funded Credit Enhancement, an institution that
meets the Qualified Credit Enhancement Provider Rating Requirements established
by each Rating Agency, which requirements will be established by the Rating
Agencies at the time, if any, that the Master Servicer elects to replace the
Initial Credit Enhancement with Credit Enhancement that is not Funded Credit
Enhancement (or, in either case, such lesser requirements as the applicable
Rating Agency shall allow); provided, however, that in the event the Master
Servicer elects to obtain Credit Enhancement that is not Funded Credit
Enhancement and is unable after the exercise of its best efforts to obtain from
a Qualified Credit Enhancement Provider as so defined such Credit Enhancement
with respect to which the representations set forth in Section 11(a) shall be
true, the term "Qualified Credit Enhancement Provider" shall mean a Person who
satisfies such requirements except that its long-term unsecured debt rating by
any nationally recognized rating agency may be lower than that set forth in such
requirements, but shall not be lower than the highest credit rating of any
Person who otherwise satisfies said requirements and from whom the Master
Servicer is able to obtain such a Credit Enhancement.
"Qualified Substitute Cap Arrangement," if any, shall have the meaning
specified in Section 15.
"Reimbursed Loss Event" shall mean, with respect to each Class for any
Distribution Date, the occurrence of the reimbursement of Investor Losses
pursuant to Section 13(c) 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" shall mean, for any Class for any Distribution
Date, an amount equal to the product of (i) the aggregate amount of Investor
Losses that have not been reimbursed pursuant to Section 13(c) prior to the
commencement of the related Due Period and (ii) a fraction the numerator of
which is the Certificate Rate or the Class Weighted Average Certificate Rate, as
applicable, for such Class for the related Due Period and the denominator of
which is (x) if the relevant Certificate Rate is to be calculated on the basis
of the actual number of days elapsed and a 360-day year, (A) if each Interest
Payment Date is also a Distribution Date, 360 divided by the
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<PAGE> 28
actual number of days from and including the immediately preceding Distribution
Date to but excluding the current Distribution Date or (B) if each Interest
Payment Date is not also a Distribution Date, 360 divided by the actual number
of days from and including the Interest Calculation Date in the preceding
calendar month to but excluding the Interest Calculation Date following the
current Distribution Date or (y) if the relevant Certificate Rate is to be
calculated on the basis of a 360-day year of twelve 30-day months, twelve.
"Reimbursed Loss Interest Gross-up Amount" shall mean, for any 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 or the Class Weighted Average Certificate Rate, as
applicable, for such Class for the related Due Period and the denominator of
which is (x) if the relevant Certificate Rate is to be calculated on the basis
of the actual number of days elapsed and a 360-day year, (A) if each Interest
Payment Date is also a Distribution Date, 360 divided by the actual number of
days from and including the immediately preceding Distribution Date to but
excluding the current Distribution Date or (B) if each Interest Payment Date is
not also a Distribution Date, 360 divided by the actual number of days from and
including the Interest Calculation Date in the preceding calendar month to but
excluding the Interest Calculation Date following the current Distribution Date
or (y) if the relevant Certificate Rate is to be calculated on the basis of a
360-day year of twelve 30-day months, twelve.
"Replacement Class Interest Rate Cap," if any, shall mean an interest rate
cap agreement or other interest rate protection having substantially the same
terms and conditions as the Class Interest Rate Cap that it replaces, and
otherwise satisfying the conditions set forth in Section 15.
"Required Daily Deposit" shall mean, if applicable, with respect to each
Servicer, an amount equal to:
(a) during the Revolving Period and the Accumulation Period or the
Controlled Liquidation Period, as applicable, 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 or the Controlled Liquidation
Period, as applicable, 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 or the Controlled Liquidation
Amount, as applicable, 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 provided,
however, that
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<PAGE> 29
with respect to any day on which the Controlled
Accumulation Amount or the Controlled Liquidation Amount, as
applicable, for the related Distribution Date can not be determined,
the aggregate amount to be deposited for such Due Period shall be the
Controlled Accumulation Amount or the Controlled Liquidation Amount,
as applicable, for the Distribution Date preceding the related
Distribution Date; plus
(y) the positive difference, if any, between
(1) the product of the Class A Percentage for the related
Distribution Date with respect to Principal Collections and the amount
of Principal Collections received during the Due Period through and
including such day, less the product of the Class A Yield Percentage
and 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 shall be
the Series Initial Investor Interest and the denominator of which
shall be 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 shall be treated as zero;
or
(b) during the Early Accumulation Period and the Amortization Period, an
amount equal to the sum of the Series Finance Charge Collections and
the Series Principal Collections for the Series established hereby for
such day minus all accrued but unfunded Class A Monthly Servicing
Fees; and
multiplied, in each case, by a fraction the numerator of which shall be the
aggregate amount of Principal Receivables in the Trust that are serviced by such
Servicer and the denominator of which shall 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
such Servicer for such day shall be equal to all the Collections received by
such Servicer on such day.
Notwithstanding the foregoing, (i) upon the occurrence of any circumstance
described in Section 10.02(d), (e) or (f) of the Pooling and Servicing Agreement
with respect to any Servicer, the Required Daily Deposit for any Series then
outstanding shall equal the amount described in
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<PAGE> 30
paragraph (b) above for such Servicer and (ii) a Servicer may use Collections
received by it for its own account prior to the applicable Distribution Date as
permitted by Sections 3.03(b) and 4.03(b) of the Pooling and Servicing
Agreement.
"Revolving Period" shall have the meaning set forth in the Series Term
Sheet.
"Series Additional Funds," if applicable, shall mean, for any Distribution
Date, the Additional Funds deposited into the Series Collections Account for the
Series established hereby on such Distribution Date.
"Series Additional Investor Funds," if applicable, shall mean, for any
Distribution Date, the Series Additional Funds, if any, that are not applied to
payment of the Supplemental Servicing Fee pursuant to Section 14.
"Series Available Principal Amount" shall mean, for any Distribution Date,
if a Group Principal Allocation Event has occurred, an amount calculated as
follows: For each Series that is a member of the same Group as the Series
established hereby (including the Series established hereby), 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 longest time remaining until its latest Class Expected Final Payment Date
or, if none, the last scheduled day of its Accumulation Period (assuming that no
Early Accumulation Event or Amortization Event occurs with respect to such
Series)), an amount equal to (x) the Group Available Principal Amount less (y)
the difference between the Series Required Principal Amount, if any, and the
Principal Distribution Amount for such Series for such Distribution Date, if
any, that was funded on such Distribution Date (including any portion of such
amount that was funded by amounts withdrawn from the Group Principal Collections
Reallocation Account pursuant to Section 9(b)(21), Section 9(b)(34), 9(b)(35) or
a substantially similar provision. For purposes of calculating the Series
Available Principal Amount for each other such Series, the Group Available
Principal Amount shall be reduced by the amount calculated in clause (y) for the
prior Series for which the Series Available Principal Amount was calculated.
"Series Buffer Amount," if applicable, shall have the meaning set forth in
the Series Term Sheet.
"Series Closing Date" shall mean the date designated as such in the Series
Term Sheet.
"Series Collections Account" shall have the meaning specified in Section 8.
"Series Cut-Off Date" shall mean the date designated as such in the Series
Term Sheet.
"Series Distribution Account" shall have the meaning specified in
Section 8.
"Series Excess Servicing" shall mean, as of any Distribution Date, the sum
of the amounts of Class Excess Servicing for each Class of the Series
established hereby, as such amount is modified pursuant to Section 9.
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<PAGE> 31
"Series Excess Spread" shall 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 established hereby minus (b) the sum of (i) with
respect to each Class, 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 (x) if the
relevant Certificate Rate is to be calculated on the basis of the actual number
of days elapsed and a 360-day year, (A) if each Interest Payment Date is also a
Distribution Date, 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 or (B) if each Interest Payment Date is not also a
Distribution Date, 360 divided by the actual number of days from and including
the immediately preceding Interest Calculation Date (or, in the case of the
first Distribution Date, from and including the Series Closing Date) to but
excluding the Interest Calculation Date following the current Distribution Date
or (y) if the relevant Certificate Rate is to be calculated on the basis of a
360-day year of twelve 30-day months, twelve (or in the case of the first
Distribution Date, 360 divided by the number of days from and including the
Series Closing Date to but excluding the current Distribution Date (if each
Interest Payment Date is also a Distribution Date) or the Interest Calculation
Date following the current Distribution Date (if each Interest Payment Date is
not also a Distribution Date), assuming 30-day months), (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 such Distribution Date.
"Series Finance Charge Collections" shall 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" shall mean the aggregate face amount of
Investor Certificates initially authenticated and delivered pursuant to Section
7, as specified in the Series Term Sheet.
"Series Interest Funding Account" shall have the meaning specified in
Section 8.
"Series Invested Amount" with respect to any Distribution Date, shall mean
the sum of the Class Invested Amounts for each Class of the Series established
hereby on such Distribution Date.
"Series Investor Interest" with respect to any Distribution Date, shall
mean the sum of the Class Investor Interests for each Class of the Series
established hereby on such Distribution Date.
"Series Minimum Principal Receivables Balance" shall mean, with respect to
the Series established hereby, 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, (ii) if a Fixed
Principal Allocation Event has occurred but the Fully Funded Date has not
occurred, the Series Investor Interest as of the date of the occurrence of the
Fixed Principal Allocation Event, divided by 0.93 or (iii) on and after the
Fully Funded Date, if any, zero, and (B) (x) the product of (i) the sum of (1)
the amount on deposit in the Series Principal Funding
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<PAGE> 32
Account on such date of determination and (2) for any date of determination
during (x) the Early Accumulation Period, if any, the Estimated Principal
Distribution Amount for the next Distribution Date and (y) for any date of
determination during the Accumulation Period, the amount specified in the Master
Servicer's notice of its election to commence the Accumulation Period as the
Controlled Accumulation Amount for such 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 on behalf of the Holder
of the Seller Certificate 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 on behalf of the Holder of the Seller
Certificate 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" shall mean, with respect to any specified category,
with respect to any Distribution Date or Trust Distribution Date, as applicable,
the sum of the Class Percentages with respect to such category for each Class of
the Series established hereby on such Distribution Date or Trust Distribution
Date, as applicable.
"Series Principal Collections" shall 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" shall have the meaning specified in
Section 8.
"Series Principal Funding Account" shall mean the Series Principal Funding
Account established pursuant to Section 8. Amounts "on deposit in" the Series
Principal Funding Account shall be deemed to be on deposit for the benefit of
(i) the Class A Certificateholders for the period up to and including the Class
A Expected Final Payment Date or Class A Final Maturity Date, as applicable, and
(ii) if there is a Subordinate Class with respect to Class A, the Class B
Certificateholders for the period beginning immediately after the Class A
Expected Final Payment Date or Class A Final Maturity Date, as applicable, and
ending on the Class B Expected Final Payment Date or Class B Final Maturity
Date, as applicable. Amounts "on deposit in" the Series Principal Funding
Account shall be deemed to include amounts invested in Permitted Investments
pursuant to Section 8 unless the context clearly requires otherwise.
"Series Required Principal Amount" shall mean, for this Series, with
respect to each Distribution Date of the Controlled Liquidation Period or the
Accumulation Period, as applicable, the product of (x) (i) if the related Due
Period does not occur in February, 1.25 or (ii) if the related Due Period occurs
in February, 1.05, and (y) the Controlled Liquidation Amount or the Controlled
Accumulation Amount, as applicable, for such Distribution Date, and with respect
to each other Series that is a member of the same Group as the Series
established hereby, the amount specified in the Series Supplement for such
Series for such Distribution Date.
"Series Term Sheet" shall mean the Series Term Sheet setting forth the
terms of the Series of Investor Certificates issued hereby, to which this Annex
is attached.
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"Series Termination Date" shall mean the date designated as such in the
Series Term Sheet.
"Series Yield Collections" shall 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" shall mean the number identified as such in the
Series Term Sheet, as such number may be changed from time to time pursuant to
Section 25.
"Shared Credit Enhancement" shall mean Credit Enhancement available for the
benefit of both the Class A Investor Certificates and the Class B Investor
Certificates.
"Special Payment Date" shall mean each Distribution Date with respect to
the Amortization Period and the Distribution Date related to each Class Expected
Final Payment Date or Class Final Maturity Date, as applicable.
"Stated Class A Credit Enhancement Amount" shall mean the "stated amount"
with respect to the Class A Cash Collateral Credit Enhancement, as set forth in
the Series Term Sheet.
"Stated Class B Credit Enhancement Amount" shall mean the "stated amount"
with respect to the Credit Enhancement that is available solely for the benefit
of the Class B Investor Certificates, as set forth in the Series Term Sheet.
"Stated Shared Credit Enhancement Amount," if applicable, shall mean the
"stated amount" with respect to the shared portion of the Credit Enhancement, as
set forth in the Series Term Sheet.
"Statement Date" shall mean each date designated as such in the Series Term
Sheet.
"Subclass" with respect to any Class shall mean, if applicable, each
portion of such Class that has a different Certificate Rate or method of
calculating its Certificate Rate.
"Subordinate Class" shall mean, with respect to any Class, the Class, if
any, identified by the letter of the alphabet next succeeding the letter
designating such Class (e.g., the Subordinate Class with respect to Class A is
Class B).
"Subordinate Series" shall mean any Series which is subordinated in right
of payment, in whole or in part, pursuant to the Series Supplement with respect
to such Series, to the Series established hereby.
"Supplemental Credit Enhancement Amount," if applicable, shall have the
meaning set forth in the Series Term Sheet.
"Supplemental Credit Enhancement Event" shall occur the first time the
long-term debt or deposit rating of Greenwood or any Additional Seller is
withdrawn or reduced below BBB- by Standard & Poor's.
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"Supplemental Servicing Fee" shall mean, if applicable, with respect to any
Distribution Date, an amount equal to the product of the Supplemental Servicing
Fee Percentage and the Series Investor Interest on the first day of the Due
Period related to such Distribution Date (or in the case of the first
Distribution Date for the Series established hereby, the Series Investor
Interest on the Series Cut-Off Date).
"Supplemental Servicing Fee Percentage," if applicable, shall mean the
percentage identified as such in the Series Term Sheet.
"Supplemental Subordinated Amount," if applicable, shall have the meaning
set forth in the Series Term Sheet.
"Swap Rate," if applicable, with respect to any Class Interest Rate Swap,
shall have the meaning specified in the Series Term Sheet.
"Telerate Page 3750," if applicable, shall mean the display page so
designated on the Bridge Telerate, Inc. (or such other rate as may replace that
page on that service for the purpose of displaying comparable rates or prices).
"Total Available Credit Enhancement Amount" shall mean, with respect to the
first Distribution Date, the Stated Class B Credit Enhancement Amount plus, if
applicable, the Stated Shared Credit Enhancement Amount, and, on each
Distribution Date thereafter, shall mean the Available Class B Credit
Enhancement Amount plus, if applicable, the Available Shared Credit Enhancement
Amount, in each case after all adjustments thereto on the immediately preceding
Distribution Date, and, in each case, as adjusted pursuant to Section 9 on such
Distribution Date.
"Total Maximum Credit Enhancement Amount" shall have the meaning set forth
in the Series Term Sheet.
"United States" or "U.S." shall mean the United States of America, its
territories and possessions, any State of the United States and the District of
Columbia.
SECTION 2. Subordination
(a) Subordination of Certain Classes. If there is a Subordinate Class
with respect to Class A, the Holders of each Class B Investor Certificate, by
their acceptance of such Investor Certificate, hereby subordinate, for the
benefit of the Holders of Class A Investor Certificates, to the extent and in
the manner set forth in Section 9, all of such Investor Certificateholders'
right, title and interest in and to future distributions due on such Holders'
Investor Certificates, but only to the extent of the Available Subordinated
Amount.
(b) No Subordination of Series. The Investor Certificates of the
Series established hereby shall not be subordinated in right of payment to any
other Series, whether currently outstanding or to be issued in the future. One
or more other Series, however, may be subordinated in right of payment to the
Series established hereby, although the Sellers shall have no obligation to
issue such a Subordinate Series. If any Subordinate Series is issued, such
Subordinate Series shall be subordinate in right of payment to the Series
established hereby only to the extent set forth in the Series Supplement with
respect to such Subordinate Series.
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SECTION 3. Representations and Warranties of the Sellers. The
representations and warranties of the Sellers contained in Section 2.04 of the
Pooling and Servicing Agreement and the corresponding sections of any Assignment
are true on and as of the date hereof and/or the date set forth in the Pooling
and Servicing Agreement, as applicable. Each Seller also represents and warrants
to the Trust as of the date hereof that the execution, delivery and performance
of this Series Supplement by such Seller have been duly authorized by all
necessary corporate action, do not require any approval or consent of any
governmental agency or authority, do not and will not conflict with any material
provision of the Certificate of Incorporation or By-Laws of such Seller, do not
and will not conflict with, or result in a breach which would constitute a
material default under, any agreement for borrowed money binding upon or
applicable to it or such of its property which is material to it, or, to the
best of such Seller's knowledge, any law or governmental regulation or court
decree applicable to it or such material property, and this Series Supplement is
the valid, binding and enforceable obligation of such Seller, except as the same
may be limited by receivership, insolvency, reorganization, moratorium or other
laws relating to the enforcement of creditors' rights generally or by general
equity principles.
SECTION 4. Representations and Warranties of Greenwood as Master Servicer
and Servicer. The representations and warranties of Greenwood as the Master
Servicer and as a Servicer contained in Section 3.04 of the Pooling and
Servicing Agreement are true on and as of the date hereof. Greenwood as Master
Servicer and Servicer also represents and warrants to the Trust as of the date
hereof that the execution, delivery and performance of this Series Supplement by
Greenwood have been duly authorized by all necessary corporate action, do not
require any approval or consent of any governmental agency or authority, do not
and will not conflict with any material provision of the Certificate of
Incorporation or By-Laws of Greenwood, do not and will not conflict with, or
result in a breach which would constitute a material default under, any
agreement for borrowed money binding upon or applicable to it or such of its
property which is material to it, or, to the best of Greenwood's knowledge, any
law or governmental regulation or court decree applicable to it or such material
property, and this Series Supplement is the valid, binding and enforceable
obligation of Greenwood, except as the same may be limited by receivership,
insolvency, reorganization, moratorium or other laws relating to the enforcement
of creditors' rights generally or by general equity principles.
SECTION 5. Representations and Warranties of Other Servicers. The
representations and warranties of each Servicer (other than Greenwood), if any,
contained in Section 3.05 of the Pooling and Servicing Agreement are true and
correct on and as of the date hereof. Each such Servicer also represents and
warrants to the Trust as of the date hereof that the execution, delivery and
performance of this Series Supplement by such Servicer have been duly authorized
by all necessary corporate action, do not require any approval or consent of any
governmental agency or authority, do not and will not conflict with any material
provision of the Certificate of Incorporation or By-Laws of such Servicer, do
not and will not conflict with, or result in a breach which would constitute a
material default under, any agreement for borrowed money binding upon or
applicable to it or such of its property which is material to it, or, to the
best of such Servicer's knowledge, any law or governmental regulation or court
decree applicable to it or such material property, and this Series Supplement is
the valid, binding and enforceable obligation of such Servicer, except as the
same may be limited by receivership, insolvency, reorganization, moratorium or
other laws relating to the enforcement of creditors' rights generally or by
general equity principles.
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SECTION 6. Representations and Warranties of the Trustee. The
representations and warranties of the Trustee contained in Section 11.16 of the
Pooling and Servicing Agreement are true on and as of the date hereof. The
Trustee also represents and warrants as of the date hereof that the Trustee has
full power, authority and right to execute, deliver and perform this Series
Supplement, and has taken all necessary action to authorize the execution,
delivery and performance by it of this Series Supplement, and this Series
Supplement has been duly executed and delivered by the Trustee.
SECTION 7. Authentication of Certificates. Pursuant to the request of the
Sellers, the Trustee shall cause Investor Certificates in authorized
denominations evidencing the Series established hereby to be duly authenticated
and delivered as of the Series Closing Date to or upon the order of the Sellers
pursuant to Section 6.06 of the Pooling and Servicing Agreement.
SECTION 8. Establishment and Administration of Investor Accounts and the
Credit Enhancement Account.
(a) The Series Distribution Account, Series Collections Account and Series
Principal Collections Account. The Trustee, for the benefit of the
Certificateholders, shall cause to be established and maintained in the name of
the Trust, with the corporate trust department of an office or branch of either
the Trustee or a Qualified Institution, three non-interest bearing segregated
demand deposit accounts (the "Series Distribution Account"; for Collections, the
"Series Collections Account"; and for Series Principal Collections and certain
other amounts deposited therein pursuant to Section 9, the "Series Principal
Collections Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders. The Trust
shall possess all right, title and interest in all funds on deposit in the
Series Distribution Account, the Series Collections Account and the Series
Principal Collections Account; provided, however, that all interest and earnings
(less investment expenses) on funds on deposit in any such account shall be paid
to the Holder of the Seller Certificate in accordance with Section 4.02(c) of
the Pooling and Servicing Agreement. Pursuant to authority granted to it
pursuant to Section 3.01(b) of the Pooling and Servicing Agreement, the Master
Servicer shall have the revocable power to instruct the Trustee to withdraw
funds from the Series Distribution Account, the Series Collections Account and
the Series Principal Collections Account for the purpose of carrying out the
duties of the Master Servicer hereunder. The Master Servicer at all times shall
maintain accurate records reflecting each transaction in the Series Distribution
Account, the Series Collections Account and the Series Principal Collections
Account. The Paying Agent also shall have the revocable authority to make
withdrawals from the Series Distribution Account.
(b) Reallocation Accounts. The Trustee, for the benefit of the
Certificateholders, shall cause to be established and maintained in the name of
the Trust, with the corporate trust department of an office or branch of either
the Trustee or a Qualified Institution, two non-interest bearing segregated
trust accounts for the Group of which the Series established hereby is a member
(for reallocated Series Finance Charge Collections, Series Yield Collections,
Class A Investment Income and Series Additional Funds, the "Group Finance Charge
Collections Reallocation Account," and for reallocated Series Principal
Collections and other amounts deposited into the Series Principal Collections
Account pursuant to Section 9, the "Group Principal Collections Reallocation
Account") bearing a designation clearly indicating that the
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funds deposited therein are held for the benefit of the Certificateholders. The
Trust shall possess all right, title and interest in all funds on deposit from
time to time in the Group Finance Charge Collections Reallocation Account and
the Group Principal Collections Reallocation Account and in all proceeds
thereof. Pursuant to authority granted to it pursuant to Section 3.01(b) of the
Pooling and Servicing Agreement, the Master Servicer shall have the revocable
power to instruct the Trustee to withdraw funds from the Group Finance Charge
Collections Reallocation Account and the Group Principal Collections
Reallocation Account for the purpose of carrying out the duties of the Master
Servicer hereunder. The Master Servicer at all times shall maintain accurate
records reflecting each transaction in the Group Finance Charge Collections
Reallocation Account and in the Group Principal Collections Reallocation
Account.
(c) The Series Principal Funding Account. The Trustee, for the benefit
of the Certificateholders, shall establish and maintain or cause to be
established and maintained in the name of the Trust, with the corporate trust
department of an office or branch of either the Trustee or a Qualified
Institution, a non-interest bearing segregated trust account (for principal to
be paid to Investor Certificateholders of this Series, the "Series Principal
Funding Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders. The Trust
shall possess all right, title and interest in all funds on deposit from time to
time in the Series Principal Funding Account and in all proceeds thereof. The
Series Principal Funding Account shall be under the sole dominion and control of
the Trustee for the benefit of the Certificateholders. Pursuant to authority
granted to it pursuant to Section 3.01(b) of the Pooling and Servicing
Agreement, the Master Servicer shall have the revocable power to withdraw funds
from the Series Principal Funding Account for the purpose of carrying out the
duties of the Master Servicer hereunder. The Master Servicer at all times shall
maintain accurate records reflecting each transaction in the Series Principal
Funding Account. The Paying Agent also shall have the revocable authority to
make withdrawals from the Series Principal Funding Account.
Funds on deposit in the Series Principal Funding Account shall be invested
in Permitted Investments by the Trustee (or, at the direction of the Trustee, by
the Master Servicer on behalf of the Trustee) at the direction of Greenwood on
behalf of the Holder of the Seller Certificate, as set forth below. Any
Permitted Investment with a stated maturity shall mature on or prior to the
following Distribution Date. On or before the occurrence of the first
Distribution Date with respect to the Accumulation Period or Controlled
Liquidation Period, as applicable (and on or before any subsequent Distribution
Date in which the notice previously given is no longer correct or valid), the
Master Servicer shall notify the Trustee of the amount of Certificate Principal
to be deposited into the Series Principal Funding Account on such Distribution
Date, and Greenwood on behalf of the Holder of the Seller Certificate shall
direct the Trustee in writing to invest the funds that will be on deposit in the
Series Principal Funding Account on such Distribution Date (including any funds
previously invested in Permitted Investments that will be available for
reinvestment on such Distribution Date) in Permitted Investments. Greenwood's
notice to the Trustee shall specifically identify each such Permitted Investment
(including its principal amount and maturity). In addition, Greenwood on behalf
of the Holder of the Seller Certificate shall from time to time provide written
notice to the Trustee directing the Trustee to reinvest funds representing
principal, interest or other investment income received by it with respect to
such Permitted Investments (whether upon maturity or otherwise) in additional
Permitted Investments. In the event that Greenwood on behalf of the Holder of
the Seller Certificate fails to direct the
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Trustee to invest or reinvest any funds that are deposited in the Series
Principal Funding Account or that are received by it with respect to Permitted
Investments by 2:00 p.m. on the date such funds are available for investment,
the Trustee shall use reasonable efforts to invest such funds overnight in
securities represented by instruments in bearer or registered form which
evidence obligations issued or fully guaranteed, as to timely payment, by the
United States of America or any instrumentality or agency thereof when such
obligations are backed by the full faith and credit of the United States of
America until such time as the Trustee receives the required notice from
Greenwood; provided, however, that the Trustee shall have no liability for the
failure to invest such funds if the Trustee has employed reasonable efforts to
make such investment.
(d) The Series Interest Funding Account. The Trustee, for the benefit
of the Certificateholders, shall establish and maintain or cause to be
established and maintained in the name of the Trust, in the corporate trust
department of an office or branch of either the Trustee or a Qualified
Institution, a non-interest bearing segregated trust account (for payment of
Certificate Interest, the "Series Interest Funding Account") bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Certificateholders. The Trust shall possess all right, title and
interest in all funds on deposit from time to time in the Series Interest
Funding Account and in all proceeds thereof. Pursuant to authority granted to it
pursuant to Section 3.01(b) of the Pooling and Servicing Agreement, the Master
Servicer shall have the revocable power to instruct the Trustee to withdraw
funds from the Series Interest Funding Account for the purpose of carrying out
the duties of the Master Servicer hereunder. Any funds on deposit in the Series
Interest Funding Account for more than one Business Day shall be invested in
Permitted Investments pursuant to Section 4.02(c) of the Pooling and Servicing
Agreement. The Master Servicer at all times shall maintain accurate records
reflecting each transaction in the Series Interest Funding Account. The Paying
Agent shall also have the revocable authority to make withdrawals from the
Series Interest Funding Account.
(e) The Credit Enhancement Account. If the Credit Enhancement is
Funded Credit Enhancement, the Master Servicer, for the benefit of the
Certificateholders and the Credit Enhancement Provider, shall establish and
maintain or cause to be established and maintained in the name of the Trust,
with the corporate trust department of an office or branch of either the Trustee
or a Qualified Institution, a non-interest bearing segregated trust account (the
"Credit Enhancement Account") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders and
the Credit Enhancement Provider. The Trust shall possess all right, title and
interest in all funds on deposit from time to time in the Credit Enhancement
Account and in all proceeds thereof. The Credit Enhancement Account shall be
under the sole dominion and control of the Trustee as the administrator of the
Credit Enhancement for the benefit of the Certificateholders and the Credit
Enhancement Provider; provided, however, the Master Servicer may make Credit
Enhancement Drawings pursuant to, and for the purposes set forth in, Section 9.
The interest of the Credit Enhancement Provider in the Credit Enhancement
Account shall be subordinated to the interests of the Certificateholders to the
extent provided herein and in the Credit Enhancement Agreement. The Trustee, at
the direction of the Master Servicer, shall (i) on the Series Closing Date,
deposit into the Credit Enhancement Account an amount equal to the sum of the
Stated Class A Credit Enhancement Amount, the Stated Shared Credit Enhancement
Amount, and the Stated Class B Credit Enhancement Amount, as applicable (such
amounts to be funded by the Credit Enhancement Provider pursuant to the Credit
Enhancement Agreement) and (ii) make withdrawals from, and
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deposits to, the Credit Enhancement Account from time to time in the amounts and
for the purposes set forth in this Series Supplement. The Credit Enhancement
Provider shall not be entitled to reimbursement from the assets of the Trust for
any withdrawals from the Credit Enhancement Account except as specifically
provided in this Series Supplement. The Master Servicer at all times shall
maintain accurate records reflecting each transaction in the Credit Enhancement
Account.
Funds on deposit in the Credit Enhancement Account shall be invested in
Permitted Investments by the Trustee as administrator of the Credit Enhancement
at the direction of the Master Servicer, as set forth below. Any Permitted
Investment with a stated maturity shall mature on or prior to the following
Distribution Date or such longer period as will not result in the lowering or
withdrawal of the rating of any Class of any Series then outstanding by the
Rating Agencies and any funds received with respect to the maturity of a
Permitted Investment shall be available in sufficient time to allow for any
payments to be made to the Investor Certificateholders on such Distribution
Date. The Master Servicer's notice to the Trustee shall specifically identify
each such Permitted Investment (including its principal amount and maturity). In
addition, the Master Servicer shall from time to time provide written notice to
the Trustee directing the Trustee to reinvest funds representing principal,
interest or other investment income received by it with respect to such
Permitted Investments (whether upon maturity or otherwise) in additional
Permitted Investments. In the event that the Master Servicer fails to direct the
Trustee to invest or reinvest any funds that are deposited in the Credit
Enhancement Account or that are received by it with respect to Permitted
Investments by 2:00 p.m. on the date such funds are available for investment,
the Trustee shall use reasonable efforts to invest such funds overnight in
securities represented by instruments in bearer or registered form which
evidence obligations issued or fully guaranteed, as to timely payment, by the
United States of America or any instrumentality or agency thereof when such
obligations are backed by the full faith and credit of the United States of
America until such time as the Trustee receives the required notice from the
Master Servicer; provided, however, that the Trustee shall have no liability for
the failure to invest such funds if the Trustee has employed reasonable efforts
to make such investment.
On each Distribution Date, all interest and earnings (net of losses and
investment expenses) accrued since the preceding Distribution Date on funds on
deposit in the Credit Enhancement Account shall be paid to the Trustee as
administrator of the Credit Enhancement for application in accordance with the
provisions of the Credit Enhancement Agreement. For purposes of determining the
availability of funds or the balances in the Credit Enhancement Account, all
investment earnings on such funds shall be deemed not to be available or on
deposit. If, on any Distribution Date, after giving effect to all other deposits
to and withdrawals from the Credit Enhancement Account as of such Distribution
Date, the amount on deposit in the Credit Enhancement Account is greater than
the Total Maximum Credit Enhancement Amount, then the excess of the amount on
deposit over the Total Maximum Credit Enhancement Amount shall be withdrawn from
the Credit Enhancement Account and paid to the Trustee as administrator of the
Credit Enhancement for application in accordance with the provisions of the
Credit Enhancement Agreement.
Upon the earliest to occur of (i) the termination of the Trust, (ii) the
Series Termination Date and (iii) the day on which the Class Invested Amount for
each Class of the Series established hereby is paid in full, and after payment
of all amounts to be paid on such day from the Credit
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Enhancement Account to or for the benefit of Investor Certificateholders of the
Series established hereby, all amounts remaining on deposit in the Credit
Enhancement Account shall 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.
(f) Transfer of Investor Accounts. If at any time any of the Investor
Accounts established in Sections 8(a) through 8(e) is not being held by the
Trustee and the institution holding such Investor Account ceases to be a
Qualified Institution, the Master Servicer shall within 10 Business Days
establish a new Investor Account (meeting any conditions specified in this
Series Supplement with respect to such Investor Account) with a Qualified
Institution and transfer any cash and/or any investments to such new Investor
Account.
SECTION 9. Allocations of Collections
(a) Deposits to Series Collections Account. On or before each
Distribution Date, the Master Servicer shall direct the Trustee in writing to
withdraw from the Group Collections Account and 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 Additional Funds for each Class of
the Series established hereby shall also have been deposited into the Series
Collections Account pursuant to Section 4.03(e) of the Pooling and Servicing
Agreement.
(b) Deposits During the Revolving Period, Early Accumulation Period,
Accumulation Period, Controlled Liquidation Period or Amortization Period, as
Applicable. The Master Servicer shall, on or before each Distribution Date
during the Revolving Period, the Early Accumulation Period, the Accumulation
Period, the Controlled Liquidation Period or any Amortization Period, as
applicable, direct the Trustee in writing that funds be paid or deposited in the
following amounts, to the extent such funds are available and in the order of
priority specified, to the account or Person indicated, in each case as set
forth below; provided, however, that if the 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 Total Available 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 if, on the related
Drawing Date, the Credit Enhancement Provider is unable to pay its debts as they
become due.
(1) During the Accumulation Period or the Early Accumulation Period, if
any, or on the first Distribution Date of the Amortization Period, if
applicable, an amount equal to the amount of Class Investment Income for the
related Due Period for any Class shall be withdrawn from the Series Principal
Funding Account and deposited into the Series Collections Account.
(2) With respect to Class A, an amount equal to the lesser of
(x) the Class A Required Amount and
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(y) the sum of (1) Class A Finance Charge Collections,
(2) Class A Yield Collections, (3) Class A Investment
Income, if applicable, and (4) Class A Additional
Funds
shall be withdrawn from the Series Collections Account and deposited into the
Series Distribution Account. The amount by which the Class A Required Amount
exceeds the amount of such deposit shall be the "Class A Required Amount
Shortfall."
(3) With respect to Class A, an amount equal to the lesser of
(x) the Class A Required Amount Shortfall and
(y) funds, if any, available to pay such Class A Required
Amount Shortfall from funds initially allocated to
any Subordinate Series
shall be deposited into the Series Distribution Account. The Class A Required
Amount Shortfall shall be reduced by the amount of such deposit.
(4) With respect to Class A, an amount equal to the lesser of
(x) the Class A Cumulative Investor Charged-Off Amount
and
(y) Class A Excess Servicing
shall be withdrawn from the Series Collections Account and deposited into the
Series Principal Collections Account. The Class A Cumulative Investor
Charged-Off Amount, Series Excess Servicing and the Available Subordinated
Amount shall be reduced by the amount of such deposit.
(5) An amount equal to the lesser of
(x) the Class A Cumulative Investor Charged-Off Amount
and
(y) funds, if any, available to pay such Class A
Cumulative Investor Charged-Off Amount from funds
initially allocated to any Subordinate Series
shall be deposited into the Series Principal Collections Account. The Class A
Cumulative Investor Charged-Off Amount shall be reduced by the amount of such
deposit.
(6) If there is a Subordinate Class with respect to Class A, an amount
equal to the least of
(x) the Class A Required Amount Shortfall,
(y) the Available Subordinated Amount, and
(z) Class B Available Collections
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shall be withdrawn from the Series Collections Account and deposited into the
Series Distribution Account. The Class B Subordinated Payment shall be increased
by, and the Class A Required Amount Shortfall, the Available Subordinated Amount
and Class B Available Collections shall be decreased by, the amount of such
deposit.
(7) If there is a Subordinate Class with respect to Class A, an amount
equal to the least of
(x) the Class A Cumulative Investor Charged-Off Amount,
(y) the Available Subordinated Amount, and
(z) Class B Available Collections
shall be withdrawn from the Series Collections Account and deposited into the
Series Principal Collections Account. The Class B Subordinated Payment shall be
increased by, and the Class A Cumulative Investor Charged-Off Amount, the
Available Subordinated Amount and Class B Available Collections shall be reduced
by, the amount of such deposit.
(8) If there is a Subordinate Class with respect to Class A, an amount
equal to the lesser of
(x) the Class B Required Amount and
(y) the positive difference, if any, between
(1) the amount of Class B Available Finance
Charge Collections, and
(2) the Class B Subordinated Payment
shall be withdrawn from the Series Collections Account and deposited into the
Series Distribution Account. The amount by which the Class B Required Amount
exceeds the amount of such deposit shall be the "Class B Required Amount
Shortfall."
(9) If there is a Subordinate Class with respect to Class A, an amount
equal to the lesser of
(x) the Class B Required Amount Shortfall and
(y) funds, if any, available to pay such Class B Required
Amount Shortfall from funds initially allocated to
any Subordinate Series
shall be deposited into the Series Distribution Account. The Class B Required
Amount Shortfall shall be reduced by the amount of such deposit.
(10) If there is a Subordinate Class with respect to Class A, an amount
equal to the lesser of
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(x) the Class B Cumulative Investor Charged-Off Amount
and
(y) funds, if any, available to pay such Class B
Cumulative Investor Charged-Off Amount from funds
initially allocated to any Subordinate Series
shall be deposited into the Series Principal Collections Account. The Class B
Cumulative Investor Charged-Off Amount shall be reduced by the amount of such
deposit.
(11) If there is a Subordinate Class with respect to Class A, an amount
equal to the least of
(x) the Class A Required Amount Shortfall,
(y) the Available Subordinated Amount, and
(z) Series Excess Servicing
shall be withdrawn from the Series Collections Account and deposited into the
Series Distribution Account. The Class A Required Amount Shortfall, the
Available Subordinated Amount and the amount of Series Excess Servicing shall be
reduced by the amount of such deposit.
(12) If there is a Subordinate Class with respect to Class A, an amount
equal to the least of
(x) the Class A Cumulative Investor Charged-Off Amount,
(y) the Available Subordinated Amount, and
(z) Series Excess Servicing
shall be withdrawn from the Series Collections Account and deposited into the
Series Principal Collections Account. The Class A Cumulative Investor
Charged-Off Amount, the Available Subordinated Amount and the amount of Series
Excess Servicing shall be reduced by the amount of such deposit. If the Class A
Cumulative Investor Charged-Off Amount is greater than zero after such
reduction, the Class A Cumulative Investor Charged-Off Amount shall be further
reduced by an amount equal to the least of
(x) the Class A Cumulative Investor Charged-Off Amount,
(y) the Available Subordinated Amount, and
(z) the Class B Investor Interest.
The Class A Cumulative Investor Charged-Off Amount, the Available Subordinated
Amount and the Class B Investor Interest shall each be reduced by such least
amount, and the Class B Cumulative Investor Charged-Off Amount shall be
increased by such amount.
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(13) If there is a Subordinate Class with respect to Class A, an amount
equal to the lesser of
(x) the Class B Required Amount Shortfall and
(y) Series Excess Servicing
shall be withdrawn from the Series Collections Account and deposited into the
Series Distribution Account. The Class B Required Amount Shortfall and the
amount of Series Excess Servicing shall be reduced by the amount of such
deposit.
(14) If there is a Subordinate Class with respect to Class A, an amount
equal to the lesser of
(x) the Class B Cumulative Investor Charged-Off Amount
and
(y) Series Excess Servicing
shall be withdrawn from the Series Collections Account and deposited into the
Series Principal Collections Account. The Class B Cumulative Investor
Charged-Off Amount and the amount of Series Excess Servicing shall be reduced by
the amount of such deposit.
(15) On each Distribution Date prior to the Fully Funded Date, if any,
an amount equal to the lesser of
(x) the amount by which the Total Available Credit
Enhancement Amount is less than the Total Maximum
Credit Enhancement Amount and
(y) Series Excess Servicing
shall 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. If there is Shared Credit
Enhancement or Class A Cash Collateral Credit Enhancement, such deposit shall
increase the Available Shared Credit Enhancement Amount or Available Class A
Credit Enhancement Amount, until the Available Shared Credit Enhancement Amount
or Available Class A Credit Enhancement Amount, as applicable, equals the
Maximum Shared Credit Enhancement Amount or the Maximum Class A Credit
Enhancement Amount, as applicable. If there is a Subordinate Class with respect
to Class A, any remaining portion of such deposit shall increase the Available
Class B Credit Enhancement Amount until the Available Class B Credit Enhancement
Amount equals the Maximum Class B Credit Enhancement Amount. The Total Available
Credit Enhancement Amount shall be increased by, and the amount of Series Excess
Servicing shall be decreased by, the amount of such deposit.
(16) If there is Shared Credit Enhancement or Class A Cash Collateral
Credit Enhancement, and if the Class A Required Amount Shortfall is greater than
zero, the Master Servicer, on the related Drawing Date, shall make a Credit
Enhancement Drawing in an amount equal to the lesser of
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(x) the Class A Required Amount Shortfall and
(y) the Available Shared Credit Enhancement Amount or the
Available Class A Credit Enhancement Amount, as
applicable,
and such amount shall be deposited into the Series Distribution Account. The
Class A Required Amount Shortfall and the Available Shared Credit Enhancement
Amount or Available Class A Credit Enhancement Amount, as applicable, shall be
reduced by the amount of such deposit.
(17) If there is Shared Credit Enhancement or Class A Cash Collateral
Credit Enhancement, and if the Class A Cumulative Investor Charged-Off Amount is
greater than zero, the Master Servicer, on the related Drawing Date, shall make
a Credit Enhancement Drawing in an amount equal to the lesser of
(x) the Class A Cumulative Investor Charged-Off Amount
and
(y) the Available Shared Credit Enhancement Amount or the
Available Class A Credit Enhancement Amount, as
applicable,
and such amount shall be deposited into the Series Principal Collections
Account. The Class A Cumulative Investor Charged-Off Amount and the Available
Shared Credit Enhancement Amount or Available Class A Credit Enhancement Amount,
as applicable, shall be reduced by the amount of such deposit.
(18) If there is Shared Credit Enhancement, and if there is a
Subordinate Class with respect to Class A, and if the Class B Required Amount
Shortfall is greater than zero, the Master Servicer, on the related Drawing
Date, shall make a Credit Enhancement Drawing in an amount equal to the lesser
of
(x) the Class B Required Amount Shortfall and
(y) the Available Shared Credit Enhancement Amount
and such amount shall be deposited into the Series Distribution Account. The
Class B Required Amount Shortfall and the Available Shared Credit Enhancement
Amount shall be reduced by the amount of such deposit.
(19) If there is Shared Credit Enhancement, and if there is a
Subordinate Class with respect to Class A, and if the Class B Cumulative
Investor Charged-Off Amount is greater than zero, the Master Servicer, on the
related Drawing Date, shall make a Credit Enhancement Drawing in an amount equal
to the lesser of
(x) the Class B Cumulative Investor Charged-Off Amount
and
(y) the Available Shared Credit Enhancement Amount
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<PAGE> 46
and such amount shall be deposited into the Series Principal Collections
Account. The Class B Cumulative Investor Charged-Off Amount and the Available
Shared Credit Enhancement Amount shall be reduced by the amount of such deposit.
(20) If there is Subordinate Class with respect to Class A, and if the
Class B Required Amount Shortfall is greater than zero, the Master Servicer, on
the related Drawing Date, shall make a Credit Enhancement Drawing in an amount
equal to the lesser of
(x) the Class B Required Amount Shortfall and
(y) the Available Class B Credit Enhancement Amount
and such amount shall be deposited into the Series Distribution Account. The
Class B Required Amount Shortfall and the Available Class B Credit Enhancement
Amount shall be reduced by the amount of such deposit.
(21) If there is a Subordinate Class with respect to Class A, and if
the Class B Cumulative Investor Charged-Off Amount is greater than zero, the
Master Servicer, on the related Drawing Date, shall make a Credit Enhancement
Drawing in an amount equal to the lesser of
(x) the Class B Cumulative Investor Charged-Off Amount
and
(y) the Available Class B Credit Enhancement Amount
and such amount shall be deposited into the Series Principal Collections
Account. The Class B Cumulative Investor Charged-Off Amount and the Available
Class B Credit Enhancement Amount shall be reduced by the amount of such
deposit.
(22) An amount equal to the lesser of
(x) the Credit Enhancement Fee and
(y) Series Excess Servicing
shall be withdrawn from the Series Collections Account and paid to the Trustee
as the administrator of the Credit Enhancement for application in accordance
with the provisions of the Credit Enhancement Agreement. The amount of Series
Excess Servicing shall be reduced by the amount of such payment.
(23) The Net Swap Payment, up to the remaining amount of Series Excess
Servicing, shall be withdrawn from the Series Collections Account and paid to
the Interest Rate Swap Counterparty in accordance with the provisions of the
Class Interest Rate Swap.
(24) An amount equal to the amount of Series Excess Servicing shall be
withdrawn from the Series Collections Account and deposited into the Group
Finance Charge Collections Reallocation Account.
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(25) The allocations set forth in clauses (25)(A) and (25)(B) shall be
made, first, with respect to Class A, and then, if there is a Subordinate Class
with respect to Class A, the allocations set forth in clauses (25)(A) and
(25)(B) shall be made with respect to Class B, to the extent that funds are
available pursuant to this clause (25):
(A) An amount equal to the lesser of
(x) the Class Required Amount Shortfall and
(y) the product of
(1) a fraction the numerator of which is the
Class Required Amount Shortfall and the
denominator of which is the sum of the Class
Required Amount Shortfalls for all Classes
designated by the same letter of the
alphabet of all Series in the Group to which
the Series established hereby belongs (after
giving effect to provisions in the
applicable Series Supplements substantially
similar to the clauses preceding this clause
(25)) and
(2) the amount on deposit in the Group Finance
Charge Collections Reallocation Account
before any withdrawals therefrom with
respect to any other Series pursuant to a
comparable clause in the applicable Series
Supplements,
shall be withdrawn from the Group Finance Charge Collections Reallocation
Account and deposited into the Series Distribution Account. The Class Required
Amount Shortfall shall be reduced by the amount of such deposit. The Available
Subordinated Amount shall be increased by the amount of any such deposit that
reduces the Class B Required Amount Shortfall.
(B) An amount equal to the lesser of
(x) the Class Cumulative Investor Charged-Off Amount and
(y) the product of
(1) a fraction the numerator of which is the
Class Cumulative Investor Charged-Off Amount
and the denominator of which is the sum of
the Class Cumulative Investor Charged-Off
Amounts for all Classes designated by the
same letter of the alphabet of all Series in
the Group to which the Series established
hereby belongs (after giving effect to
provisions in the applicable Series
Supplements substantially similar to the
clauses preceding this clause (25)) and
(2) the amount on deposit in the Group Finance
Charge Collections Reallocation Account
before any withdrawals
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<PAGE> 48
therefrom with respect to any other Series
pursuant to a comparable clause in the
applicable Series Supplements,
shall be withdrawn from the Group Finance Charge Collections Reallocation
Account and deposited into the Series Principal Collections Account. The Class
Cumulative Investor Charged-Off Amount shall be reduced by the amount of such
deposit. The Available Subordinated Amount shall be increased by the amount of
any such deposit that reduces the Class B Cumulative Investor Charged-Off
Amount.
(C) After the allocations set forth in clauses (25)(A) and (25)(B) are
made with respect to Class A and Class B, then, if there are one or more
Subordinate Classes other than Class B, the allocations set forth in clauses
(25)(A) and (25)(B) shall be made with respect to each other such Class, in
alphabetical order, to the extent that funds are available pursuant to this
clause (25).
(26) The allocations set forth in clauses (26)(A) and (26)(B) shall be
made, to the extent that funds are available pursuant to this clause (26):
(A) If there is Shared Credit Enhancement or Class A Cash Collateral
Credit Enhancement, an amount equal to the lesser of
(x) the amount by which the Available Shared Credit
Enhancement Amount or the Available Class A Credit
Enhancement Amount, as applicable, is less than the
Maximum Shared Credit Enhancement Amount or the
Maximum Class A Credit Enhancement Amount, as
applicable and
(y) the product of
(1) a fraction, the numerator of which is the
amount by which the Available Shared Credit
Enhancement Amount or the Available Class A
Credit Enhancement Amount, as applicable, is
less than the Maximum Shared Credit
Enhancement Amount or the Maximum Class A
Credit Enhancement Amount, as applicable,
and the denominator of which is the sum of,
for each Series in the Group of which the
Series established hereby is a member, the
amount by which the Available Shared Credit
Enhancement Amount or the Available Class A
Credit Enhancement Amount, as applicable,
for such Series is less than the Maximum
Shared Credit Enhancement Amount or the
Maximum Class A Credit Enhancement Amount,
as applicable, for such Series (after giving
effect to provisions in the applicable
Series Supplements substantially similar to
the clauses preceding this clause (26)) and
(2) the amount on deposit in the Group Finance
Charge Collections Reallocation Account
before any withdrawals
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therefrom with respect to any other Series
pursuant to a comparable clause in the
applicable Series Supplements,
shall be withdrawn from the Group Finance Charge Collections Reallocation
Account and paid to the Trustee as administrator of the Credit Enhancement for
application in accordance with the provisions of the Credit Enhancement
Agreement. Such deposit shall increase the Available Shared Credit Enhancement
Amount or the Available Class A Credit Enhancement Amount, as applicable.
(B) If there is a Subordinate Class with respect to Class A, an amount
equal to the lesser of
(x) the amount by which the Available Class B Credit
Enhancement Amount is less than the Maximum Class B
Credit Enhancement Amount and
(y) the product of
(1) a fraction, the numerator of which is the
amount by which the Available Class B Credit
Enhancement Amount is less than the Maximum
Class B Credit Enhancement Amount and the
denominator of which is the sum of, for each
Series in the Group of which the Series
established hereby is a member, the amount
by which the Available Class B Credit
Enhancement Amount for such Series is less
than the Maximum Class B Credit Enhancement
Amount for such Series (after giving effect
to provisions in the applicable Series
Supplements substantially similar to the
clauses preceding this clause (26)) and
(2) the amount on deposit in the Group Finance
Charge Collections Reallocation Account
before any withdrawals therefrom with
respect to any other Series pursuant to a
comparable clause in the applicable Series
Supplements,
shall be withdrawn from the Group Finance Charge Collections Reallocation
Account and paid to the Trustee as administrator of the Credit Enhancement for
application in accordance with the provisions of the Credit Enhancement
Agreement. Each of the Available Class B Credit Enhancement Amount and the
Available Subordinated Amount shall be increased by the amount of such deposit.
(27) After all allocations from the Group Finance Charge Collections
Reallocation Account to be made pursuant to any other Series Supplement for any
Series that is a member of the same Group of which the Series established hereby
is a member have been made, an amount equal to the product of (x) a fraction the
numerator of which shall be the Series Investor Interest and the denominator of
which shall be the sum of the Series Investor Interests for each Series that is
a member of the same Group as the Series established hereby (including the
Series established hereby) and (y) the amount remaining on deposit in the Group
Finance Charge
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Collections Reallocation Account shall be withdrawn from the
Group Finance Charge Collections Reallocation 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 Finance Charge Collections Reallocation Account shall be withdrawn
from such account and allocated pursuant to the provisions of the Series
Supplements for each other Series that is a member of the same Group as the
Series established hereby.
(28) Any amounts remaining on deposit in the Series Collections Account
shall be withdrawn from the Series Collections Account and deposited into the
Series Principal Collections Account.
(29) The Net Swap Receipt, to the extent paid to the Trustee by the
Interest Rate Swap Counterparty pursuant to the Class Interest Rate Swap, shall
be deposited in the Series Collections Account.
(30) Any amount remaining on deposit in the Series Collections Account
will be withdrawn from the Series Collections Account and paid to the Holder of
the Seller Certificate.
(31) Unless the Distribution Date is a Distribution Date in the
Revolving Period, the lesser of
(x) the Principal Distribution Amount and
(y) the amount on deposit in the Series Principal
Collections Account
shall be withdrawn from the Series Principal Collections Account and deposited
into the Series Principal Funding Account. The amount by which the Principal
Distribution Amount exceeds the amount of such deposit shall be the "Principal
Distribution Amount Shortfall."
(32) Unless the Distribution Date is a Distribution Date in the
Revolving Period, the lesser of
(x) the Principal Distribution Amount Shortfall and
(y) funds, if any, available to pay such Principal
Distribution Amount Shortfall from funds initially
allocated to any Subordinate Series
shall be deposited into the Series Principal Funding Account. The Principal
Distribution Amount Shortfall shall be reduced by the amount of such deposit.
(33) Any amounts remaining on deposit in the Series Principal
Collections Account shall be withdrawn from the Series Principal Collections
Account and be deposited into the Group Principal Collections Reallocation
Account.
(34) During the Accumulation Period or the Controlled Liquidation
Period, as applicable, the allocation set forth below shall be made with respect
to each Class, beginning with Class A and continuing, seriatim, for each Class,
to the extent that funds are available pursuant to this clause (34):
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An amount equal to the lesser of
(x) the portion of the Principal Distribution Amount
Shortfall that is allocable to such Class and
(y) the product of
(1) a fraction the numerator of which is the
portion of the Principal Distribution Amount
Shortfall that is allocable to such Class
and the denominator of which is the sum of
the portions of the Principal Distribution
Amount Shortfalls allocable to all Classes
designated by the same letter of the
alphabet of all Series in the Group to which
the Series established hereby belongs that
are in their Accumulation Periods or
Controlled Liquidation Periods, as
applicable (after giving effect to
provisions in the applicable Series
Supplements substantially similar to the
clauses preceding this clause (34)) and
(2) the amount on deposit in the Group Principal
Collections Reallocation Account before any
withdrawals therefrom with respect to any
other Series
shall be withdrawn from the Group Principal Collections Reallocation Account and
deposited into the Series Principal Funding Account. The Principal Distribution
Amount Shortfall shall be reduced by the amount of such deposit.
(35) After all allocations from the Group Principal Collections
Reallocation Account to be made pursuant to any other Series Supplement for any
Series that is a member of the same Group of which the Series established hereby
is a member have been made, the amount remaining on deposit in the Group
Principal Collections Reallocation Account shall be withdrawn from the Group
Principal Collections Reallocation Account and deposited into the Collections
Account.
(36) After all other allocations have been provided for with respect to
each Series then outstanding (whether or not such Series is a member of the same
Group as the Series established hereby), the lesser of
(x) the amount of the Seller Interest and
(y) the amount on deposit in the Collections Account
shall be paid to the Holder of the Seller Certificate. If, after such payment,
any amounts remain on deposit in the Collections Account, such amounts shall
remain in the Collections Account for allocation as Principal Collections on the
next Trust Distribution Date.
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SECTION 10. Payments.
(a) Payments.
(1) On each Distribution Date related to a Due Period in the Accumulation
Period or the Early Accumulation Period, and on the first Distribution Date of
the Amortization Period, the Master Servicer shall direct the Trustee in writing
to withdraw the amount of Excess Income, if any, on deposit in the Series
Principal Funding Account from the Series Principal Funding Account and pay such
amount to the Holder of the Seller Certificate.
(2) On each Distribution Date, after giving effect to payments made
pursuant to Section 9 and the calculation of Investor Losses and adjustment of
the Class Investor Interest and Class Invested Amount with respect to each Class
pursuant to Section 13, the Master Servicer shall direct the Trustee in writing
to withdraw and cause the Paying Agent to pay funds from the applicable Investor
Account to or for the benefit of each Class of Investor Certificateholders,
seriatim, with respect to each Class, beginning with Class A, until such
payments have been made with respect to each Class, as set forth below:
(A) First, an amount equal to the lesser of
(x) the Class Modified Required Amount and
(y) the amount on deposit in the Series Distribution Account.
shall be withdrawn from the Series Distribution Account and deposited into the
Series Interest Funding Account. The amount by which the Class Modified Required
Amount exceeds the amount so deposited into the Series Interest Funding Account
shall be the "Class Monthly Deficiency Amount" with respect to such Distribution
Date.
(B) Second, an amount equal to the lesser of
(x) the sum of the Class Monthly Servicing Fee for such Distribution
Date and all accrued but unpaid Class Monthly Servicing Fees from
prior months and
(y) the amount deposited into the Series Distribution Account with
respect to such Class on such Distribution Date pursuant to
Section 9 less the amount deposited into the Series Interest
Funding Account with respect to such Class pursuant to clause (A)
above
shall be withdrawn from the Series Distribution Account and paid to the Master
Servicer.
(3) On each Interest Payment Date, the Master Servicer shall direct the
Trustee in writing to deposit into the Series Interest Funding Account any Class
Interest Rate Cap Payment made by any Interest Rate Cap Provider for any Class
or Subclass pursuant to the Class Interest Rate Cap for such Class or Subclass.
(4) On each Interest Payment Date, after giving effect to the payments
described above on such day, the Master Servicer shall direct the Trustee in
writing to withdraw the amount deposited into the Series Interest Funding
Account with respect to each Class or Subclass since the preceding Interest
Payment Date. The Master Servicer shall cause the Paying
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<PAGE> 53
Agent to pay such amount on each Interest Payment Date to the Investor
Certificateholders of such Class or Subclass in accordance with Section 5.01 of
the Pooling and Servicing Agreement.
(5) On each Principal Payment Date, after giving effect to the payments
described above on such day, an amount equal to the lesser of
(x) the Controlled Liquidation Amount and
(y) the amount deposited into the Series Principal Funding Account on
any Distribution Date pursuant to Section 9
shall be withdrawn from the Series Principal Funding Account. The Master
Servicer shall cause the Paying Agent to pay such amount to the Investor
Certificateholders of such Class or Subclass in accordance with Section 5.01 of
the Pooling and Servicing Agreement. Except as set forth in the following
sentence, all such amounts shall be paid to or with respect to the Class A
Investor Certificateholders until the Class A Invested Amount is reduced to
zero; and, thereafter, if there is a Subordinate Class with respect to Class A,
such amounts shall be paid to or with respect to the Class B Investor
Certificateholders until the Class B Invested Amount is reduced to zero, unless
the Series Termination Date occurs prior to such date; provided, however, that
on the Fully Funded Date, if any, the Class B Invested Amount shall be withdrawn
from the Series Principal Funding Account and paid to the Class B Investor
Certificateholders. In no event shall any amounts be paid with respect to any
Class of Investor Certificates pursuant to this clause (5) in excess of the
Class Invested Amount for such Class. Any amounts remaining on deposit in the
Series Principal Funding Account after the Class Invested Amount for each Class
has been reduced to zero shall be paid to the Holder of the Seller Certificate.
(6) On each Special Payment Date during the Amortization Period, after
giving effect to the payments described above on such day, an amount equal to
the lesser of
(x) the Principal Distribution Amount and
(y) the amount deposited into the Series Principal Funding Account on
such Special Payment Date pursuant to Section 9
shall be withdrawn from the Series Principal Funding Account. The Master
Servicer shall cause the Paying Agent to pay such amount to the Investor
Certificateholders of such Class or Subclass in accordance with Section 5.01 of
the Pooling and Servicing Agreement. Except as set forth in the following
sentence, all such amounts shall be paid to or with respect to the Class A
Investor Certificateholders until the Class A Invested Amount is reduced to
zero; and, thereafter, if there is a Subordinate Class with respect to Class A,
such amounts shall be paid to or with respect to the Class B Investor
Certificateholders until the Class B Invested Amount is reduced to zero, unless
the Series Termination Date occurs prior to such date. In no event shall any
amounts be paid with respect to any Class of Investor Certificates pursuant to
this clause (6) in excess of the Class Invested Amount for such Class. Any
amounts remaining on deposit in the Series Principal Funding Account after the
Class Invested Amount for each Class has been reduced to zero shall be paid to
the Holder of the Seller Certificate.
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(7) On the first Distribution Date of the Amortization Period, if any,
after giving effect to the payments and withdrawals and conversions described
above on such day, an amount equal to the lesser of
(x) the Series Invested Amount and
(y) the amount on deposit in the Series Principal Funding Account
shall be withdrawn from the Series Principal Funding Account. The Master
Servicer shall cause the Paying Agent to pay such amount to the Investor
Certificateholders of such Class or Subclass in accordance with Section 5.01 of
the Pooling and Servicing Agreement. Except as set forth in the following
sentence, all such amounts shall be paid to or with respect to the Class A
Investor Certificateholders until the Class A Invested Amount is reduced to
zero; and, thereafter, if there is a Subordinate Class with respect to Class A,
such amounts shall be paid to or with respect to the Class B Investor
Certificateholders until the Class B Invested Amount is reduced to zero, unless
the Series Termination Date occurs prior to such date. In no event shall any
amounts be paid with respect to any Class of Investor Certificates pursuant to
this clause (7) in excess of the Class Invested Amount for such Class. Any
amounts remaining on deposit in the Series Principal Funding Account after the
Class Invested Amount for each Class has been reduced to zero shall be paid to
the Holder of the Seller Certificate.
(8) On the Class Expected Final Payment Date or the Class Final Maturity
Date, if applicable (or, if such Class Expected Final Payment Date or Class
Final Maturity Date is not also a Distribution Date, on the Distribution Date
occurring in the same calendar month as the Class Expected Final Payment Date or
the Class Final Maturity Date, if applicable), the Master Servicer shall direct
the Trustee in writing to withdraw the amount on deposit in the Series Principal
Funding Account with respect to each Class; provided that (i) such amount shall
be no greater than the Class Invested Amount and (ii) funds, if any, remaining
on deposit in the Series Principal Funding Account after the payment in full of
the Class Invested Amount with respect to each Class shall be withdrawn and paid
to the Holder of the Seller Certificate. The Master Servicer shall cause the
Paying Agent to pay such amount to the Investor Certificateholders of such Class
or Subclass in accordance with Section 5.01 of the Pooling and Servicing
Agreement.
(b) Payments to the Sellers and/or the Master Servicer. Notwithstanding the
other provisions in Section 9 and this Section 10, any amounts payable to
Greenwood on behalf of the Holder of the Seller Certificate or to the Master
Servicer on any Distribution Date pursuant to Section 9 and this Section 10 may
be paid prior to such Distribution Date pursuant to Section 4.03(d) of the
Pooling and Servicing Agreement.
SECTION 11. Credit Enhancement
(a) Initial Credit Enhancement. The Master Servicer hereby represents with
respect to the Initial Credit Enhancement and shall be deemed to represent with
respect to any successor Credit Enhancement that (i) the Master Servicer has
provided for the Credit Enhancement for the account of the Trustee and for the
benefit of the Investor Certificateholders, (ii) the Master Servicer has entered
into a Credit Enhancement Agreement, (iii) the Credit Enhancement permits the
Trustee or the Master Servicer, acting as the Trustee's attorney-in-fact or
otherwise, to make
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<PAGE> 55
Credit Enhancement Drawings from time to time in an amount up to the Total
Available Credit Enhancement Amount at such time, for the purposes set forth in
this Agreement and (iv) the Credit Enhancement and the respective Credit
Enhancement Agreement may be terminated by the Trustee without penalty if (x)
the Master Servicer elects to obtain a successor Credit Enhancement and such
successor Credit Enhancement does not cause the ratings of the Investor
Certificates of the Series established hereby to be withdrawn or lowered by
either of the Rating Agencies from the respective ratings of such Investor
Certificates immediately prior to such election or (y) if the Credit Enhancement
is not Funded Credit Enhancement, the Credit Enhancement Provider ceases to be a
Qualified Credit Enhancement Provider.
(b) Successor Credit Enhancement.
(i) If the Credit Enhancement is not Funded Credit Enhancement and if,
at any time, the provider of such Credit Enhancement ceases to be a
Qualified Credit Enhancement Provider, the Master Servicer shall obtain a
successor Credit Enhancement within 30 days or such longer period as will
not result in the lowering or withdrawal of the rating of any Class of any
Series then outstanding by the Rating Agencies (a) which, if such successor
Credit Enhancement is not to be Funded Credit Enhancement, will be issued
by a Qualified Credit Enhancement Provider and (b) with respect to which
the representations set forth in Section 11(a) will be satisfied; provided,
however, that the Master Servicer shall not be required to continue efforts
to obtain a successor Credit Enhancement if the then existing Credit
Enhancement Provider again becomes a Qualified Credit Enhancement Provider
and remains such; and, provided, further, that unless otherwise agreed to
by the Rating Agencies, the Credit Enhancement and Credit Enhancement
Agreement will not be terminated and no successor Credit Enhancement
Provider shall be selected if the successor Credit Enhancement, the
successor Credit Enhancement Agreement, or the selection of such successor
Credit Enhancement Provider would cause the ratings of the Investor
Certificates of the Series established hereby to be withdrawn or lowered by
either Rating Agency from the respective ratings of such Investor
Certificates immediately prior to such selection. The Master Servicer, the
Trustee and the Sellers shall promptly enter into any such successor Credit
Enhancement Agreement, and the Master Servicer shall use its best efforts
to secure the signature of any other required party to such agreement.
(ii) Regardless of whether the Credit Enhancement is Funded Credit
Enhancement, the Master Servicer may elect, at any time, to obtain a
successor Credit Enhancement, provided that such successor Credit
Enhancement does not cause the ratings of the Investor Certificates of the
Series established hereby to be withdrawn or lowered by either of the
Rating Agencies from the respective ratings of such Investor Certificates
immediately prior to such election.
(iii) In any case, subject to the foregoing, any successor Credit
Enhancement obtained by the Master Servicer need not consist of the same
type of Credit Enhancement as the Initial Credit Enhancement, but may
consist of a different type of facility, including, but not limited to, a
reserve account, a cash collateral account, an irrevocable standby letter
of credit, a surety bond or a combination of any of the above. Upon
issuance of, or
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other provision for, any such successor Credit Enhancement, the Trustee
shall terminate the prior Credit Enhancement and Credit Enhancement
Agreement.
(c) Supplemental Credit Enhancement Event. Upon the occurrence of a
Supplemental Credit Enhancement Event, Greenwood as Servicer shall, within 60
days of notice from Standard & Poor's of the withdrawal or downgrade (or such
longer period as may be agreed to by Standard & Poor's), arrange for the payment
of the Supplemental Credit Enhancement Amount, if any, by a Person other than
Greenwood (or from Series Excess Servicing) to the Trustee as administrator of
the Credit Enhancement for application in accordance with the provisions of the
Credit Enhancement Agreement. Both the form and the provider of the Supplemental
Credit Enhancement Amount, if any, shall be determined at the time it is to be
paid; provided, that the Master Servicer shall have received confirmation from
Standard & Poor's that the arrangements with respect to the Supplemental Credit
Enhancement Amount, if any, will not result in the rating of the Investor
Certificates of the Series established hereby being withdrawn or lowered. In
addition to the foregoing, the Master Servicer shall notify Moody's of the
occurrence of a Supplemental Credit Enhancement Event as soon as practicable
after such occurrence, and shall notify Moody's in advance of its implementation
of the form and provider of the Supplemental Credit Enhancement Amount, if any.
SECTION 12. Alternative Credit Support Election.
(a) The Sellers may elect to effect a change in the calculation of the
Class Percentage with respect to Finance Charge Collections during the Early
Accumulation Period or the Amortization Period, as set forth in the definition
of "Class Percentage," and increase the Available Class B Credit Enhancement
Amount, by making an Alternative Credit Support Election. An Alternative Credit
Support Election may be made as follows:
(i) at any time during the Revolving Period, Greenwood on behalf of
the Holder of the Seller Certificate shall deliver written notice of such
Alternative Credit Support Election to the Rating Agencies, the Trustee and
the Credit Enhancement Provider;
(ii) prior to the last day of the Revolving Period, the Additional
Credit Support Amount shall be paid to the Trustee as administrator of the
Credit Enhancement for application in accordance with the provisions of the
Credit Enhancement Agreement; provided, however, that following an Early
Accumulation Event or an Amortization Event, the Additional Credit Support
Amount may be paid to the Trustee as administrator of the Credit
Enhancement at any time on or prior to the last day of the Due Period in
which the Early Accumulation Event or the Amortization Event occurs;
(iii) prior to the last day of the Revolving Period (or, following an
Early Accumulation Event or an Amortization Event during the Revolving
Period, on or prior to the last day of the Due Period in which the Early
Accumulation Event or the Amortization Event occurs), the Rating Agencies
shall have confirmed that the Alternative Credit Support Election shall not
cause a reduction in or withdrawal of the rating of any Class of Investor
Certificates of the Series established hereby; and
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(iv) prior to the last day of the Revolving Period (or, following an
Early Accumulation Event or an Amortization Event during the Revolving
Period, on or prior to the last day of the Due Period in which the Early
Accumulation Event or the Amortization Event occurs), Greenwood on behalf
of the Holder of the Seller Certificate shall have delivered to the Rating
Agencies written confirmation that the conclusions reached in the legal
opinions delivered on the Initial Closing Date regarding the absolute
transfer of the Receivables and the security interest of the Trust in the
Receivables are not affected by the Alternative Credit Support Election.
(b) If each of the actions set forth in Section 12(a) above has been taken
or satisfied as required, the Alternative Credit Support Election shall become
effective on the last day of the Due Period in which the Additional Credit
Support Amount has been paid to the Trustee as administrator of the Credit
Enhancement (an "Effective Alternative Credit Support Election").
(c) At any time until the Alternative Credit Support Election becomes
effective, such Alternative Credit Support Election may be cancelled upon notice
to the Rating Agencies, the Trustee and the Credit Enhancement Provider.
Thereafter, the Additional Credit Support Amount, if any, shall be returned by
the Trustee as administrator of the Credit Enhancement in accordance with the
Credit Enhancement Agreement.
SECTION 13. Calculation of Investor Losses.
(a) For each Distribution Date, the Master Servicer shall calculate the
Class Investor Charged-Off Amount and the Class Cumulative Investor Charged-Off
Amount with respect to each Class, in each case as of the end of the related Due
Period.
(b) If on any Distribution Date, the Class Investor Charged-Off Amount with
respect to any Class exceeds the Class Charge-Off Reimbursement Amount with
respect to such Class, the Class Investor Interest and the Class Invested Amount
for such Class shall each be reduced by the amount of such excess (an "Investor
Charge-Off Loss" with respect to such Class).
(c) On each Distribution Date the Class Investor Interest and the Class
Invested Amount for each Class shall be increased by, and the amount of
aggregate unreimbursed Investor Losses for each such Class shall be decreased
by, the positive difference, if any, between the Class Charge-Off Reimbursement
Amount on such Distribution Date and the Class Investor Charged-Off Amount for
such Distribution Date; provided, however, that neither the Class Invested
Amount nor the Class Investor Interest shall exceed the Class Initial Investor
Interest for such Class minus the sum of (x) the aggregate amount of payments of
Certificate Principal paid to the 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 Certificate Principal and (z) the aggregate amount of
losses, if any, on investments of principal of funds on deposit in the Series
Principal Funding Account for the benefit of such Class; and provided, further,
that the amount of Investor Losses with respect to any Class shall not be
reduced to an amount less than zero.
SECTION 14. Servicing Compensation. As compensation for its servicing
activities hereunder and under the Pooling and Servicing Agreement and
reimbursement of its expenses as
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set forth in Section 3.03 of the Pooling and Servicing Agreement, the Master
Servicer shall be entitled to receive a monthly servicing fee with respect to
the Series established hereby in respect of any Due Period (or portion thereof)
prior to the earlier of the date on which the Series Investor Interest is
reduced to zero and the Series Termination Date. Such monthly servicing fees
shall be composed of the Class Monthly Servicing Fees and the Supplemental
Servicing Fees, if any. The Class Monthly Servicing Fees shall be paid to the
Master Servicer on behalf of each Class on each Distribution Date pursuant to
Section 10. The Supplemental Servicing Fee, if any, shall be paid to the Master
Servicer on or before each Distribution Date from the Series Additional Funds
for such Distribution Date. In no event shall the Trustee or the Investor
Certificateholders be liable for the Supplemental Servicing Fee.
SECTION 15. Class Interest Rate Caps.
(a) In the event that the Master Servicer has obtained a Class Interest
Rate Cap in favor of the Trustee for the benefit of a Class or Subclass that
does not have a fixed or maximum Certificate Rate, the Master Servicer hereby
represents that such Class Interest Rate Cap provides that (i) the Trust shall
not be required to make any payments thereunder and (ii) the Trust shall be
entitled to receive payments (determined in accordance with the Class Interest
Rate Cap) from the Interest Rate Cap Provider on an Interest Payment Date if
LIBOR or the Commercial Paper Rate, as applicable, for the related Calculation
Period exceeds the Class Cap Rate for the applicable Class or Subclass. Any
Class Interest Rate Cap Payment shall be deposited into the Series Interest
Funding Account.
(b) In the event that the commercial paper or certificate of deposit rating
of the Interest Rate Cap Provider is withdrawn or reduced below the ratings
specified in the Series Term Sheet (or, in either case, such lower rating as the
applicable Rating Agency shall allow), then within 30 days after receiving
notice of such decline in the creditworthiness of the Interest Rate Cap Provider
as determined by either Rating Agency, either (x) the Interest Rate Cap
Provider, with the prior confirmation of the Rating Agencies that such
arrangement will not result in the reduction or withdrawal of the rating of any
Investor Certificates of the Series established hereby, will enter into an
arrangement the purpose of which shall be to assure performance by the Interest
Rate Cap Provider of its obligations under the Class Interest Rate Caps; or (y)
the Master Servicer shall at its option either (i) with the prior confirmation
of the Rating Agencies that such action will not result in a reduction or
withdrawal of the rating of any Investor Certificates of the Series established
hereby, cause the Interest Rate Cap Provider to pledge securities in the manner
provided by applicable law, which shall be held by the Trustee or its agent free
and clear of the Lien of any third party, in a manner conferring on the Trustee
a perfected first Lien in such securities securing the Interest Rate Cap
Provider's performance of its obligations under the Class Interest Rate Caps, or
(ii) provided that Replacement Class Interest Rate Caps or Qualified Substitute
Cap Arrangements meeting the requirements of Section 15(c) have been obtained,
direct the Trustee (A) to provide written notice to the Interest Rate Cap
Provider of its intention to terminate the Class Interest Rate Caps within such
30-day period and (B) to terminate the Class Interest Rate Caps within such
30-day period, to request the payment to it of all amounts due to the Trust
under the Class Interest Rate Caps through the termination date and to deposit
any such amounts so received, on the day of receipt, to the Series Interest
Funding Account, or (iii) establish any other arrangement (including an
arrangement or arrangements in addition to or in substitution for any prior
arrangement made in accordance with the provisions of this Section
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15(b)) satisfactory to the Rating Agencies such that the Rating Agencies will
not reduce or withdraw the rating of any Investor Certificates of the Series
established hereby (a "Qualified Substitute Cap Arrangement"); provided,
however, that in the event at any time any alternative arrangement established
pursuant to clause (x) or (y)(i) or (y)(iii) above shall cease to be
satisfactory to the Rating Agencies then the provisions of this Section 15(b)
shall again be applied and in connection therewith the 30-day period referred to
above shall commence on the date the Master Servicer receives notice of such
cessation.
(c) Unless an alternative arrangement pursuant to clause (x) or (y)(i) of
Section 15(b) is being established, the Master Servicer shall use its best
efforts to obtain Replacement Class Interest Rate Caps or Qualified Substitute
Cap Arrangements meeting the requirements of this Section 15(c) during the
30-day period referred to in Section 15(b). The Trustee shall not terminate the
Class Interest Rate Caps unless, prior to the expiration of the 30-day period
referred to in Section 15(b), the Master Servicer delivers to the Trustee (i)
Replacement Class Interest Rate Caps or Qualified Substitute Cap Arrangements,
(ii) to the extent applicable, an Opinion of Counsel as to the due
authorization, execution and delivery and validity and enforceability of each
such Replacement Class Interest Rate Cap or Qualified Substitute Cap
Arrangement, as the case may be, and (iii) confirmation from each Rating Agency
that the termination of the Class Interest Rate Caps and their replacement with
such Replacement Class Interest Rate Caps or Qualified Substitute Cap
Arrangements will not adversely affect its rating of the Investor Certificates
of the Series established hereby.
(d) Master Servicer shall notify the Trustee, the Rating Agencies and the
Credit Enhancement Provider within five Business Days after obtaining knowledge
that the commercial paper or certificate of deposit rating of the Interest Rate
Cap Provider has been withdrawn or reduced by either Rating Agency.
(e) Notwithstanding the foregoing, the Master Servicer may at any time
obtain Replacement Class Interest Rate Caps, provided that the Master Servicer
delivers to the Trustee (i) an Opinion of Counsel as to the due authorization,
execution and delivery and validity and enforceability of such Replacement Class
Interest Rate Caps and (ii) confirmation from the Rating Agencies that the
termination of the then current Class Interest Rate Caps and their replacement
with such Replacement Class Interest Rate Caps will not adversely affect the
rating of the Investor Certificates of the Series established hereby.
(f) The Trustee hereby appoints the Master Servicer to perform the duties
of the calculation agent under the Class Interest Rate Caps and the Master
Servicer accepts such appointment.
SECTION 16. Class Interest Rate Swaps. In the event that the Investor
Certificates of any Class are subject to a Class Interest Rate Swap, the Trust
will enter into a Class Interest Rate Swap in a form approved by the Master
Servicer. Pursuant to the terms of the Class Interest Rate Swap, on each
Distribution Date, the Interest Rate Swap Counterparty shall pay to the Trust
the Net Swap Receipt or the Trust shall pay to the Interest Rate Swap
Counterparty the Net Swap Payment, as applicable. If the Trust does not receive
payment from the Interest Rate Swap Counterparty on each Distribution Date (if
due), the Trustee, on behalf of the Trust, shall attempt to determine from the
Interest Rate Swap Counterparty the reasons therefore and whether such
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payment is to be made by the Interest Rate Swap Counterparty on such
Distribution Date. If the Class Interest Rate Swap has not been terminated and
the Trust has not received any payment due from the Interest Rate Swap
Counterparty on the related Distribution Date, the Trustee shall notify the
Master Servicer of such fact prior to 1:00 p.m. Chicago time on such
Distribution Date.
SECTION 17. Investor Certificateholders' Monthly Statement. On each
Statement Date, a statement substantially in the form of Exhibit B prepared by
the Trustee (based on information provided by the Master Servicer) setting forth
the information listed thereon shall be available from the Trustee, each Paying
Agent and, if applicable, the Listing Agent.
SECTION 18. Master Servicer's Monthly Certificate. On or before the second
Business Day preceding each Statement Date, the Master Servicer shall forward to
Greenwood on behalf of the Holder of the Seller Certificate, the Trustee and
each Paying Agent a certificate of a Servicing Officer substantially in the form
of Exhibit C setting forth the information listed thereon.
SECTION 19. Notices. Any notices to holders of Investor Certificates issued
in bearer form shall be given as described in the Series Term Sheet.
SECTION 20. Additional Amortization Events. If any one of the following
events shall occur:
(a) after giving effect to payments and distributions on the Class Expected
Final Payment Date or the Class Final Maturity Date, as applicable, with respect
to any Class, the Class Invested Amount for such Class is not reduced to zero;
(b) if applicable, following either (i) the withdrawal or reduction of the
commercial paper or certificate of deposit rating of any Interest Rate Cap
Provider to below the ratings specified in the Series Term Sheet (or, in either
case, such lower rating as the applicable Rating Agency has allowed) or (ii)
notice from either Rating Agency that any Qualified Substitute Cap Arrangement
or any other arrangement established pursuant to Section 15 is no longer
satisfactory to such Rating Agency, the Master Servicer shall fail, within the
applicable time period specified in Section 15, to (x) obtain Replacement Class
Interest Rate Caps or Qualified Substitute Cap Arrangements or (y) cause the
Interest Rate Cap Provider to pledge securities as collateral securing the
obligations of the Interest Rate Cap Provider or establish any other arrangement
as provided in Section 15, in each case in a manner satisfactory to the Trustee
and the Rating Agencies (such that neither Rating Agency will reduce or withdraw
the ratings of the Investor Certificates of the Series established hereby); or
(c) if the amount of Principal Receivables in the Trust at the end of any
Due Period for three consecutive Due Periods of the Early Accumulation Period
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;
an Amortization Event shall occur with respect to the Investor Certificates of
the Series established hereby, immediately upon the occurrence of such event. If
an Amortization Event described in this Section 20 shall occur, this Section 20
constitutes written notice by the Trustee and not less than 51% of the Class
Invested Amount of each Class of the Series established hereby
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to the Master Servicer and the Sellers that such Amortization Event has
occurred. No additional notice of any kind, which is hereby waived by the
Sellers and the Master Servicer, shall be required as a condition of the
occurrence of any Amortization Event described in this Section 20. In addition,
the events set forth in Section 21 shall constitute either Early Accumulation
Events or additional Amortization Events with respect to the Series established
hereby .
SECTION 21. Early Accumulation Events; Additional Amortization Events. If
the Series established hereby is eligible to have an Early Accumulation Period,
each of the events described in clause (a), (b), (g), (i) or (j) of Section 9.01
of the Pooling and Servicing Agreement shall not be Amortization Events but
shall instead be Early Accumulation Events. In addition, for purposes of this
Series Supplement, each of the following events shall be (i) Early Accumulation
Events, if the Series established hereby is eligible to have an Early
Accumulation Period, or (ii) Amortization Events, if the Series established
hereby is not eligible to have an Early Accumulation Period:
(a) on any Distribution Date, the three month rolling average Series Excess
Spread is less than the Series Buffer Amount and the three month rolling average
Group Excess Spread is less than the Group Buffer Amount;
(b) if a Supplemental Credit Enhancement Event shall have occurred and
Greenwood as Servicer shall have failed to arrange for the Supplemental Credit
Enhancement in accordance with the requirements of Section 11(c) hereof
(including, without limitation, receipt of the confirmation from Standard &
Poor's required thereby).
If any event described in clause (a), (b), (g), (i) or (j) of Section 9.01 of
the Pooling and Servicing Agreement occurs, an Early Accumulation Event shall
occur with respect to the Investor Certificates of such Class only if the event
has a material adverse effect on the Investor Certificateholders of such Class
and if, after the applicable grace period described in those clauses, either the
Trustee declares or the Investor Certificateholders of such Class 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 Early Accumulation Event has occurred as of the date of the notice. In
the case of any event described in clause (a) or (b) of this Section 21, an
Early Accumulation Event shall occur with respect to the Investor Certificates
of such Class immediately upon the occurrence of the event without any notice or
other action on the part of the Trustee or the Investor Certificateholders of
such Class. On the date on which an Early Accumulation Event is deemed to have
occurred the Early Accumulation Period will commence.
SECTION 22. Purchase of Investor Certificates and Series Termination.
(a) If as of any Distribution Date during the Amortization Period (after
giving effect to any payments calculated pursuant to Section 9 made on such
Distribution Date) the Series Investor Interest of the Series established hereby
is less than or equal to 5% of the Series Initial Investor Interest, Greenwood
on behalf of the Holder of the Seller Certificate may purchase and cancel the
Investor Certificates of the Series established hereby by depositing into the
Series Distribution Account, 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 such immediately
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succeeding Distribution Date. The Master Servicer shall direct the Trustee in
writing to withdraw the amount allocable to such Class from the Series
Distribution Account and pay such amount to the Investor Certificateholders of
such Class pursuant to Section 12.02 of the Pooling and Servicing Agreement. All
Investor Certificates of the Series established hereby that are purchased by
Greenwood on behalf of the Holder of the Seller Certificate pursuant to this
Section 22(a) shall be delivered by Greenwood on behalf of the Holder of the
Seller Certificate upon such purchase to, and be cancelled by, the Transfer
Agent and be disposed of in a manner satisfactory to the Trustee and Greenwood
on behalf of the Holder of the Seller Certificate.
(b) If as of any Distribution Date during the Accumulation Period, the
Early Accumulation Period or the Controlled Liquidation Period, as applicable
(after giving effect to any payments calculated pursuant to Section 9 made on
such Distribution Date), the Series Investor Interest of the Series established
hereby is less than or equal to 5% of the Series Initial Investor Interest
(before giving effect to any reduction in the Series Initial Investor Interest
pursuant to Section 6.14 of the Pooling and Servicing Agreement), Greenwood on
behalf of the Holder of the Seller Certificate may, but shall not be obligated
to, purchase the Investor Certificates of the Series established hereby by
depositing into the Series Principal Funding Account, on such Distribution Date,
an amount equal to such Series Investor Interest. After giving effect to such
deposit, such Series Investor Interest shall be reduced to zero, and the Seller
Interest shall be increased by the amount of such deposit.
(c) Following the sale of Receivables pursuant to Section 12.02 of the
Pooling and Servicing Agreement, the Master Servicer shall direct the Trustee in
writing to withdraw the amount allocable to each Class from the Series
Distribution Account and pay such amount to the Investor Certificateholders of
such Class pursuant to Section 12.02 of the Pooling and Servicing Agreement.
SECTION 23. Variable Accumulation Period. If the Series Term Sheet for the
Series established hereby so provides, the Master Servicer may elect, by written
notice to the Trustee, Greenwood on behalf of the Holder of the Seller
Certificate and the Credit Enhancement Provider, to delay the commencement of
the Accumulation Period, and extend the length of the Revolving Period, subject
to the conditions set forth in this Section 23; provided, however, that the
Accumulation Period shall 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 shall be made no later than the first day of the last scheduled
Due Period of the Revolving Period (including any prior extension of the
Revolving Period pursuant to this Section 23).
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 would not result in the
Class Invested Amount with respect to any Class of the Series established hereby
not being paid in full on the relevant Class Expected Final Payment Date; (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 would 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.
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SECTION 24. Optional Accumulation Period Commencement. If the Series Term
Sheet for the Series established hereby so provides, unless the Amortization
Period or the Early Accumulation Period shall have commenced prior thereto, the
Master Servicer may elect to commence the Accumulation Period by delivering
written notice to the Trustee, Greenwood, on behalf of the Holder of the Seller
Certificate and the Credit Enhancement Provider at least 5 Business Days prior
to the Accumulation Commencement Date subject to the conditions set forth in
this Section 24; provided, however, that the Accumulation Period shall commence
no later than the first day of the following Due Period. Such written notice
shall set forth the Accumulation Amount for each Distribution Date relating to
the Accumulation Period.
SECTION 25. Series Yield Factor. The Series Yield Factor for the Series
established hereby shall initially be the Series Yield Factor set forth in the
Series Term Sheet. The Master Servicer may change the Series Yield Factor upon
20 days prior written notice to the Trustee, Greenwood on behalf of the Holder
of the Seller Certificate, the Credit Enhancement Provider and the Rating
Agencies, provided that the following conditions are satisfied: (i) the Series
Yield Factor may not be reduced below the initial Series Yield Factor or
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 would not (x)
result in any delay in the payment of principal to the Investor
Certificateholders of any Series then outstanding, or (y) cause an Amortization
Event or an Early Accumulation Event to occur with respect to any Series then
outstanding; and (iii) Standard & Poor's shall have advised the Master Servicer
and Greenwood on behalf of the Holder of the Seller Certificate that such change
in the Series Yield Factor would not cause the rating of any Class of any Series
then outstanding to be lowered or withdrawn. Any such change shall be effective
as of the first day of the Due Period specified in the notice of the Master
Servicer.
SECTION 26. Ratification of Pooling and Servicing Agreement. As
supplemented and amended by this Series Supplement, the Pooling and Servicing
Agreement is in all respects ratified and confirmed and the Pooling and
Servicing Agreement as so supplemented by this Series Supplement shall be read,
taken, and construed as one and the same instrument.
SECTION 27. Counterparts. This Series Supplement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and the
same instrument.
SECTION 28. Governing Law. This Series Supplement shall be construed in
accordance with the internal laws of the State of New York, without reference to
its conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
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EXHIBIT A-1
FORM OF CLASS A CERTIFICATE
[FORM OF THE FACE OF THE CLASS A CERTIFICATES]
UNLESS THIS CLASS A CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS A CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
NO. $
CUSIP NO. ______________
DISCOVER CARD MASTER TRUST I, SERIES 200 -
FLOATING RATE CLASS A CREDIT CARD PASS-THROUGH CERTIFICATE
GREENWOOD TRUST COMPANY
MASTER SERVICER, SERVICER AND SELLER
(NOT AN INTEREST IN OR OBLIGATION OF GREENWOOD TRUST COMPANY AND NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.)
This certifies that Cede & Co. (the "Class A Certificateholder") is the
registered owner of a Fractional Undivided Interest in the Discover Card Master
Trust I (the "Trust"), the corpus of which consists of a portfolio of
receivables (the "Receivables") existing as of the Cut-Off Date (or, with
respect to Receivables in Additional Accounts, as of the applicable Additional
Account Cut-Off Date) or thereafter created under certain open end credit card
accounts for specified Persons (the "Accounts") originated by Greenwood Trust
Company, a Delaware banking corporation ("Greenwood"), or an affiliate of
Greenwood, and transferred to the Trust by Greenwood or one or more Additional
Sellers, all monies due or to become due with respect thereto, all proceeds (as
defined in Section 9-306 of the Uniform Commercial Code as in effect in the
Applicable State) of such Receivables pursuant to a Pooling and Servicing
Agreement, dated as of October 1, 1993, by and between U.S. Bank National
Association (formerly First Bank National Association, successor trustee to Bank
of America Illinois, formerly Continental Bank, National Association) as Trustee
(the "Trustee") and Greenwood as Master Servicer, Servicer and
A-1-1
<PAGE> 65
Seller, as amended (the "Pooling and Servicing Agreement"), a summary of certain
of the pertinent provisions of which is set forth herein below, and benefits
under any Credit Enhancement with respect to any Series of investor certificates
issued from time to time pursuant to the Pooling and Servicing Agreement, to the
extent applicable. Reference is hereby made to the further provisions of this
Class A Certificate set forth on the reverse hereof, and such further provisions
shall for all purposes have the same effect as if set forth at this place.
This Class A Certificate shall not be entitled to any benefit under the
Pooling and Servicing Agreement or any amendment thereto, or the Series
Supplement, dated as of , 200 (the "Series Supplement"), by and between the
Trustee and Greenwood or any amendment thereto, or become vested or obligatory
for any purpose until the certificate of authentication hereon shall have been
signed by or on behalf of the Trustee under the Pooling and Servicing Agreement.
A-1-2
<PAGE> 66
IN WITNESS WHEREOF, Greenwood has caused this Class A Certificate to be
duly executed and authenticated.
GREENWOOD TRUST COMPANY
By: ___________________________
A-1-3
<PAGE> 67
[FORM OF THE REVERSE OF THE CLASS A CERTIFICATES]
It is the intent of the Sellers and the Investor Certificateholders that,
for federal, state and local income and franchise tax purposes only, the
Investor Certificates will be evidence of indebtedness of the Sellers. The
Sellers and the Class A Certificateholder, by the acceptance of this Class A
Certificate, agree to treat this Class A Certificate for federal, state and
local income and franchise tax purposes as indebtedness of the Sellers secured
by the Receivables and other assets held in the Trust.
To the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Pooling and Servicing Agreement or the Series
Supplement. This Class A Certificate is issued under and is subject to the
terms, provisions and conditions of the Pooling and Servicing Agreement and the
Series Supplement, to which Pooling and Servicing Agreement and Series
Supplement, as each may be amended from time to time, the Class A
Certificateholder by virtue of the acceptance hereof assents and by which the
Class A Certificateholder is bound.
This Class A Certificate is one of a series of Certificates entitled
"Discover Card Master Trust I, Series 200 - Floating Rate Class A Credit Card
Pass-Through Certificates" (the "Class A Certificates"), each of which
represents a Fractional Undivided Interest in the Trust including the right to
receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement and the Series Supplement to be
deposited in the Investor Accounts with respect to Discover Card Master Trust I,
Series 200 - or paid to the Class A Certificateholders. Also issued under the
Pooling and Servicing Agreement and the Series Supplement are Investor
Certificates designated as "Discover Card Master Trust I, Series 200 - Floating
Rate Class B Credit Card Pass-Through Certificates" (the "Class B
Certificates"). The Class A Certificates and the Class B Certificates are
collectively referred to herein as the Investor Certificates.
The aggregate interest represented by the Class A Certificates at any time
in the assets of the Trust shall not exceed an amount equal to the Class A
Investor Interest at such time, plus accrued but unpaid Certificate Interest for
the Class A Certificates and any interest thereon. The Class Initial Investor
Interest of the Class A Certificates is $__________ . The Class A Invested
Amount on any Distribution Date will be an amount equal to the Class A Initial
Investor Interest minus the sum of (a) the aggregate amount of payments of
Certificate Principal paid to the Class A Certificateholders prior to such
Distribution Date, (b) the aggregate amount of Investor Losses for such Class
not reimbursed prior to such Distribution Date and (c) the aggregate amount of
losses of principal on investments in funds on deposit for the benefit of such
Class in the Series Principal Funding Account. In addition to the Investor
Certificates, a Seller Certificate has been issued pursuant to the Pooling and
Servicing Agreement which represents, at any time, the undivided interest in the
Trust not represented by the Investor Certificates or the investor certificates
of any other Series of investor certificates then outstanding. Subject to the
terms and conditions of the Pooling and Servicing Agreement, the Sellers may
from time to time direct the Trustee, on behalf of the Trust, to issue one or
more new Series of investor certificates, which will represent Fractional
Undivided Interests in the Trust.
A-1-4
<PAGE> 68
During the Revolving Period, which begins on the Series Cut-Off Date, and
during the Accumulation Period, Certificate Interest will be distributed on the
15th day of each calendar month with respect to interest accrued during the
preceding Interest Accrual Period, commencing in __________, or if such 15th day
is not a Business Day, on the next succeeding Business Day (an "Interest Payment
Date"), to the Class A Certificateholders of record as of the last day of the
month preceding the related Interest Payment Date. Principal on the Class A
Certificates is scheduled to be paid in a single payment on the Distribution
Date in ___________ (the "Class A Expected Final Payment Date"), but may be paid
sooner or later and in installments if an Amortization Event occurs. During the
Amortization Period, if any, Certificate Interest and Certificate Principal
collected by the Master Servicer will be distributed to the Class A
Certificateholders on the Distribution Date of each calendar month, commencing
in the month following the commencement of the Amortization Period. In any
event, the final payment of principal of either class will be made no later than
the first Business Day following the Distribution Date in (the "Series
Termination Date").
The amount to be distributed on each Principal Payment Date to the holder
of this Class A Certificate will be equal to the product of (a) the percentage
equivalent of a fraction, the numerator of which is the portion of the Class A
Initial Investor Interest evidenced by this Class A Certificate and the
denominator of which is the Class A Initial Investor Interest and (b) the
aggregate of all payments to be made to the Class A Certificateholders on such
Distribution Date. Distributions with respect to this Class A Certificate will
be made by the Paying Agent by check mailed to the address of the Class A
Certificateholder of record appearing in the Certificate Register (except for
the final distribution in respect of this Class A Certificate) without the
presentation or surrender of this Class A Certificate or the making of any
notation thereon, except that with respect to Class A Certificates registered in
the name of Cede & Co., the nominee registrant for The Depository Trust Company,
distributions will be made in the form of immediately available funds.
This Class A Certificate does not represent an obligation of, or an
interest in, the Master Servicer. This Class A Certificate is limited in right
of payment to certain Collections respecting the Receivables, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement
and the Series Supplement.
The Pooling and Servicing Agreement permits, with certain exceptions, the
amendment and modification of the rights and obligations of the Master Servicer,
and the rights of Investor Certificateholders under the Pooling and Servicing
Agreement and Series Supplement, at any time by the Master Servicer, the Sellers
and the Trustee in certain cases (some of which require confirmation from the
Rating Agencies that such amendment will not result in the downgrading or
withdrawal of the rating assigned to the Investor Certificates) without the
consent of the Investor Certificateholders, and in all other cases with the
consent of the Investor Certificateholders owning Fractional Undivided Interests
aggregating not less than 66-2/3% of the Class Invested Amount of each such
affected Class (and with confirmation from the Rating Agencies that such
amendment will not result in the downgrading or withdrawal of the rating
assigned to the Investor Certificates); provided, however, that no such
amendment shall (a) have a material adverse effect on any Class of Investor
Certificateholders by reducing in any manner the amount of, or delaying the
timing of, distributions which are required to be made on any Investor
Certificate without the
A-1-5
<PAGE> 69
consent of the affected Investor Certificateholders or (b) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of
each Investor Certificateholder of each affected Class then of record. Any such
amendment and any such consent by the Class A Certificateholder shall be
conclusive and binding on such Class A Certificateholder and upon all future
Holders of this Class A Certificate and of any Class A Certificate issued in
exchange hereof or in lieu hereof whether or not notation thereof is made upon
this Class A Certificate.
The transfer of this Class A Certificate shall be registered in the
Certificate Register upon surrender of this Investor Certificate for
registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Class A Certificateholder or such Class A Certificateholder's attorney
duly authorized in writing, and thereupon one or more new Class A Certificates
of authorized denominations and for the same aggregate Fractional Undivided
Interest will be issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class A Certificates are exchangeable for new
Class A Certificates evidencing like aggregate Fractional Undivided Interests,
as requested by the Class A Certificateholder surrendering such Class A
Certificates. No service charge may be imposed for any such exchange but the
Master Servicer or Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
The Master Servicer, the Trustee, the Paying Agent and the Transfer Agent,
and any agent of any of them, may treat the person in whose name this Class A
Certificate is registered as the owner hereof for all purposes, and neither the
Master Servicer, the Trust nor the Trustee, the Paying Agent, the Transfer
Agent, nor any agent of any of them or any such agent shall be affected by
notice to the contrary except in certain circumstances described in the Pooling
and Servicing Agreement.
Subject to certain conditions in the Pooling and Servicing Agreement and
the Series Supplement, if the principal of the Investor Certificates has not
been paid in full prior to the Series Termination Date, the obligations created
by the Pooling and Servicing Agreement and the Series Supplement with respect to
the Investor Certificates shall terminate on the Series Termination Date.
A-1-6
<PAGE> 70
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Class A Certificates referred to in the within mentioned
Pooling and Servicing Agreement and Series Supplement.
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:____________________________________
Authorized Officer
A-1-7
<PAGE> 71
EXHIBIT A-2
FORM OF CLASS B CERTIFICATE
[FORM OF THE FACE OF THE CLASS B CERTIFICATES]
UNLESS THIS CLASS B CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CLASS B CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
NO. $
CUSIP NO. ________________
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AND TO THE RIGHTS OF THE MASTER SERVICER AS DESCRIBED IN THE
POOLING AND SERVICING AGREEMENT AND SERIES SUPPLEMENT REFERRED TO HEREIN.
DISCOVER CARD MASTER TRUST I, SERIES 200 -
FLOATING RATE CLASS B CREDIT CARD PASS-THROUGH CERTIFICATE
GREENWOOD TRUST COMPANY
MASTER SERVICER, SERVICER AND SELLER
(NOT AN INTEREST IN OR OBLIGATION OF GREENWOOD TRUST COMPANY AND NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.)
THIS INVESTOR CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF ANY
EMPLOYEE BENEFIT PLAN (AS DEFINED BELOW).
This certifies that Cede & Co. (the "Class B Certificateholder") is the
registered owner of a Fractional Undivided Interest in the Discover Card Master
Trust I (the "Trust"), the corpus of which consists of a portfolio of
receivables (the "Receivables") existing as of the Cut-Off Date (or, with
respect to Receivables in Additional Accounts, as of the applicable Additional
Account Cut-Off Date) or thereafter created under certain open end credit card
accounts for specified Persons (the "Accounts") originated by Greenwood Trust
Company, a Delaware banking
<PAGE> 72
corporation ("Greenwood"), or an affiliate of Greenwood, and transferred to the
Trust by Greenwood or one or more Additional Sellers, all monies due or to
become due with respect thereto, all proceeds (as defined in Section 9-306 of
the Uniform Commercial Code as in effect in the Applicable State) of such
Receivables pursuant to a Pooling and Servicing Agreement, dated as of October
1, 1993, by and between U.S. Bank National Association (formerly First Bank
National Association, successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association) as Trustee (the "Trustee") and Greenwood
as Master Servicer, Servicer and Seller, as amended (the "Pooling and Servicing
Agreement"), a summary of certain of the pertinent provisions of which is set
forth herein below, and benefits under any Credit Enhancement with respect to
any Series of investor certificates issued from time to time pursuant to the
Pooling and Servicing Agreement, to the extent applicable. Reference is hereby
made to the further provisions of this Class B Certificate set forth on the
reverse hereof, and such further provisions shall for all purposes have the same
effect as if set forth at this place.
This Class B Certificate shall not be entitled to any benefit under the
Pooling and Servicing Agreement or any amendment thereto, or the Series
Supplement, dated as of , 200 (the "Series Supplement"), by and between the
Trustee and Greenwood or any amendment thereto, or become vested or obligatory
for any purpose until the certificate of authentication hereon shall have been
signed by or on behalf of the Trustee under the Pooling and Servicing Agreement.
A-2-2
<PAGE> 73
IN WITNESS WHEREOF, Greenwood has caused this Class B Certificate to be
duly executed and authenticated.
GREENWOOD TRUST COMPANY
By:____________________________
A-2-3
<PAGE> 74
[FORM OF THE REVERSE OF THE CLASS B CERTIFICATES]
It is the intent of the Sellers and the Investor Certificateholders that,
for federal, state and local income and franchise tax purposes only, the
Investor Certificates will be evidence of indebtedness of the Sellers. The
Sellers and the Class B Certificateholder, by the acceptance of this Class B
Certificate, agree to treat this Class B Certificate for federal, state and
local income and franchise tax purposes as indebtedness of the Sellers secured
by the Receivables and other assets held in the Trust.
To the extent not defined herein, the capitalized terms used herein have
the meanings assigned in the Pooling and Servicing Agreement or the Series
Supplement. This Class B Certificate is issued under and is subject to the
terms, provisions and conditions of the Pooling and Servicing Agreement and the
Series Supplement, to which Pooling and Servicing Agreement and Series
Supplement, as each may be amended from time to time, the Class B
Certificateholder by virtue of the acceptance hereof assents and by which the
Class B Certificateholder is bound.
This Class B Certificate is one of a series of Certificates entitled
"Discover Card Master Trust I, Series 200 - Floating Rate Class B Credit Card
Pass-Through Certificates" (the "Class B Certificates"), each of which
represents a Fractional Undivided Interest in the Trust including the right to
receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement and the Series Supplement to be
deposited in the Investor Accounts with respect to Discover Card Master Trust I,
Series 200 - or paid to the Class B Certificateholders. Also issued under the
Pooling and Servicing Agreement and the Series Supplement are Investor
Certificates designated as "Discover Card Master Trust I, Series 200 - Floating
Rate Class A Credit Card Pass-Through Certificates" (the "Class A
Certificates"). The Class A Certificates and the Class B Certificates are
collectively referred to herein as the Investor Certificates.
The aggregate interest represented by the Class B Certificates at any time
in the assets of the Trust shall not exceed an amount equal to the Class
Investor Interest of the Class B Certificates at such time, plus accrued but
unpaid Certificate Interest for the Class B Certificates and any interest
thereon. The Class B Certificateholders are also entitled to the benefit of the
Credit Enhancement, to the extent provided in the Series Supplement. The Class
Initial Investor Interest of the Class B Certificates is $ . The Class B
Invested Amount on any Distribution Date will be an amount equal to the Class B
Initial Investor Interest minus the sum of (a) the aggregate amount of payments
of Certificate Principal paid to the Class B Certificateholders prior to such
Distribution Date, (b) the aggregate amount of Investor Losses for such Class
not reimbursed prior to such Distribution Date and (c) the aggregate amount of
losses of principal on investments in funds on deposit for the benefit of such
Class in the Series Principal Funding Account. In addition to the Investor
Certificates, a Seller Certificate has been issued pursuant to the Pooling and
Servicing Agreement which represents, at any time, the undivided interest in the
Trust not represented by the Investor Certificates or the investor certificates
of any other Series of investor certificates then outstanding. Subject to the
terms and conditions of the Pooling and Servicing Agreement, the Sellers may
from time to time direct the
A-2-4
<PAGE> 75
Trustee, on behalf of the Trust, to issue one or more new Series of investor
certificates, which will represent Fractional Undivided Interests in the Trust.
During the Revolving Period, which begins on the Series Cut-Off Date, and
during the Accumulation Period, Certificate Interest will be distributed on the
15th day of each calendar month with respect to interest accrued during the
preceding Interest Accrual Period, commencing in ____________ , or if such 15th
day is not a Business Day, on the next succeeding Business Day, and on the Class
B Expected Final Payment Date (each, an "Interest Payment Date"), to the Class B
Certificateholders of record as of the last day of the month preceding the
related Interest Payment Date. Principal on the Class B Certificates is
scheduled to be paid in a single payment on the Distribution Date in
________________ (the "Class B Expected Final Payment Date"), but may be paid
sooner or later or in installments under certain circumstances. During the
Amortization Period, if any, Certificate Interest and Certificate Principal
collected by the Master Servicer will be distributed to the Class B
Certificateholders on the Distribution Date of each calendar month, commencing
in the month following the commencement of the Amortization Period; provided,
however, that no Certificate Principal will be distributed to the Class B
Certificateholders until the Class A Investor Interest has been reduced to zero.
The rights of the Class B Certificateholders to receive the distributions to
which they would otherwise be entitled on the Receivables will be subordinated
to the rights of the Class A Certificateholders and the Master Servicer to the
extent described in the Pooling and Servicing Agreement and Series Supplement.
In any event, the final payment of principal of either Class will be made no
later than the first Business Day following the Distribution Date in
______________ (the "Series Termination Date").
The amount to be distributed on each Distribution Date to the holder of
this Class B Certificate will be equal to the product of (a) the percentage
equivalent of a fraction, the numerator of which is the portion of the Class B
Initial Investor Interest evidenced by this Class B Certificate and the
denominator of which is the Class B Initial Investor Interest and (b) the
aggregate of all payments to be made to the Class B Certificateholders on such
Distribution Date. Distributions with respect to this Class B Certificate will
be made by the Paying Agent by check mailed to the address of the Class B
Certificateholder of record appearing in the Certificate Register (except for
the final distribution in respect of this Class B Certificate) without the
presentation or surrender of this Class B Certificate or the making of any
notation thereon, except that with respect to Class B Certificates registered in
the name of Cede & Co., the nominee registrant for The Depository Trust Company,
distributions will be made in the form of immediately available funds.
This Class B Certificate does not represent an obligation of, or an
interest in, the Master Servicer. This Class B Certificate is limited in right
of payment to certain Collections respecting the Receivables, all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement
and the Series Supplement.
The Pooling and Servicing Agreement permits, with certain exceptions, the
amendment and modification of the rights and obligations of the Master Servicer,
and the rights of Investor Certificateholders under the Pooling and Servicing
Agreement and Series Supplement, at any time by the Master Servicer, the Sellers
and the Trustee in certain cases (some of which require confirmation from the
Rating Agencies that such amendment will not result in the downgrading or
A-2-5
<PAGE> 76
withdrawal of the rating assigned to the Investor Certificates) without the
consent of the Investor Certificateholders, and in all other cases with the
consent of the Investor Certificateholders owning Fractional Undivided Interests
aggregating not less than 66-2/3% of the Class Invested Amount of each such
affected Class (and with confirmation from the Rating Agencies that such
amendment will not result in the downgrading or withdrawal of the rating
assigned to the Investor Certificates); provided, however, that no such
amendment shall (a) have a material adverse effect on any Class of Investor
Certificateholders by reducing in any manner the amount of, or delaying the
timing of, distributions which are required to be made on any Investor
Certificate without the consent of the affected Investor Certificateholders or
(b) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of each Investor Certificateholder of each affected Class
then of record. Any such amendment and any such consent by the Class B
Certificateholder shall be conclusive and binding on such Class B
Certificateholder and upon all future Holders of this Class B Certificate and of
any Class B Certificate issued in exchange hereof or in lieu hereof whether or
not notation thereof is made upon this Class B Certificate.
The transfer of this Class B Certificate shall be registered in the
Certificate Register upon surrender of this Investor Certificate for
registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Class B Certificateholder or such Class B Certificateholder's attorney
duly authorized in writing, and thereupon one or more new Class B Certificates
of authorized denominations and for the same aggregate Fractional Undivided
Interest will be issued to the designated transferee or transferees.
The transfer of this Investor Certificate is subject to certain
restrictions set forth in the Pooling and Servicing Agreement. In no event shall
this Investor Certificate, or any interest therein, be transferred to an
employee benefit plan, trust or account subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or described in Section
4975(e)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), and
not excepted under Section 4975(g). Any Holder of this Investor Certificate, by
its acceptance hereof, shall be deemed to represent and warrant that it is not
(i) an employee benefit plan (as defined in Section 3(3) of ERISA), that is
subject to Title I of ERISA, (ii) a plan described in Section 4975(e)(l) of the
Code, and not excepted under Section 4975(g), or (iii) an entity using assets to
purchase such Certificates which constitute plan assets by reason of a plan's
investment in such Holder.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class B Certificates are exchangeable for
new Class B Certificates evidencing like aggregate Fractional Undivided
Interests, as requested by the Class B Certificateholder surrendering such Class
B Certificates. No service charge may be imposed for any such exchange but the
Master Servicer or Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
The Master Servicer, the Trustee, the Paying Agent and the Transfer Agent,
and any agent of any of them, may treat the person in whose name this Class B
Certificate is registered as the owner hereof for all purposes, and neither the
Master Servicer, the Trust nor the Trustee, the Paying Agent, the Transfer
Agent, nor any agent of any of them or any such agent shall be
A-2-6
<PAGE> 77
affected by notice to the contrary except in certain circumstances described in
the Pooling and Servicing Agreement.
Subject to certain conditions in the Pooling and Servicing Agreement and
the Series Supplement, if the principal of the Investor Certificates has not
been paid in full prior to the Series Termination Date, the obligations created
by the Pooling and Servicing Agreement and the Series Supplement with respect to
the Investor Certificates shall terminate on the Series Termination Date.
A-2-7
<PAGE> 78
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Class B Certificates referred to in the within mentioned
Pooling and Servicing Agreement and Series Supplement.
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
By:____________________________________
Authorized Officer
A-2-8
<PAGE> 79
Exhibit B
Form of Investor Certificateholders' Monthly Statement
Discover Card Master Trust I
Series 200 - Monthly Statement
Distribution Date: __________ __, ____ Month Ending: __________ __, ____
Pursuant to the Series Supplement dated as of , 200 relating to the Pooling and
Servicing Agreement dated as of October 1, 1993 by and between Greenwood Trust
Company and U.S. Bank National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois, formerly Continental
Bank, National Association) as Trustee, as amended, the Trustee is required to
prepare certain information each month regarding current distributions to
investors and the performance of the Trust. We have set forth below this
information for the Distribution Date listed above, as well as for the calendar
month ended on the date listed above.
1. Payments for the benefit of investors in Series 200 - on this Distribution
Date (per $1,000 of Class Initial Investor Interest)
<TABLE>
<CAPTION>
Total Interest Principal
----- -------- ---------
<S> <C> <C> <C>
Series 200 -
Class A $____________ $____________ $____________
Class B $____________ $____________ $____________
</TABLE>
2. Principal Receivables at the end of [Month][Year]
<TABLE>
<S> <C>
(a) Aggregate Investor Interest $____________
Seller Interest $____________
TOTAL MASTER TRUST $____________
(b) Group One Investor Interest $____________
(c) Series 200 - Series Investor Interest $____________
(d) Class A Investor Interest $____________
Class B Investor Interest $____________
</TABLE>
3. Allocation of Receivables collected during [Month][Year]
<TABLE>
<CAPTION>
Finance Charge Principal Yield Additional
Collections Collections Collections Funds
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
(a) Allocation of Collections between
Investors and Seller
Aggregate Investor Allocation $____________ $___________ N/A N/A
Seller Allocation $____________ $___________ N/A N/A
(b) Group One Allocation $____________ $___________ N/A N/A
(c) Series 200 - Allocations $____________ $___________ N/A N/A
(d) Class A Allocations $____________ $___________ N/A N/A
Class B Allocations $____________ $___________ N/A N/A
</TABLE>
<TABLE>
<S> <C>
(f) Principal Collections as a monthly percentage of Master Trust
Receivables at the beginning of [Month][Year] ____________%
(g) Finance Charge Collections as an annualized percentage of Master Trust
Receivables at the beginning of [Month][Year] ____________%
</TABLE>
B-1
<PAGE> 80
<TABLE>
<S> <C>
(h) Total Collections as a monthly percentage of Master Trust Receivables
at the beginning of [Month][Year] ____________%
</TABLE>
4. Information concerning the Series Principal Funding Accounts ("SPFA")
<TABLE>
<CAPTION>
Deposits into the SPFAs on Deficit Amount on
this Distribution Date this Distribution Date SPFA Balance Investment Income
-------------------------- ---------------------- ------------ -----------------
<S> <C> <C> <C> <C>
Series 200 - $___________ $___________ $___________ $___________
</TABLE>
5. Information concerning amount of Controlled Liquidation Payments
<TABLE>
<CAPTION>
Amount paid on this Deficit Amount on this Total Payments through this
Distribution Date Distribution Date Distribution Date
----------------- ----------------- -----------------
<S> <C> <C> <C>
Series 200 -
Class A N/A N/A N/A
Class B N/A N/A N/A
</TABLE>
6. Information concerning the Series Interest Funding Accounts ("SIFA")
<TABLE>
<CAPTION>
Deposits into the SIFA
on this Distribution Date SIFA Balance
------------------------- ------------
<S> <C> <C>
Series 200 - N/A N/A
</TABLE>
7. Pool Factors for [Month][Year]
<TABLE>
<S> <C>
Class A ____________%
Class B ____________%
</TABLE>
8. Investor Charged-Off Amount
<TABLE>
<CAPTION>
This Distribution Date Cumulative Investor
Charged-Off Amount
<S> <C> <C>
(a) Group One $_________ $_________
(b) Series 200 - $_________ $_________
(c) Class A $_________ $_________
Class B $_________ $_________
(d) As an annualized percentage of
Principal Receivables at the
beginning of [Month][Year] __________% N/A
</TABLE>
9. Investor Losses on this Distribution Date
<TABLE>
<CAPTION>
Total per $1,000 of original
invested Principal
<S> <C> <C>
(a) Group One $_________ $_________
(b) Series 200 - $_________ $_________
(c) Class A $_________ $_________
Class B $_________ $_________
</TABLE>
B-2
<PAGE> 81
10. Reimbursement of Investor Losses on this Distribution Date
<TABLE>
<CAPTION>
Total per $1,000 of original
invested Principal
<S> <C> <C>
(a) Group One $_________ $_________
(b) Series 200 - $_________ $_________
(c) Class A $_________ $_________
Class B $_________ $_________
</TABLE>
11. Aggregate amount of Unreimbursed Investor Losses
<TABLE>
<CAPTION>
Total per $1,000 of original
invested Principal
<S> <C> <C>
(a) Group One $_________ $_________
(b) Series 200 - $_________ $_________
(c) Class A $_________ $_________
Class B $_________ $_________
</TABLE>
12. Investor Monthly Servicing Fee payable on this Distribution Date
<TABLE>
<S> <C>
(a) Group One $_________
(b) Series 200 - $_________
(c) Class A $_________
Class B $_________
</TABLE>
13. Class Available Subordinated Amount at the end of the Distribution Date
<TABLE>
<CAPTION>
as a percentage of
Total Class A Invested Amount
<S> <C> <C>
Series 200 - , Class B $____________ ________ %
</TABLE>
14. Total Available Credit Enhancement Amounts
<TABLE>
<CAPTION>
Shared Amount Class B Amount
------------- --------------
<S> <C> <C>
(a) Maximum Amount N/A $__________
(b) Available Amount N/A $__________
(c) Amount of drawings on Credit
Enhancement on this Distribution Date N/A $__________
(d) Credit Enhancement Fee on this
Distribution Date N/A $__________
</TABLE>
15. Delinquency Summary
<TABLE>
<S> <C>
Master Trust Receivables Outstanding at the end of [Month][Year] $_________
</TABLE>
B-3
<PAGE> 82
<TABLE>
<CAPTION>
Delinquent Amount Percentage of ending
Payment Status ending balance Receivables outstanding
-------------- -------------- -----------------------
<S> <C> <C>
30 - 59 days $__________________ __________%
60 - 179 days $__________________ __________%
</TABLE>
16. Excess Spread Percentages on this Distribution Date1
<TABLE>
<S> <C>
(a) Group One2 __________%
(b) Series 200 - 3 __________%
</TABLE>
17. Net Charge-Offs on this Distribution Date
<TABLE>
<S> <C>
Charges-offs net of recoveries as an annualized percentage of Principal
Receivables at the beginning of [Month][Year]4 __________%
</TABLE>
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:______________________________
- ----------
[FN]
1 For series in Group One, investors should refer only to the higher of the
Group Excess Spread Percentage (Item 16(a)) and the Series Excess Spread
Percentage (Item 16(c)) in assessing the current performance of the Trust
and the Receivables.
2 Group Excess Spread is the sum of the Series Excess Spreads (as described
below) for each series in the Group. The Group Excess Spread Percentage is
equal to the Group Excess Spread, multiplied by twelve, divided by the
Series Investor Interests for each series in the Group.
3 Series Excess Spread is the difference between (a) the sum of Finance
Charge Collections, Yield Collections, Additional Funds and Investment
Income for any Class of this Series (see Item 3(e)), and (b) the sum of (i)
the monthly interest for each Class of this Series (see Item 1), (ii) the
monthly servicing fee for each Class of this Series (see Item 12(d)), (iii)
the Investor Charged-Off Amount (see Item 8(c)), and (iv) the Credit
Enhancement Fee (see Item 14(d)), in each case for this Distribution Date.
The Series Excess Spread Percentage is equal to the Series Excess Spread,
multiplied by twelve, divided by the Series Investor Interest for this
Series.
4 For purposes of allocations to investors, recoveries are treated as Finance
Charge Collections and are included as such in Item 3 above.
</FN>
B-4
<PAGE> 83
Exhibit C
Form of Master Servicer's Monthly Certificate
Discover Card Master Trust I, Series 200 -
CREDIT CARD
PASS-THROUGH CERTIFICATES
--------------------
The undersigned, a duly authorized representative of Greenwood Trust Company
("Greenwood"), as Master Servicer pursuant to the Pooling and Servicing
Agreement dated as of October 1, 1993, as amended (the "Pooling and Servicing
Agreement"), and the Series Supplement, dated as of , 200 (the "Series
Supplement") by and between Greenwood and U.S. Bank National Association
(formerly First Bank National Association, successor trustee to Bank of America
Illinois, formerly Continental Bank, National Association) as Trustee, does
hereby certify as follows with respect to the Series Supplement for the Discover
Card Master Trust I, Series 200 - Certificates for the Distribution Date
occurring on _______________:
<TABLE>
<S> <C>
1. Greenwood is Master Servicer under the Pooling and Servicing Agreement.
2. The undersigned is a Servicing Officer of Greenwood as Master Servicer.
3. The aggregate amount of Collections processed during the related Due Period
is equal to................................................................ $_________
4. The aggregate amount of Class A Principal Collections processed during the
related Due Period is equal to............................................. $_________
5. The aggregate amount of Class A Finance Charge Collections processed during
the related Due Period is equal to......................................... $_________
6a. The aggregate amount of Class A Principal Collections recharacterized as
Series Yield Collections during the related Due Period is equal to......... $_________
6b. The aggregate amount of Class A Additional Funds for this Distribution Date
is equal to................................................................ $_________
7. The sum of all amounts payable to the Class A Certificate-holders on the
current Distribution Date Is equal to...................................... $_________
</TABLE>
C-1
<PAGE> 84
<TABLE>
<S> <C>
8. The aggregate amount of Class B Principal Collections processed during the
related Due Period is equal to............................................. $_________
9. The aggregate amount of Class B Finance Charge Collections processed during
the related Due Period is equal to......................................... $_________
10a. The aggregate amount of Class B Principal Collections recharacterized as
Series Yield Collections during the related Due Period is.................. $_________
10b. The aggregate amount of Class B Additional Funds for this Distribution Date
is equal to................................................................ $_________
11. The amount of drawings under the Credit Enhancement required to be made on
the related Drawing Date pursuant to the Series Supplement:
(a) with respect to the Class B Required Amount Shortfall is equal to..... $_________
(b) with respect to the Class B Cumulative Investor Charged-Off Amount is
equal to.............................................................. $_________
(c) with respect to the Class B Investor Interest is equal to............. $_________
12. The sum of all amounts payable to the Class B Certificate-holders on the
current Distribution Date is equal to...................................... $_________
13. Attached hereto is a true copy of the statement required to be delivered by
the Master Servicer on the date of this Certificate to the Trustee pursuant
to Section 19 of the Series Supplement.
</TABLE>
C-2
<PAGE> 85
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate this ____ day of ____________, ____.
GREENWOOD TRUST COMPANY,
as Master Servicer
By:_____________________________
Title:
C-3
<PAGE> 1
EXHIBIT 4.7
- -------------------------------------------------------------------------------
BOOK-ENTRY-ONLY COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -
WITHOUT OWNER OPTION TO REDEEM/PASS-THROUGH SECURITIES/
AND ASSET-BACKED SECURITIES
- -------------------------------------------------------------------------------
Letter of Representations*
[to be Completed by Issuer and Agent]
Discover Card Master Trust I, Series 200 -
-----------------------------------------------------
[Name of Issuer]
U.S. Bank National Association
-----------------------------------------------------
[Name of Agent]
, 200
----------------------------
[Date]
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street 49th Floor
New York, NY 10041-0099
Re: _______ Class A Credit Card Pass-Through Certificates and
_______ Class B Credit Card Pass-Through Certificates,
Discover Card Master Trust 1, Series 200 - ________________
[Issue description ("The Securities")]
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
matters relating to the Securities. Agent shall act as trustee, paying agent,
fiscal agent, or other such agent of Issuer with respect to the Securities. The
Securities have been issued pursuant to a trust indenture, trust agreement,
pooling and servicing agreement or other such document authorizing the issuance
of
- --------
* This Letter of Representations includes the Addendum attached hereto, which
modifies and supercedes this Letter of Representations to the extent set
forth therein.
<PAGE> 2
the Securities dated October 1, 1993 (the "Document"). Morgan Stanley & Co.
Incorporated; __________________; ___________________; ___________________
________________; _________________________________________________________
["Underwriter/Placement Agent"] is distributing the Securities through The
Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit
at DTC, and to act in accordance with its Rules with respect to the Securities,
Issuer and Agent make the following representations to DTC:
1. Prior to closing on the Securities on April 4, 2000 there
shall be deposited with DTC one or more Security certificates registered in the
name of DTC's nominee, Cede & Co., for each stated maturity of the Securities in
the face amounts set forth on Schedule A hereto, the total of which represents
100% of the principal amount of such Securities. If however, the aggregate
principal amount of any maturity exceeds $400 million, one certificate shall be
issued with respect to each $400 million of principal amount and an additional
certificate shall be issued with respect to any remaining principal amount. Each
Security certificate shall bear the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to Issuer or its agent for registration of transfer, exchange,
or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede
& Co., has an interest herein.
Issuer represents:
The Security certificate(s) shall remain in Agent's custody as
a "Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Agent and DTC currently in effect.
On each day on which Agent is open for business and on which
it receives an instruction originated by a DTC participant ("Participant")
through DTC's Deposit/Withdrawal at Custodian ("DWAC") system to increase the
Participant's account by a specified number of Securities (a "Deposit
Instruction"), Agent shall, no later than 6:30 p.m. (Eastern Time) that day,
either approve or cancel the Deposit Instruction through the DWAC system.
On each day on which Agent is open for business and on which
it receives an instruction originated by Participant through the DWAC system to
decrease the Participant's
<PAGE> 3
account by a specified number of Securities (a "Withdrawal Instruction"), Agent
shall, no later than 6:30 pm. (Eastern Time) that day, either approve or cancel
the Withdrawal Instruction through the DWAC system.
Agent agrees that its approval of a Deposit or Withdrawal
Instruction shall be deemed to be the receipt by DTC of a new reissued or
reregistered certificated Security on registration of transfer to the name of
Cede & Co. for the quantity of Securities evidenced by the Balance Certificate
after the Deposit or Withdrawal Instruction is effected.
2. Issuer: (a) understands that DTC has no Obligation to, and
will not, communicate to its Participants or to any person having an interest in
the Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting
by holders of the Securities, Issuer or Agent shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall send notice of such record date to DTC no fewer
than 15 calendar days in advance of such record date. Notices to DTC pursuant to
this Paragraph by telecopy shall be directed to DTC's Reorganization Department,
Proxy Unit at (212) 855-5181 or (212) 855-5182. If the party sending the notice
does not receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
Supervisor, Proxy Unit
Reorganization Department
The Depository Trust Company
55 Water Street 50th Floor
New York, NY 10041-0099
4. In the event of a full or partial redemption, Issuer or
Agent shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of a refunding, the maturity date(s) established
under the refunding; and (c) the date such notice is to be distributed to
Security holders (the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g. legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Agent shall
forward such notice either in a separate secure transmission for each CUSIP
number or in a secure transmission for multiple CUSIP numbers (if applicable)
which includes a manifest or list of each CUSIP number submitted in that
transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice). The
Publication Date shall be no fewer than 30 days nor more than 60 days prior to
the redemption date or, in the case of an advance refunding, the date that the
proceeds are deposited in escrow. Notices to DTC pursuant to this Paragraph by
telecopy shall
<PAGE> 4
be directed to DTC's Call Notification Department at (516) 227-4164 or (516)
227-4190. If the party sending the notice does not receive a telecopy receipt
from DTC confirming that the notice has been received, such party shall
telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph, by mail or
by any other means, shall be sent to:
Manager, Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
5. In the event of an invitation to tender the Securities
(including mandatory tenders, exchanges, and capital changes), notice by Issuer
or Agent to Security holders shall be sent to DTC specifying the terms of the
tender and the Publication Date of such notice. Such notice shall be sent to DTC
by a secure means (e.g. legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is in
DTC's possession no later than the close of business on the business day before
or, if possible, two business days before the Publication Date. Issuer or Agent
shall forward such notice either in a separate secure transmission for each
CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use and timeliness of such notice.) Notices to DTC pursuant to
this Paragraph and notices of other corporate actions by telecopy shall be
directed to DTC's Reorganization Department at (212) 855-5488. If the party
sending the notice does not receive a telecopy receipt from DTC confirming that
the notice has been received, such party shall telephone (212) 855-5290. Notices
to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent
to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
55 Water Street 50TH Floor
New York, NY 10041-0099
6. It is understood that if the Security holders shall at any
time have the right to tender the Securities to Issuer and require that Issuer
repurchase such holders' Securities pursuant to the document and Cede & Co., as
nominee of DTC, or its registered assigns, as the record owner, is entitled to
tender the Securities, such tenders will be effected by means of DTC's Repayment
Option Procedures. Under the Repayment Option Procedures, DTC shall receive,
during the applicable tender period, instructions from its Participants to
tender Securities for purchase. Issuer and Agent agree that such tender for
purchase may be made by DTC by means of a book-entry credit of such Securities
to the account of Agent, provided that such credit is made on or before the
final day of the applicable tender period. DTC agrees that promptly after the
recording of any such book-entry credit, it will provide to Agent an Agent
Receipt and Confirmation or the equivalent, in accordance with the Repayment
Option Procedures, identifying the Securities and the aggregate principal amount
thereof as to which such tender for purchase has been made.
<PAGE> 5
Agent shall send DTC notice regarding such optional tender by
hand or by a secure means (e.g., legible facsimile transmission, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession no later than the close of business two
business days before the Publication Date. The Publication Date shall be no
fewer than 15 days prior to the expiration date of the applicable tender period.
Such notice shall state whether any partial redemption of the Securities is
scheduled to occur during the applicable optional tender period. Notices to DTC
pursuant to this Paragraph by telecopy shall be directed to DTC's Put Bond Unit
at (212) 855-5235. If the party sending the notice does not receive a telecopy
receipt from DTC confirming that the notice has been received, such party shall
telephone (212) 855-5230. Notices to DTC pursuant to this Paragraph, by mail or
by any other means, shall be sent to:
Supervisor, Put Bond Unit
Reorganization Window
The Depository Trust Company
55 Water Street 50TH Floor
New York, NY 10041-0099
7. All notices and payment advices sent to DTC shall contain
the CUSIP number of the Securities.
8. Issuer or Agent shall send DTC written notice with respect
to the dollar amount per $1,000 original face value (or other minimum authorized
denomination if less than $1,000 face value) payable on each payment date
allocated as to the interest and principal portions thereof preferably five, but
no fewer than two, business days prior to such payment date. Such notices, which
shall also contain the current pool factor, any special adjustments to
principal/interest rates (e.g., adjustments due to deferred interest or
shortfall), and Agent contact's name and telephone number, shall be sent by
telecopy to DTC's Dividend Department at (212) 855-4555, and receipt of such
notices shall be confirmed by telephoning (212) 855-4550. Notices to DTC,
pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
55 Water Street 25TH Floor
New York, NY 10041-0099
9. Issuer represents: The interest accrual period is payment
date to payment date.
10. Issuer or Agent shall provide a written notice of interest
payment information, including the stated coupon rate information, to DTC as
soon as the information is available. Issuer or Agent shall provide such notice
directly to DTC electronically, as previously arranged by Issuer or Agent and
DTC. If electronic transmission has not been arranged, absent any other
arrangements between Issuer or Agent and DTC, such information shall be sent by
<PAGE> 6
telecopy to DTC's Dividend Department at (212) 855-4555 or (212) 855-4556. If
the party sending the notice does not receive a telecopy receipt from DTC
confirming that the notice has been received, such party shall telephone (212)
855-4550. Notices to DTC pursuant to this Paragraph, by mail or by any other
means, shall be sent to DTC's Dividend Department as indicated in Paragraph 8.
11. Interest payments and principal payments that are part of
periodic principal-and-interest payments shall be received by Cede & Co., as
nominee of DTC, or its registered assigns, in same-day funds no later than 2:30
p.m. (Eastern Time) on each payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date all such interest payments due Agent, or at
such earlier time as may be required by Agent to guarantee that DTC shall
receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the
payment date. Absent any other arrangements between Issuer or Agent and DTC,
such funds shall be wired to the Dividend Deposit Account number that will be
stamped on the signature page hereof at the time DTC executes this Letter of
Representations.
12. Issuer or Agent shall provide DTC's Dividend Department,
no later than 12:00 noon (Eastern Time) on the payment date, automated
notification of CUSIP-level detail. If the circumstances prevent the funds paid
to DTC from equaling the dollar amount associated with the detail payments by
12:00 noon (Eastern Time), Issuer or Agent must provide CUSIP-level
reconciliation to DTC no later than 2:30 p.m. (Eastern Time). Reconciliation
must be provided by either automated means or written format. Such
reconciliation notice, if sent by telecopy, shall be directed to DTC Dividend
Department at (212) 855-4633 and receipt of such reconciliation notice shall be
confirmed by telephoning (212) 855-4430.
13. Maturity and redemption payments allocated with respect to
each CUSIP number shall be received by Cede & Co., as nominee of DTC, or its
registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on
the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment
date all such maturity and redemption payments due Agent, or at such earlier
time as required by Agent to guarantee that DTC shall receive payment in
same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date.
Absent any other arrangements between Issuer or Agent and DTC, such funds shall
be wired to the Redemption Deposit Account number that will be stamped on the
signature page hereof at the time DTC executes this Letter of Representations.
14. Principal payments (plus accrued interest, if any) as the
result of optional tenders for purchase effected by means of DTC's Repayment
Option Procedures shall be received by Cede & Co., as nominee of DTC, or its
registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on
the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment
date all such reorganization payments due Agent, or at such earlier time as
required by Agent to guarantee that DTC shall receive payment in same-day funds
no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other
arrangements between Issuer or Agent and DTC, such funds shall be wired to the
Reorganization Deposit Account number that will be stamped on the signature page
hereof at the time DTC executes this Letter of Representations.
<PAGE> 7
15. Agent shall send DTC all periodic certificate holders
remittance reports with respect to the Securities. If sent by facsimile
transmission, such reports shall be sent to (212) 855-4777. If the party sending
the report does not receive a telecopy receipt from DTC confirming that the
notice has been received, such party shall telephone (212) 855-4590.
16. DTC may direct Issuer or Agent to use any other number or
address as the number or address to which notices or payments of interest or
principal may be sent.
17. In the event of a redemption, acceleration, or any other
similar transaction (e.g., tender made and accepted in response to Issuer's or
Agent's invitation) necessitating a reduction in the aggregate principal amount
of Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
certificate will be presented to Issuer or Agent prior to payment, if required.
18. In the event that Issuer determines that beneficial owners
of Securities shall be able to obtain certificated Securities, Issuer or Agent
shall notify DTC of the availability of certificates. In such event, Issuer or
Agent shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
19. DTC may discontinue providing its services as securities
depository with respect to the Securities at any time be giving reasonable
notice to Issuer or Agent (at which time DTC will confirm with Issuer or Agent
the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Issuer and Agent shall cooperate fully with DTC
by taking appropriate action to make available one or more separate certificates
evidencing Securities to any Participant having Securities credited to its DTC
accounts.
20. Nothing herein shall be deemed to require Agent to advance
funds on behalf of Issuer.
21. This Letter of Representations may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts together shall constitute but one and the
same instrument.
22. This Letter of Representations shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to principles of conflicts of law.
23. The sender of each notice delivered to DTC pursuant to
this Letter of Representations is responsible for confirming that such notice
was properly received by DTC.
24. Issuer recognizes that DTC does not in any way undertake
to, and shall not have any responsibility to, monitor or ascertain the
compliance of any transactions in the Securities with the following, as amended
from time to time: (a) any exemptions from
<PAGE> 8
registration under the Securities Act of 1933; (b) the Investment Company Act of
1940; (c) the Employee Retirement Income Security Act of 1974; (d) the Internal
Revenue Code of 1986; (e) any rules of any self-regulatory organizations (as
defined under the Securities Exchange Act of 1934); or (f) any other local,
state, or federal laws or regulations thereunder.
25. Issuer hereby authorizes DTC to provide to Agent listings
of Participants' holdings, known as Securities Position Listings ("SPLs") with
respect to the Securities from time to time at the request of the Agent. DTC
charges a fee for such SPLs. This authorization, unless revoked by Issuer, shall
continue with respect to the Securities while any Securities are on deposit at
DTC, until and unless Agent shall no longer be acting. In such event, Issuer
shall provide DTC with similar evidence, satisfactory to DTC, of the
authorization of any successor thereto so to act. Requests for SPLs shall be
sent by telecopy to the Proxy Unit of DTC's Reorganization Department at (212)
855-5181 or (212) 855-5182. Receipt of such requests shall be confirmed by
telephoning (212) 855-5202. Requests for SPLs, sent by mail or by any other
means, shall be directed to the address indicated in Paragraph 3.
26. Issuer and Agent shall comply with the applicable
requirements stated in DTC's Operational Arrangements, as they may be amended
from time to time. DTC's Operational Arrangements are posted on DTC's website at
"www.DTC.org."
27. The following riders(s), attached hereto, are hereby
incorporated into this Letter of Representations:
(1) Addendum;
(2) Schedule A
<PAGE> 9
NOTES:
A. IF THERE IS AN AGENT (AS DEFINED IN THIS LETTER OF REPRESENTATIONS), AGENT AS
WELL AS ISSUER MUST SIGN THIS LETTER. IF THERE IS NO AGENT, IN SIGNING THIS
LETTER ISSUER ITSELF UNDERTAKES TO PERFORM ALL OF THE OBLIGATIONS SET FORTH
HEREIN.
B. SCHEDULE B CONTAINS STATEMENTS THAT DTC BELIEVES ACCURATELY DESCRIBE DTC, THE
METHOD OF EFFECTING BOOK-ENTRY TRANSFERS OF SECURITIES DISTRIBUTED THROUGH DTC,
AND CERTAIN RELATED MATTERS.
Very truly yours,
GREENWOOD TRUST COMPANY
-----------------------------------------------
[Issuer]
By:
--------------------------------------------
[Authorized Officer's Signature]
U.S. BANK NATIONAL ASSOCIATION
-----------------------------------------------
[Agent]
By:
--------------------------------------------
[Authorized Officer's Signature]
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
------------------------------
Funds should be wired to:
The Chase Manhattan Bank
ABA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
[Select Appropriate Account.]
Dividend Deposit Account #066-026776
Redemption Deposit Account #066-027306
Reorganization Deposit Account #066-027608
cc: Underwriter/Placement Agent
Underwriter's/Placement Agent's Counsel
<PAGE> 10
A D D E N D U M
to
Letter of Representations dated ________, 200__
Discover Card Master Trust I, Series 200 -
General: For purposes of this Letter of Representations:
"Securities" shall mean the $________ aggregate principal
amount of Floating Rate Class A Credit Card Pass-Through
Certificates and the $_________ aggregate principal amount of
Floating Rate Class B Credit Card Pass-Through Certificates
issued by Discover Card Master Trust I, Series 200 - and
"Security holders" shall mean the holders of such
certificates;
"Issuer" shall mean Greenwood Trust Company ("Greenwood") on
behalf of Discover Card Master Trust I, Series 200 - ; and
"Document" shall mean the Pooling and Servicing Agreement
dated as of October 1, 1993, as amended and as supplemented by
the Series Supplement dated as of ________, 200_, each by and
between Greenwood as Master Servicer, Servicer and Seller and
the Agent.
Paragraph 8: The following is hereby added after the third sentence of
Paragraph 8:
"Issuer or Agent will forward such notice either in a
separate secure transmission for each CUSIP number or
in a secure transmission for multiple CUSIP numbers
(if applicable) which includes a manifest or list of
each CUSIP submitted in that transmission."
Paragraph 16: The following is hereby inserted after the word "Agent" in
line 1 of Paragraph 16:
", and if requested, shall confirm such direction in
writing if practicable,"
Paragraph 17: The following is hereby inserted at the end of Paragraph 17
before the period:
"provided, however, that this paragraph shall not
apply to any event that causes a reduction in the
aggregate principal amount of Securities outstanding
that occurs in accordance with their terms,
including, without limitation, an Amortization Event
(as defined in the Document)".
<PAGE> 11
SCHEDULE A
DISCOVER CARD MASTER TRUST I, SERIES 200 -
$____________ CLASS A CREDIT CARD PASS-THROUGH CERTIFICATES AND $_____________
CLASS B CREDIT CARD PASS-THROUGH CERTIFICATES
<TABLE>
<CAPTION>
Principal Amount Maturity Date* Interest Rate
<S> <C> <C> <C>
Class A Certificates
CUSIP Number
Certificate Number:
1 $__________ ___________, 200_
2 $__________ ___________, 200_
Class B Certificates
CUSIP Number
Certificate Number:
1 $___________ ___________, 200_
</TABLE>
- --------------------
* Last Possible Distribution Date
<PAGE> 1
Exhibit 4.8
CREDIT ENHANCEMENT AGREEMENT
AMONG
U.S. BANK NATIONAL ASSOCIATION
AS TRUSTEE,
GREENWOOD TRUST COMPANY
AS MASTER SERVICER, SERVICER AND SELLER
AND
DISCOVER RECEIVABLES FINANCING CORPORATION
AS CREDIT ENHANCEMENT PROVIDER
-----------------------------
DATED AS OF , 200
----------------------------
DISCOVER CARD MASTER TRUST I
SERIES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Defined Terms.........................................................................1
Section 2. Loan..................................................................................2
Section 3. Calculation of Amount of Interest Payable on the Loan.................................3
Section 4. Payment of Interest on the Loan.......................................................3
Section 5. Repayment of Principal of the Loan....................................................3
Section 6. Payments to the Holder of the Seller Certificate and the Master Servicer..............4
Section 7. Deposits to and Withdrawals from the Credit Enhancement Account.......................5
Section 8. Certain Additional Loans..............................................................5
Section 9. Limited Obligation; Waiver of Setoff; Obligations Absolute............................6
Section 10. Investments and Information..........................................................7
Section 11. Servicing Transfer...................................................................7
Section 12. Representations and Warranties.......................................................8
Section 13. Covenants............................................................................9
Section 14. Governing Law........................................................................9
Section 15. Termination..........................................................................9
Section 16. Notices..............................................................................9
Section 17. Bankruptcy..........................................................................10
Section 18. Limitation of Remedies..............................................................10
Section 19. No Petition.........................................................................11
Section 20. Amendments..........................................................................11
Section 21. Successors and Assigns; Replacement of Credit Enhancement Provider..................11
Section 22. Participation.......................................................................12
</TABLE>
<PAGE> 3
CREDIT ENHANCEMENT AGREEMENT, dated as of , 200 ,
among U.S. BANK NATIONAL ASSOCIATION (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly Continental Bank,
National Association) as trustee (together with its successors and assigns as
trustee, the "Trustee") for Discover Card Master Trust I (the "Trust"),
GREENWOOD TRUST COMPANY ("Greenwood") as Master Servicer, Servicer and Seller
with respect to the Trust and DISCOVER RECEIVABLES FINANCING CORPORATION as cash
collateral depositor (the "Credit Enhancement Provider").
W I T N E S S E T H
WHEREAS, Greenwood as Master Servicer, Servicer and Seller and
the Trustee have entered into a Pooling and Servicing Agreement, dated as of
October 1, 1993 (as the same may from time to time be amended, modified or
otherwise supplemented, the "Pooling and Servicing Agreement"), and that certain
Series Supplement, dated as of , 200 (as the same may from time to
time be amended, modified or otherwise supplemented, the "Series Supplement");
WHEREAS, the Trust, pursuant to the Pooling and Servicing
Agreement and the Series Supplement, is issuing $ in aggregate
principal amount of Investor Certificates of Discover Card Master Trust I,
Series 200 - (the "Series"), which will entitle the holders thereof to interest
during the Revolving Period, the Accumulation Period, and the Amortization
Period, if any, and principal on the Class A Expected Final Payment Date, the
Class B Expected Final Payment Date and during the Amortization Period, if any;
WHEREAS, the principal and interest payments on the Investor
Certificates are to be funded by Principal Collections and Finance Charge
Collections received by the Trust on the Receivables; and
WHEREAS, it is a condition to the issuance of the Investor
Certificates that at the closing on the date hereof, the Credit Enhancement
Provider make a term loan (the "Loan") to the Trust, for the benefit of the
Investor Certificateholders of the Series, of $ ( % of the Series
Initial Investor Interest), for deposit in the Credit Enhancement Account to
provide additional funds to make payments on the Investor Certificates under
certain circumstances.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
adequacy of which are hereby expressly acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINED TERMS.
(a) The capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement or the Series Supplement, as applicable.
(b) The following terms have the definitions set forth below:
<PAGE> 4
"Interest Period" means (i) with respect to the initial
Distribution Date, the period commencing on the Series Closing Date and ending
on the day immediately preceding the initial Distribution Date and (ii) with
respect to each subsequent Distribution Date, the period commencing on the
preceding Distribution Date and ending on the day immediately preceding such
Distribution Date.
"Lender Rate" means, with respect to each Interest Period, the
prime commercial lending rate per annum established by the Trustee, as in effect
on each day in the Interest Period.
"LIBOR-Based Rate" means, with respect to each Interest
Period, the per annum interest rate equal to the London Interbank Offered Rate
which appears on Telerate Page 3750 at approximately 11:00 a.m. (London time)
two LIBOR Business Days prior to the first day of such Interest Period for
deposits of United States dollars for a period of time comparable to the
Interest Period, and in an amount comparable to the principal amount of the
Loan, plus 0. %.
"Portfolio Yield" means, with respect to any Due Period, the
annualized percentage equivalent of a fraction, the numerator of which shall 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 for such Due Period and (iii) the amount of Series Additional Funds
for each Series then outstanding for such Due Period, and the denominator of
which shall be the total amount of Principal Receivables in the Trust as of the
first day of such Due Period.
"Provider Amount" means, with respect to each Distribution
Date, the lesser of (i) the unpaid principal amount of the Loan (including any
amounts loaned by the Credit Enhancement Provider pursuant to Section 8 hereof)
and (ii) the amount on deposit in the Credit Enhancement Account, in each case
before giving effect to any payments, allocations or distributions on such
Distribution Date.
"Series Interest Payment Amount" means, for any Distribution
Date, an amount equal to the amount of interest payable on the Loan on such
Distribution Date, including any accrued but unpaid interest with respect to
previous Interest Periods and interest thereon, less the amount paid to the
Credit Enhancement Provider on such Distribution Date pursuant to Section 4(a)
hereof. The Series Interest Payment Amount shall be the amount of interest
payable pursuant to this Agreement for purposes of calculating the "Credit
Enhancement Fee" for the purpose of, and as such term is defined in, the Series
Supplement and such amount shall be paid in accordance with the provisions of
the Series Supplement.
SECTION 2. LOAN. The Credit Enhancement Provider hereby makes
a term loan to the Trust, for the benefit of the Investor Certificateholders of
the Series, on the Series Closing Date in an amount equal to $ , receipt of
which is hereby acknowledged by the Trustee. The amount of such Loan shall be
increased by the amount of any additional loan made by the Credit Enhancement
Provider pursuant to Section 8 hereof.
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<PAGE> 5
SECTION 3. CALCULATION OF AMOUNT OF INTEREST PAYABLE ON THE
LOAN.
(a) The Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum determined for such day
as follows. To the extent the unpaid portion of the principal of the Loan during
such Interest Period equals or is less than the amount on deposit in the Credit
Enhancement Account, the rate for such Interest Period on such principal portion
shall be the LIBOR-Based Rate. To the extent any portion of the unpaid principal
of the Loan exceeds such amount on deposit, the rate for such Interest Period on
such principal portion shall be the Lender Rate.
(b) Interest shall be payable monthly in arrears on each
Distribution Date. Interest on the Loan shall be calculated on the basis of the
actual number of days elapsed during the applicable Interest Period divided by
(i) 360, to the extent the LIBOR-Based Rate is applicable, or (ii) 365 or 366,
as the case may be, to the extent the Lender Rate is applicable. The Trustee
shall, as soon as practicable, notify the Seller, the Master Servicer and the
Credit Enhancement Provider of each determination of the Lender Rate and of the
LIBOR-Based Rate. Each determination thereof by the Trustee pursuant to the
provisions of this Agreement shall be conclusive and binding on the Seller, the
Master Servicer and the Credit Enhancement Provider, in the absence of manifest
error.
(c) If any portion of interest due and payable on a
Distribution Date is not paid on such Distribution Date, the unpaid portion of
such interest shall be due and payable on the next succeeding Distribution Date.
Any interest that is not paid on the due date thereof shall accrue interest from
the Distribution Date on which such interest was due and payable to the date
such interest is actually paid at a rate per annum equal to the Lender Rate.
SECTION 4. PAYMENT OF INTEREST ON THE LOAN. On each
Distribution Date, the Trustee as administrator of the Credit Enhancement shall
pay or cause to be paid to the Credit Enhancement Provider the amount of accrued
but unpaid interest on the Loan from the funds and in the order of priority set
forth below; provided, however, that such payments shall not exceed the amount
of accrued but unpaid interest on the Loan and that such payments will be made
only to the extent such funds are available:
(a) interest and earnings (net of losses and investment
expenses) accrued since the preceding Distribution Date on the Provider Amount;
and
(b) the Series Interest Payment Amount, to the extent such
amount has been paid to the Trustee as administrator of the Credit Enhancement
pursuant to the Series Supplement.
SECTION 5. REPAYMENT OF PRINCIPAL OF THE LOAN. The principal
amount of the Loan shall be due and payable on the Series Termination Date. The
Trust shall repay the unpaid principal balance of the Loan in full on or before
the Series Termination Date in accordance with the provisions of this Agreement;
provided, however, that the unpaid
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<PAGE> 6
principal amount of the Loan shall only be paid from the funds described below,
and only to the extent such funds are available.
(a) If, as of any Distribution Date, after giving effect to
all other deposits to and withdrawals from the Credit Enhancement Account as of
such Distribution Date, the amount on deposit in the Credit Enhancement Account
exceeds the Total Maximum Credit Enhancement Amount, (i) the amount of such
excess, up to the amount, if any, by which the amount on deposit in the Credit
Enhancement Account exceeds the unpaid principal amount of the Loan, shall be
withdrawn from the Credit Enhancement Account and paid to Greenwood on behalf of
the Holder of the Seller Certificate and (ii) the remaining amount of such
excess, if any, after payment of any amounts to be paid to Greenwood on behalf
of the Holder of the Seller Certificate pursuant to clause (i) of this Section
5(a), shall be withdrawn from the Credit Enhancement Account and paid to the
Credit Enhancement Provider for application toward the unpaid principal amount
of the Loan.
(b) On the earlier to occur of (i) the Series Termination Date
and (ii) the day on which the Class Invested Amount with respect to each Class
of the Series is paid in full, and after payment of any amounts to be paid on
such day from the Credit Enhancement Account to or for the benefit of the
Investor Certificateholders of the Series, all amounts remaining on deposit in
the Credit Enhancement Account, up to the amount of the unpaid principal amount
of the Loan, shall be withdrawn from such account and paid to the Credit
Enhancement Provider for application toward the unpaid principal amount of the
Loan.
SECTION 6. PAYMENTS TO THE HOLDER OF THE SELLER CERTIFICATE
AND THE MASTER SERVICER.
(a) On each Distribution Date, the Trustee as administrator of
the Credit Enhancement shall pay or cause to be paid to Greenwood on behalf of
the Holder of the Seller Certificate (i) the interest and earnings (net of
losses and investment expenses) accrued since the preceding Distribution Date on
an amount equal to the positive difference, if any, between (x) the amount on
deposit in the Credit Enhancement Account and (y) the Provider Amount and (ii)
the positive difference, if any, between (x) the amount of interest and earnings
(net of losses and investment expenses) accrued since the preceding Distribution
Date on the Provider Amount and (y) the amount paid to the Credit Enhancement
Provider on such Distribution Date pursuant to Section 4(a).
(b) On each Distribution Date, an amount equal to the amount,
if any, paid to the Trustee as administrator of the Credit Enhancement pursuant
to Section 9(b)(27) of the Series Supplement, shall be paid to Greenwood on
behalf of the Holder of the Seller Certificate.
(c) On the earlier to occur of (i) the Series Termination Date
and (ii) the day on which the Class Invested Amount with respect to each Class
of the Series is paid in full, and after payment of any amounts to be paid on
such day from the Credit Enhancement Account to or for the benefit of the
Investor Certificateholders of the Series, any amounts remaining on deposit in
the Credit Enhancement Account that are not paid to the Credit Enhancement
Provider
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<PAGE> 7
pursuant to Section 5(b) hereof shall be withdrawn from such account and paid to
Greenwood on behalf of the Holder of the Seller Certificate.
SECTION 7. DEPOSITS TO AND WITHDRAWALS FROM THE CREDIT
ENHANCEMENT ACCOUNT.
(a) The proceeds of the Loan made by the Credit Enhancement
Provider to the Trust pursuant to Section 2 hereof, for the benefit of the
Investor Certificateholders of the Series, on the Series Closing Date and the
proceeds of any additional loan made by the Credit Enhancement Provider pursuant
to Section 8 hereof, shall be deposited into the Credit Enhancement Account. In
addition, any amounts paid to the Trustee as administrator of the Credit
Enhancement on any Distribution Date with respect to the Total Available Credit
Enhancement Amount or the Available Class B Credit Enhancement Amount pursuant
to the terms of the Series Supplement also shall be deposited into the Credit
Enhancement Account upon receipt of such funds by the Trustee.
(b) Any withdrawals from the Credit Enhancement Account for
the benefit of the Investor Certificateholders pursuant to Section 9 of the
Series Supplement may be made by the Master Servicer or by the Trustee as
administrator of the Credit Enhancement and shall be deemed to be made first
from amounts on deposit in the Credit Enhancement Account as a result of
payments of Series Excess Servicing and other amounts to the Trustee as
administrator of the Credit Enhancement to fund the Total Available Credit
Enhancement Amount, including any Series Excess Servicing or other such amounts
on deposit in the Credit Enhancement Account as a result of an Alternative
Credit Support Election having been made or as a result of the occurrence of a
Supplemental Credit Enhancement Event, and only after such amounts are exhausted
shall any such withdrawals be deemed to be made from amounts on deposit in the
Credit Enhancement Account that are attributable to the Loan.
(c) On or before any Distribution Date on which Greenwood is
the Master Servicer, all payments made pursuant to this Agreement or the Series
Supplement between the Master Servicer or the Holder of the Seller Certificate
and the Credit Enhancement Account, may be aggregated for such Distribution Date
such that Greenwood, acting as Master Servicer and as agent of the Holder of the
Seller Certificate, may make only one payment to the Credit Enhancement Account
in satisfaction of all payments of the Master Servicer and the Holder of the
Seller Certificate pursuant to this Agreement or the Series Supplement, to the
extent that all payment obligations of the Master Servicer and the Holder of the
Seller Certificate to the Credit Enhancement Account on such Distribution Date
exceed all payment obligations of the Credit Enhancement Account to the Master
Servicer and the Holder of the Seller Certificate on such Distribution Date.
SECTION 8. CERTAIN ADDITIONAL LOANS.
(a) Alternative Credit Support Election. In the event that an
Alternative Credit Support Election is made pursuant to the provisions of the
Series Supplement, Greenwood on behalf of the Holder of the Seller Certificate
may cause the Additional Credit Support Amount to be funded by Series Excess
Servicing and other amounts paid to the Trustee as administrator of
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<PAGE> 8
the Credit Enhancement to fund the Available Class B Credit Enhancement Amount,
pursuant to Section 9 of the Series Supplement, or may request that the Credit
Enhancement Provider make an additional loan in the amount of the Additional
Credit Support Amount. If Greenwood on behalf of the Holder of the Seller
Certificate makes such request, and if the Credit Enhancement Provider elects to
make such loan, the amount of such loan shall be added to the unpaid principal
amount of the Loan. In the event that the Alternative Credit Support Election
does not become effective, the Additional Credit Support Amount (or, if the
entire amount of the Additional Credit Support Amount is not then on deposit in
the Credit Enhancement Account, the portion of the Additional Credit Support
Amount that is then on deposit) shall be withdrawn from the Credit Enhancement
Account and repaid to Greenwood on behalf of the Holder of the Seller
Certificate (or, if such amount was loaned by the Credit Enhancement Provider,
returned to the Credit Enhancement Provider).
(b) Supplemental Credit Enhancement Event. In the event that a
Supplemental Credit Enhancement Event occurs, Greenwood as Servicer may cause
the Supplemental Credit Enhancement Amount to be funded by Series Excess
Servicing and other amounts paid to the Trustee as administrator of the Credit
Enhancement to fund the Available Class B Credit Enhancement Amount, or may
request that the Credit Enhancement Provider make an additional loan in the
amount of the Supplemental Credit Enhancement Amount. If Greenwood as Servicer
makes such a request, and if the Credit Enhancement Provider elects to make such
loan, the amount of such loan shall be equal to the Supplemental Credit
Enhancement Amount and shall be added to the unpaid principal amount of the
Loan.
(c) Notice. The Credit Enhancement Provider shall give prior
written notice to Moody's of the making of any loan by the Credit Enhancement
Provider other than the additional loans described in this Section 8.
(d) At the time of any additional loan described in this
Section 8, Greenwood as Servicer and the Credit Enhancement Provider may agree
in writing that the Supplemental Credit Enhancement Amount or the Additional
Credit Support Amount, as applicable, shall bear interest at a different
LIBOR-Based Rate, which rate shall reflect prevailing market conditions and the
expected duration of such additional loan.
SECTION 9. LIMITED OBLIGATION; WAIVER OF SETOFF; OBLIGATIONS
ABSOLUTE.
(a) Notwithstanding any provision in any other section of this
Agreement to the contrary, the obligation to repay the Loan, together with
interest thereon, shall be without recourse to any Seller, the Master Servicer,
any Servicer, the Trustee, the Trust, any Certificateholder, or any affiliate,
officer, director, employee or person acting on behalf of any of them, and the
obligation to pay such amounts shall be limited solely to the application of
funds pursuant to this Agreement, in the manner and to the extent such funds are
available, except for the direct recourse indemnification obligation of each
successor Master Servicer pursuant to Section 11 hereof. The Credit Enhancement
Provider agrees that its interest in funds on deposit in the Credit Enhancement
Account is subordinated to the interests of the Investor Certificateholders of
the Series, as provided in this Agreement and in the Series Supplement. The
6
<PAGE> 9
Credit Enhancement Provider further agrees that it shall have no right of setoff
or lender's lien against any Seller, the Master Servicer, any Servicer, the
Trustee, the Trust, or any Certificateholder.
(b) The obligations of the Seller, the Trustee, the Credit
Enhancement Provider and the Master Servicer under this Agreement shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement.
SECTION 10. INVESTMENTS AND INFORMATION.
(a) The Trustee shall from time to time during the term of
this Agreement invest all amounts on deposit in the Credit Enhancement Account
as the Master Servicer shall direct, which investments shall at all times be
made in compliance with the terms of the Pooling and Servicing Agreement and the
Series Supplement.
(b) The Master Servicer shall provide the Credit Enhancement
Provider with such background information and data with respect to the Credit
Enhancement Account as the Credit Enhancement Provider may reasonably request.
(c) The Master Servicer shall obtain the consent of the Credit
Enhancement Provider prior to the investment in any Permitted Investments with a
stated maturity, the maturity of which is longer than as would cause them to
mature on or prior to the following Distribution Date as provided in Section
8(e) of the Series Supplement.
SECTION 11. SERVICING TRANSFER. In the event that a successor
Master Servicer is appointed pursuant to the Pooling and Servicing Agreement,
from and after the effective date of such transfer of servicing, the successor
Master Servicer appointed pursuant to the Pooling and Servicing Agreement, and
not the former Master Servicer, shall (a) be responsible for the performance of
all servicing functions to be performed from and after such date, (b) agree to
be bound by the terms, covenants and conditions contained herein applicable to
the Master Servicer and be subject to the duties and obligations of the Master
Servicer hereunder, and (c) agree to indemnify and hold harmless the Credit
Enhancement Provider from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which the Credit Enhancement Provider
may incur (or which may be claimed against the Credit Enhancement Provider) by
reason of the gross negligence or willful misconduct of the successor Master
Servicer in exercising its powers and carrying out its obligations under the
Pooling and Servicing Agreement and the Series Supplement. Such transfer of
servicing shall not affect any rights or obligations of the former Master
Servicer under this Agreement that arose prior to the effective date of the
transfer of servicing, except that such former Master Servicer shall have no
obligation to indemnify the Credit Enhancement Provider as a result of any act
or failure to act of any successor Master Servicer in the performance of the
servicing functions.
SECTION 12. REPRESENTATIONS AND WARRANTIES.
(a) The Credit Enhancement Provider hereby represents and
warrants to the Master Servicer and the Trustee that:
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<PAGE> 10
(i) The Credit Enhancement Provider has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, and has the corporate power and authority to execute, deliver
and perform its obligations under this Agreement.
(ii) This Agreement has been duly authorized, executed and
delivered on the part of the Credit Enhancement Provider.
(iii) When executed and delivered, this Agreement will
constitute a valid and binding agreement of the Credit Enhancement Provider
enforceable against the Credit Enhancement Provider in accordance with its
terms, except (A) as the same may be limited by insolvency, bankruptcy or
reorganization or other laws relating to or affecting the enforcement of
creditors' rights and (B) as the same may be limited by general equity
principles (whether considered in a proceeding at law or in equity) and by the
discretion of the court before which any proceeding therefor may be brought.
(b) The Master Servicer hereby represents and warrants to the
Credit Enhancement Provider and the Trustee that:
(i) The Master Servicer has been duly incorporated and is
validly existing as a banking corporation in good standing under the laws of the
State of Delaware, and has the corporate power and authority to execute, deliver
and perform its obligations under the Pooling and Servicing Agreement, the
Series Supplement and this Agreement.
(ii) This Agreement, the Pooling and Servicing Agreement and
the Series Supplement have been duly authorized, executed and delivered on the
part of the Master Servicer.
(iii) When executed and delivered, each of this Agreement, the
Pooling and Servicing Agreement and the Series Supplement will constitute a
valid and binding agreement of the Master Servicer enforceable against the
Master Servicer in accordance with its terms, except (A) as the same may be
limited by insolvency, bankruptcy, receivership or reorganization or other laws
relating to or affecting the enforcement of creditors' rights and (B) as the
same may be limited by general equity principles (whether considered in a
proceeding at law or in equity) and by the discretion of the court before which
any proceeding therefor may be brought.
(c) The Trustee hereby represents and warrants to the Credit
Enhancement Provider and the Master Servicer that:
(i) The Trustee is organized, existing and in good standing
under the laws of the United States of America.
(ii) The Trustee has full power, authority and right to
execute, deliver and perform this Agreement, the Pooling and Servicing Agreement
and the Series Supplement, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement, the Pooling and
Servicing Agreement and the Series Supplement.
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(iii) Each of this Agreement, the Pooling and Servicing
Agreement and the Series Supplement have been duly executed and delivered by the
Trustee.
SECTION 13. COVENANTS. Greenwood, as Master Servicer and on
behalf of the Holder of the Seller Certificate, covenants and agrees that, so
long as this Agreement shall remain in effect or any monetary obligation arising
hereunder or under the Series Supplement shall remain unpaid, it will change the
terms and provisions of a Credit Agreement with respect to a Greenwood Discover
Card Account or any other Account with respect to which it is the Servicer
(including, without limitation, the calculation of the amount, or the timing, of
charge-offs) only if it does not believe, after a good faith assessment of the
expected effects of such change, that such change will result in a reduction of
the Portfolio Yield, for any Due Period beginning prior to the termination of
the Series, to less than the Base Rate unless such change (i) is required by any
Requirements of Law or (ii) is deemed necessary by Greenwood in its sole
reasonable judgment to maintain its credit card business on a competitive basis.
For purposes of this Section 13, "Base Rate" shall mean (i) the weighted average
of the Certificate Rates for each Class of each Series then outstanding plus
(ii) 1% per annum. For purposes of the immediately preceding sentence, the
Certificate Rate for each Class that does not have a fixed Certificate Rate
shall be the actual Certificate Rate for such Class for the Interest Accrual
Period commencing in the immediately preceding Due Period. In the event that any
Additional Seller shall transfer Receivables in Additional Accounts to the
Trust, Greenwood on behalf of the Holder of the Seller Certificate shall cause
the Servicer with respect to such Additional Accounts to make the covenant set
forth above with respect to such Additional Accounts.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 15. TERMINATION. This Agreement shall terminate on the
date on which the Series terminates in accordance with the provisions of the
Pooling and Servicing Agreement and the Series Supplement; provided, however,
that this Agreement may be terminated by the Master Servicer at any time,
without penalty, provided that such termination does not cause the ratings of
the Investor Certificates to be lowered or withdrawn by either of the Rating
Agencies; and provided, further, that all amounts owing to the Credit
Enhancement Provider hereunder with respect to principal and interest on the
Loan shall have been paid in full. Notwithstanding the foregoing, the Credit
Enhancement Provider shall have no rights under this Agreement, and shall not be
entitled to any payments hereunder, if and for so long as there is no Loan
outstanding hereunder and no accrued but unpaid interest.
SECTION 16. NOTICES. Unless specifically indicated otherwise
herein, all notices and other communications provided for hereunder shall be in
writing and, if to the Credit Enhancement Provider, addressed to:
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<PAGE> 12
Discover Receivables Financing Corporation
12 Read's Way
New Castle, Delaware 19720
Attn: Executive Vice President and Secretary
Phone: (302) 323-7167
Fax: (302) 323-7393
or, if to the Seller or the Master Servicer, addressed to:
Greenwood Trust Company
12 Read's Way
New Castle, Delaware 19720
Attn: John J. Coane
Phone: (302) 323-7184
Fax: (302) 323-7393
or, if to the Trustee, addressed to:
U.S. Bank National Association
One Illinois Center
111 East Wacker Drive - Suite 3000
Chicago, Illinois 60601
Attn: Patricia M. Child
Phone: (312) 228-9413
Fax: (312) 228-9401
or as to any party at such other address as shall be designated by such party in
a written notice to the other parties.
Any notice or other communication shall be sufficiently given
and shall be deemed given when delivered to the addressee in writing or when
transmitted by telecopier, receipt of which by the addressee is confirmed by
telephone.
SECTION 17. BANKRUPTCY. To the extent that the Trustee, the
Master Servicer or Greenwood on behalf of the Holder of the Seller Certificate
makes a payment to the Credit Enhancement Provider or the Credit Enhancement
Provider receives any payment or proceeds with respect to the Loan, which
payment or proceeds or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any state or federal insolvency or
bankruptcy law then, to the extent such payment or proceeds are set aside, the
amount or part thereof intended to be satisfied shall be revived and continue in
full force and effect, as if such payment or proceeds had not been received by
the Credit Enhancement Provider.
SECTION 18. LIMITATION OF REMEDIES. The Credit Enhancement
Provider shall not have the right to cause the Loan or any portion thereof to
become due and payable prior to the due date for the Loan as set forth herein.
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SECTION 19. NO PETITION.
(a) The Credit Enhancement Provider, by entering into this
Agreement, hereby covenants and agrees that it will not at any time institute,
join in or otherwise cause the institution of, against any Seller, the Master
Servicer or the Trust, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States federal
or state or similar law prior to a year and a day after the final payment of all
investor certificates issued by any trust with respect to which Greenwood is the
seller.
(b) Each of Greenwood and the Trustee, by entering into this
Agreement, hereby covenants and agrees that it will not at any time institute,
join in or otherwise cause the institution of, against the Credit Enhancement
Provider, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state or
similar law prior to a year and a day after the final payment of all investor
certificates issued by any trust with respect to which Greenwood is the seller.
SECTION 20. AMENDMENTS. This Agreement shall not be amended or
modified without the written consent of each of the parties hereto. No amendment
hereto shall become effective without prior confirmation from the Rating
Agencies that such amendment will not cause a lowering or withdrawal of the then
current ratings of the Investor Certificates of the Series. The Master Servicer
shall provide a copy of any amendment hereto to the Rating Agencies.
SECTION 21. SUCCESSORS AND ASSIGNS; REPLACEMENT OF CREDIT
ENHANCEMENT PROVIDER.
(a) This Agreement shall be binding upon, and inure to the
benefit of, the Trustee, the Sellers, the Servicers, the Master Servicer and the
Credit Enhancement Provider and their respective successors and permitted
assigns.
(b) No Seller shall assign its interests hereunder and under
the Pooling and Servicing Agreement or the Series Supplement, or any portion of
such interests, except by an assignment that transfers each such interest to the
same assignee.
(c) In the event that a successor trustee is appointed
pursuant to the provisions of the Pooling and Servicing Agreement to replace the
then current Trustee, such successor trustee, from and after its appointment,
shall be the Trustee for purposes of this Agreement and shall assume all of the
rights and obligations of the Trustee hereunder.
(d) The Credit Enhancement Provider may not assign any of its
rights or obligations hereunder without the prior written consent of Greenwood
on behalf of the Holder of the Seller Certificate and without prior written
confirmation from the Rating Agencies that such assignment will not result in
the lowering or withdrawal of the rating of any Class of any Series then
outstanding.
SECTION 22. PARTICIPATION. Any successor Credit Enhancement
Provider that is not a special-purpose corporation that is an affiliate of
Greenwood may, without the consent of the Trustee, the Trust, any Seller, the
Master Servicer, any Servicer or any
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Certificateholder of the Series, sell participations to one or more banks or
other entities in all or a portion of its rights under this Agreement (including
all or a portion of the Loan); provided, however, that (a) the Credit
Enhancement Provider's obligations under this Agreement shall remain unchanged,
(b) the Credit Enhancement Provider shall remain solely responsible to the other
parties hereto for the performance of such obligations, (c) the Trustee, the
Trust, the Sellers and the Master Servicer shall continue to deal solely and
directly with the Credit Enhancement Provider in connection with the Credit
Enhancement Provider's rights and obligations under this Agreement, and (d) the
Credit Enhancement Provider shall retain the sole right to enforce the
obligations of the Trustee, the Trust, the Sellers or the Master Servicer under
this Agreement and to approve any amendment, modification or waiver of any
provision of this Agreement.
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IN WITNESS WHEREOF, the parties hereby have caused this
Agreement to be duly executed and delivered by the undersigned thereunto duly
authorized as of the day and year first above written.
DISCOVER RECEIVABLES FINANCING
CORPORATION,
as Credit Enhancement Provider
By
----------------------------------------------
Name:
Title:
GREENWOOD TRUST COMPANY,
as Master Servicer, Servicer and Seller
By
----------------------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By
----------------------------------------------
Name:
Title:
13
<PAGE> 1
EXHIBIT 5.1
[Latham & Watkins Letterhead]
May 12, 2000
Greenwood Trust Company, as Originator
of Discover Card Master Trust I
12 Read's Way
New Castle, Delaware 19720
Re: Discover Card Master Trust I,
Registration Statement on Form S-3
Ladies and Gentlemen:
At your request, we have examined the above-captioned
Registration Statement on Form S-3, together with the exhibits thereto (the
"Registration Statement"), to be filed by you and the Discover Card Master Trust
I (the "Trust"), registering credit card pass-through certificates representing
undivided interests in the Trust. The certificates of a particular series will
be issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") dated as of October 1, 1993, which is incorporated by
reference to Exhibit 4.1 of your Registration Statement on Form S-1
(Registration No. 33-71502), as amended by the First Amendment to the Pooling
and Servicing Agreement, dated as of August 15, 1994, which is incorporated by
reference to Exhibit 4.2 of the Trust's Current Report on Form 8-K dated August
1, 1995, by the Second Amendment to the Pooling and Servicing Agreement, dated
as of February 29, 1996, which is incorporated by reference to Exhibit 4.4 of
the Trust's Current Report on Form 8-K dated April 30, 1996, by the Third
Amendment to the Pooling and Servicing Agreement, dated as of March 30, 1998,
which is incorporated by reference to Exhibit 4.1(d) of the Trust's Registration
Statement on Form 8-A filed on April 13, 1998, and by the Fourth Amendment to
the Pooling and Servicing Agreement, dated as of November 30, 1998, which is
incorporated by reference to Exhibit 4.1 of the Trust's Current Report on Form
8-K dated
<PAGE> 2
LATHAM & WATKINS
Greenwood Trust Company
May 12, 2000
Page 2
November 30, 1998, and as supplemented by a related Series Supplement (the
"Series Supplement"), a copy of the form of which is included as Exhibit 4.4 to
the Registration Statement and the specific terms of which are summarized in the
prospectus to be included therein, each by and between Greenwood as Master
Servicer, Servicer and Seller and U.S. Bank National Association (formerly First
Bank National Association, successor trustee to Bank of America Illinois,
formerly Continental Bank, National Association) as Trustee. We are familiar
with the proceedings taken and to be taken by Greenwood as originator of the
Trust in connection with the authorization of the issuance and sale of
certificates, and have examined such documents and such questions of law and
fact as we have deemed necessary in order to express the opinion hereinafter
stated.
We are opining herein as to the effect on the subject
transactions of only United States federal law and the laws of the State of New
York, and we express no opinion with respect to the applicability thereto or the
effect thereon of the laws of any other jurisdiction or as to any matters of
municipal law or the laws of any local agencies within any state.
Based on the foregoing, and subject to the proposed additional
proceedings being taken as now contemplated prior to the issuance of a
particular series of certificates and the terms of the particular series of
certificates being otherwise in compliance with then applicable law, we are of
the opinion, as of the date hereof, that the certificates of a particular
series, upon issuance and sale thereof in the manner described in the
Registration Statement and as provided in the Pooling and Servicing Agreement
and a related Series Supplement, will be validly issued, fully paid and
nonassessable, and enforceable in accordance with their terms and entitled to
the benefits of the Pooling and Servicing Agreement and the related Series
Supplement, except as the same may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors, and (ii) general
principles of equity (whether enforcement is considered in a proceeding at law
or in equity) and by the discretion of the court before which any proceeding
therefor may be brought.
We hereby consent to the filing of (i) this opinion and (ii)
the opinion to be filed as Exhibit 8.1 to the Registration Statement and to the
reference to our firm in the prospectus to be included therein under the
captions "Legal Matters," "Federal Income Tax Consequences," "State Tax
Consequences" and "The Seller -- Insolvency Related Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE> 1
EXHIBIT 5.2
[LATHAM & WATKINS LETTERHEAD]
U.S. Bank National Association
One Illinois Center
111 East Wacker Drive -- Suite 3000
Chicago, Illinois 60601
Re: Greenwood Trust Company
Discover Card Master Trust I,
Series [ ] Investor Certificates
Ladies and Gentlemen:
We have acted as counsel to Greenwood Trust Company
("Greenwood") in connection with the transactions contemplated by the Pooling
and Servicing Agreement, dated as of October 1, 1993, between Greenwood as
Master Servicer, Servicer and Seller and U.S. Bank National Association
(formerly First Bank National Association, successor trustee to Bank of America
Illinois, formerly Continental Bank, National Association) as Trustee (the
"Trustee"), as amended on or prior to the date hereof (the "Pooling and
Servicing Agreement"), as supplemented by the Series Supplement between
Greenwood and the Trustee, dated as of [ ] (the "Series Supplement").
Pursuant to the Pooling and Servicing Agreement, Greenwood has sold or otherwise
conveyed certain Discover Card receivables to the Discover Card Master Trust I
(the "Trust"). The Trust will issue the Discover Card Master Trust I, Series [ ]
Investor Certificates pursuant to the Series Supplement. The Trust previously
has issued other series of investor certificates, and is expected to issue one
or more additional series of investor certificates from time to time in the
future.
Except as the context clearly requires otherwise, all
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Pooling and Servicing Agreement or the
Series Supplement. As used herein "Lien," in addition to the meaning ascribed to
such term in the Pooling and Servicing Agreement, means statutory and
<PAGE> 2
[ ]
Page 2
non-consensual liens. As used herein, "Receivables" includes only those
Receivables which are sold as part of a securitization transaction and does not
include any Receivables relating to Additional Accounts or the proceeds thereof.
The term "UCC" means the Uniform Commercial Code as in effect in the State of
New York. The phrase "security interest" is used herein as defined in Section
1-201(37) of the UCC and includes any interest of a buyer of accounts or chattel
paper which is subject to Article 9 of the UCC.
In our capacity as such counsel, we have examined originals or
copies of such records, documents or other instruments as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below.
These records, documents and instruments include the following (the "Relevant
Documents") for purposes of this opinion letter:
(i) the Pooling and Servicing Agreement;
(ii) the Series Supplement;
(iii) a certificate dated as of the date hereof of a senior
financial officer of Greenwood;
(iv) a certificate dated as of the date hereof of an
officer of the Trustee; and
(v) an opinion of Young Conaway Stargatt & Taylor, LLP
(the "Delaware Counsel Opinion") dated as of the date
hereof with respect to certain matters of Delaware
law.
Greenwood, as a Delaware-chartered bank insured by the Federal
Deposit Insurance Corporation (the "FDIC"), is not eligible to be a debtor under
the Bankruptcy Code (11 U.S.C. Section 1 et seq.). Rather, should Greenwood
become insolvent, it would be the subject of a conservatorship or receivership
proceeding. Under the Federal Deposit Insurance Act (12 U.S.C. Section 1811 et
seq.), as amended (the "FDIA" or "Act"), the FDIC is the organization most
likely to be appointed the conservator or receiver in such a proceeding
involving Greenwood. If the FDIC were appointed the receiver or conservator of
Greenwood pursuant to Section 1821(c)(3) of the Act, the FDIC may exercise the
powers conferred upon a receiver or conservator by Delaware law and, in
addition, may exercise the powers conferred on the FDIC by the Act as if
Greenwood were a federal depository institution for which the FDIC had been
appointed conservator or receiver. Under Section 1821(c)(4) of the Act, the FDIC
may appoint itself as conservator or receiver of Greenwood and, pursuant to such
appointment, may exercise the powers conferred on the FDIC by the Act as if
Greenwood were a federal depository institution, except that, under Section
1821(c)(13) of the Act, the FDIC shall apply certain aspects of Delaware law.
With the exception of the FDIC Statement of Policy Regarding
Treatment of Security Interests After Appointment of the FDIC as Conservator or
Receiver, 58 Fed. Reg. 16833 (1993) (the "Policy Statement"), no applicable
regulations of the FDIC have been
<PAGE> 3
[ ]
Page 3
promulgated pursuant to Section 1821(d)(1) of the FDIA regarding the conduct of
conservatorships or receiverships under the Act; nor are we aware of any cases
that have been decided under those sections of the FDIA and which are applicable
by analogy to the transactions herein contemplated other than certain cases
decided under Section 1821(d) and Section 1823(e) of the Act, which cases did
not affect our opinions expressed in respect of the Act. Accordingly, until such
time as a body of jurisprudence develops interpreting the relevant sections of
the FDIA, our analysis and the opinions expressed herein with respect to the Act
are not and cannot be rendered nor relied upon to the same extent as opinions
rendered in areas of law where there exists a well-developed jurisprudence. To
the extent the opinions herein rely on letters issued by the FDIC or its staff,
we note that it is the policy of the FDIC not to issue binding advisory opinions
as to positions it would adopt in hypothetical situations that arise in future
receiverships or conservatorships of insured depository institutions and that
the FDIC's actions as receiver or conservator are determined on a case by case
basis, in accordance with applicable laws and in light of the specific factual
situations. Subject to the foregoing limitations, such analysis and opinions are
based upon our interpretation of the statutory language of the Act and the legal
principles that we believe a court would employ in a conservatorship or
receivership case arising under the Act.
We have investigated such questions of law for the purpose of
rendering this opinion as we have deemed necessary. We are opining herein as to
the effect on the subject transactions of only United States federal law and the
laws of the State of New York, and we express no opinion with respect to the
applicability thereto or the effect thereon of the laws of any other
jurisdiction or as to any matters of municipal law or the laws of any other
local agencies within any state. You understand that the transactions that are
the subject of the opinions set forth in this opinion letter involve significant
matters governed by Delaware law and, insofar as such matters are governed by
Delaware law, we refer you to the Delaware Counsel Opinion. The opinions
expressed herein are subject to the applicable assumptions, qualifications and
limitations set forth in the Delaware Counsel Opinion.
We have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity
with authentic originals of all documents submitted to us as copies.
I. ASSUMPTIONS OF FACT
In rendering the opinions set forth in this opinion letter, we
have made no independent investigation of the facts referred to herein and have
relied for the purpose of rendering this opinion letter exclusively on facts set
forth in each of the Relevant Documents and in officer's certificates from
authorized officers of Greenwood and the Trustee, including the representations
and warranties contained therein, and on the facts and assumptions set forth
below, in each case which we assume have been and will continue to be true.
<PAGE> 4
[ ]
Page 4
The Pooling and Servicing Agreement, the Series Supplement and
the receipt of the consideration for Greenwood's obligations thereunder were
approved by the Executive Committee of the Board of Directors of Greenwood, and
such approval is reflected in the minutes of such Executive Committee of the
Board of Directors. Each such agreement has been and will be, continuously from
the time of execution thereof, an official record of Greenwood. Each such
agreement and the transactions contemplated thereby are not subject to a cease
and desist order made under Section 1818(b)(6)(D) of the Act, and are not
inconsistent with any formal or informal enforcement action by a bank regulatory
agency.
Greenwood received or will receive reasonably equivalent value
in return for the transfer to the Trust of its interest in the Receivables and
the proceeds thereof. To the extent such a transfer is deemed not to constitute
an absolute transfer, Greenwood has granted a security interest to the Trust in
the Receivables. The Pooling and Servicing Agreement is consistent with the
terms that would result from arm's-length negotiations between Greenwood and the
Investor Certificateholders (as such term is defined in the Pooling and
Servicing Agreement) and was entered into in the ordinary course of Greenwood's
business.
Neither Greenwood nor the Trustee has, in contemplation of the
insolvency of Greenwood or with the intent to hinder, delay or defraud Greenwood
or its creditors: (i) executed the Pooling and Servicing Agreement; (ii) granted
to the Trust or received from Greenwood, as applicable, a security interest in
the Receivables or the proceeds thereof; (iii) caused, permitted or suffered the
perfection or attachment of such security interest; or (iv) otherwise
transferred the Receivables to the Trust or received the Receivables from
Greenwood, as applicable, pursuant to the Pooling and Servicing Agreement.
At the present time neither the Receivables nor the proceeds
thereof are subject to any statutory or non-consensual Lien (including without
limitation any attachment or execution lien) or Lien of any kind that does not
require the filing of a financing statement. With respect to Liens that require
the filing of a financing statement, we are relying, with your permission,
exclusively on the Delaware Counsel Opinion.
The Receivables are created under and are evidenced solely by
Credit Agreements. There has been delivered to the Trustee a list of Accounts
with respect to the Receivables, in accordance with the terms of the Pooling and
Servicing Agreement.
All statements contained in certificates delivered to us by
Greenwood or the Trustee are accurate and correct including, without limitation,
the certificate of Greenwood to the effect that its chief executive office,
chief place of business and the only office where it keeps records concerning
the Receivables are located in the State of Delaware. We have further assumed
that where a certification is made to the best knowledge of a person signing a
certificate described in this paragraph, such person has knowledge of all of the
relevant facts.
<PAGE> 5
[ ]
Page 5
II. OPINION
On the basis of the foregoing, and in reliance thereon, we are
of the opinion that, as of the date hereof:
1. The Receivables constitute either "general intangibles" or
"accounts," in each case as defined in Section 9-106 of the UCC. Under Section
9-103(3) of the UCC, the perfection and the effect of perfection or
non-perfection of a security interest in the Receivables are governed by
Delaware law, as to which we understand you are relying solely on the Delaware
Counsel Opinion.
2. If the transfer of the Receivables and the proceeds thereof
to the Trust pursuant to the Pooling and Servicing Agreement constitutes an
absolute transfer of the Receivables and the proceeds thereof to the Trust, then
such absolute transfer transfers to the Trust all of the right, title and
interest of Greenwood in and to the Receivables and the proceeds thereof.
A. Qualification with Respect to Receivables that
Constitute "Accounts."
To the extent that any Receivables constitute
"accounts," the ownership interest of the Trust in such Receivables is
subject to the same limitations applicable to the perfection and
priority of the security interest created by the Pooling and Servicing
Agreement in Receivables in favor of the Trust. See UCC Section
9-102(1). To the extent our opinion in this paragraph 2 relates to such
perfection and priority, we refer you to the Delaware Counsel Opinion.
We call to your attention that Section 9-318(3) of
the UCC provides in effect that the Obligor in respect of a Receivable
is authorized to make payments to Greenwood until such Obligor receives
notification that such Receivable has been assigned to the Trust and
that payment thereof is to be made to the Trust. Accordingly, unless
and until such Obligor is so notified and directed, all payments made
to Greenwood (or to a subsequent assignee if Greenwood should make a
subsequent assignment of such Receivable and notify such Obligor of
such assignment and direct such Obligor to make payments to such
subsequent assignee) in respect of such Receivable will discharge a
corresponding amount of such Receivable, and the amount of such payment
may not be recovered from the applicable Account Obligor. We note that
Greenwood is the Servicer for the Greenwood Discover Card Accounts and
that Section 4.03 of the Pooling and Servicing Agreement provides that
if, at any time with respect to any Servicer, any of certain conditions
occurs, thereafter such Servicer shall deposit an amount equal to the
Required Daily Deposit with respect to such Servicer in the Collections
Account not later than two Business Days following the Date of
Processing of such Collections.
<PAGE> 6
[ ]
Page 6
B. Qualifications with Respect to Receivables that
Constitute "General Intangibles."
To the extent that any Receivables constitute
"general intangibles," the ownership interest of the Trust in such
Receivables is not subject to the provisions of the UCC. See Official
Uniform Comment 2 to Section 9-102. With respect to such Receivables as
exist on the date hereof, it is our opinion that no further action is
required under the laws of the State of New York to protect the
ownership interest of the Trust in such Receivables against creditors
of, or subsequent purchasers from, Greenwood except as set forth in the
second following paragraph.
With respect to Receivables that constitute "general
intangibles" and that come into existence after the date hereof, it is
arguable that the Trust's ownership interest in such Receivables will
be subject to such Liens as antedate the date on which any such
Receivables come into existence. However, in our judgment a court,
properly presented with the facts and arguments, should hold that the
Trust's ownership interest in such Receivables is not subject to such
Liens and that no further action is required to protect such ownership
interest of the Trust against creditors of, or subsequent purchasers
from, Greenwood except as set forth in the following paragraph.
A result similar to that under Section 9-318(3) of
the UCC noted supra, with respect to Receivables that constitute
"accounts," will occur if the Obligors of Receivables constituting
"general intangibles" are not directed to make payments to the Trust.
3. If the transfer is deemed not to be a sale, it would be
treated as a loan secured by the property purported to be sold, in which event
the Pooling and Servicing Agreement creates a valid security interest in favor
of the Trust, in Greenwood's right, title and interest in and to the Receivables
and the proceeds thereof.
We note that Section 9-205 of the UCC provides that a
"security interest is not invalid or fraudulent against creditors by reason of
liberty in the debtor . . . to collect or compromise accounts or chattel paper
. . ." The omission of the phrase "general intangibles" from such portion of
Section 9-205 may permit the argument that the security interest in Receivables
constituting "general intangibles" is invalid because of the provision of the
Pooling and Servicing Agreement which provides that Greenwood, with respect to
Greenwood Discover Card Accounts, will service and administer, and collect
payments due under, the Receivables. However, in our opinion, for the reasons
set forth below, the omission of the phrase "general intangibles" was not
intended to limit the scope of the quoted provision of Section 9-205 to
exclusively accounts and chattel paper, and the security interest granted by the
Pooling and Servicing Agreement is not invalidated by the aforementioned
provision of the Pooling and Servicing Agreement.
<PAGE> 7
[ ]
Page 7
The purpose of Section 9-205 was to specifically validate
security interests in accounts and chattel paper without requiring the creditor
to exercise dominion and control over such types of collateral and was
specifically included in the Uniform Commercial Code because accounts receivable
and inventory financings on the basis of collateral consisting of accounts and
chattel paper were significant commercial transactions at the time of the
promulgation of the Uniform Commercial Code by the National Conference of
Commissioners on Uniform State Laws. See Official Uniform Comment 1 to Section
9-205.
In our view, general intangibles were not mentioned in the
quoted portion of Section 9-205 not because of an intent to exclude this type of
collateral from the benefits extended to accounts and chattel paper but because
financings on the basis of general intangibles were not a commercially
significant method of finance at the time and, therefore, no consideration was
given to including general intangibles in such portion of Section 9-205.
Furthermore, invalidating a security interest in general intangibles because the
debtor may collect the general intangibles is inconsistent with other provisions
of the UCC.
Section 9-502(1), for example, provides that on default a
secured party may notify an account debtor to make payments to the secured party
whether or not the assignor was theretofore making collections on the
collateral. Section 9-105 defines "account debtor" as a "person who is obligated
on an account, chattel paper or general intangible." Thus, Section 9-502(1)
presupposes that a debtor may be collecting from an account party that is an
obligor on a general intangible, and such presupposition would be inconsistent
with interpreting the omission of "general intangible" from Section 9-205 as
invalidating security interests in general intangibles in circumstances where
debtors collect from account parties on the general intangibles. See also
Section 9-318(3) (account party authorized to pay assignor until notified to pay
assignee).
4. Subject to the discussion and qualifications in this
letter, it is our opinion that the security interest granted in the Pooling and
Servicing Agreement in favor of the Trust is enforceable in accordance with its
terms, notwithstanding the insolvency of Greenwood or the appointment of the
FDIC as conservator or receiver of Greenwood, except as may be limited otherwise
by general principles of equity; however, in our opinion, the insolvency of
Greenwood in and of itself would not be a proper basis for a court, if properly
presented, to permanently enjoin the Trustee's rights to enforce its security
interest. Furthermore, in the event of the insolvency of, or appointment of a
receiver or conservator with respect to, Greenwood, the enforceability of such
security interest may be subject to the restrictions and limitations contained
in the Act.
A. Under Section 1821(d)(12) of the Act, a court is
required to grant a stay requested by a conservator
or receiver of an insured depository institution,
such as Greenwood, of any judicial action or
proceeding to which such insured depository
institution is or becomes a party. Such conservator
or receiver may request such a stay for a period not
in excess of (i) 45 days in
<PAGE> 8
[ ]
Page 8
the case of a conservator and (ii) 90 days in the
case of a receiver. In addition, under Section
1821(d)(3) of the Act, the FDIC as receiver has the
power to determine claims of creditors of a closed
depository institution in accordance with regulations
of the FDIC promulgated pursuant to Section
1821(d)(4) of the Act, and the requirements of
Section 1821(d) of the Act, including Section
1821(d)(11) which establishes the priority of claims.
Nevertheless, no regulations have been promulgated
under Section 1821(d)(4) of the Act as of the date
hereof and the priority provisions of 12
C.F.R.Section 360.3 have been expressly amended to
not apply to any conservatorships or receiverships
occurring after August 10, 1993. In addition, Section
1821(d)(11), while prioritizing the claims against
the closed depository institution, does not determine
the enforceability of a security interest in the
assets thereof.
B. In general, under Section 1821(d)(5) of the Act,
before the end of the 180-day period beginning on the
date any claim against a depository institution is
filed with the FDIC as receiver, the FDIC shall
determine whether to allow or disallow the claim and
shall notify the claimant of any determination with
respect to such claim unless such 180-day period is
extended by written agreement between such claimant
and the FDIC. However, Section 1821(d)(8) of the Act
directs the FDIC to establish a procedure outside the
general claims procedure for expedited relief for
claimants who --
(i) allege the existence of legally valid
and enforceable or perfected security interests in
assets of any depository institution for which the
FDIC has been appointed receiver; and
(ii) allege that irreparable injury will
occur if the routine claims procedure is followed.
To date, no such procedures have been established by the FDIC.
With respect to self-help liquidation of collateral by secured claimants in FDIC
receiverships of insured depository institutions generally, we call to your
attention the letter dated December 15, 1989 from John L. Douglas, General
Counsel of the FDIC, to Ms. Frances R. Bermanzohn, Senior Vice President and
General Counsel of the Public Securities Association, a copy of which is
attached hereto (the "Letter").
C. Section 1821(d)(9) of the Act states that, subject to
an exception not material for the purposes hereof,
any agreement that does not meet the requirements set
forth in Section 1823(e) of the Act shall not form
the basis of, or substantially comprise, a claim
against the receiver or the FDIC. Among the
requirements contained in Section 1823(e) is:
<PAGE> 9
[ ]
Page 9
(2) [the agreement] was executed by the
depository institution and any person claiming an
adverse interest thereunder, including the obligor,
contemporaneously with the acquisition of the asset
by the depository institution. . . .
Arguably, the "contemporaneous" requirement of Section 1823(e)
could defeat the security interest of the Trust in any Receivables not created
contemporaneously with the execution of the Pooling and Servicing Agreement.
However, although there are no judicial decisions based on directly similar
facts nor any analogous judicial decisions, based on the considerations set
forth below, it is our view that a court, if properly presented with the facts
and arguments, should hold that the "contemporaneous" requirement of Section
1823(e) does not defeat the enforceability of the security interest of the Trust
with respect to Receivables not created contemporaneously with the execution of
the Pooling and Servicing Agreement. With respect to Receivables created after
the date hereof, we refer you to our discussion of such future Receivables
infra.
Section 1823(e) of the Act is a re-enactment of the last
paragraph of Section 1823(e) of the FDIA (the "Prior Section 1823(e)") with
certain additions not relevant for the following discussion. We are not aware of
any reported decisions interpreting Prior Section 1823(e) or Section 1823(e) of
the Act in a fact situation similar to that presented by the Pooling and
Servicing Agreement. Furthermore, the decisions of which we are aware
interpreting Section 1823(e) of the Act did not interpret the "contemporaneous"
requirement; nor do they, in our view, diminish the applicability of decisions
interpreting or applying Prior Section 1823(e).
The reported decisions of which we are aware interpreting
Prior Section 1823(e) or Section 1823(e) involve circumstances which would
condition or excuse performance of otherwise valid, although possibly voidable,
obligations in favor of banks, such as a loan by such bank to a borrower. In
those instances, the requirements of Prior Section 1823(e) or Section 1823(e)
serve to ensure appropriate consideration of unusual loan transactions by senior
bank officials and prevent fraudulent insertion of new terms, with the collusion
of bank employees, when a bank appears headed for failure. See Langley v. FDIC,
484 U.S. 86, 92 (1987); see also Thigpen v. Sparks, 1993 U.S. App. Lexis 2273
(5th Cir. 1993). But see North Arkansas Med. Ctr. v. Barrett, 962 F.2d 780 (8th
Cir. 1992) (affirming the dismissal of a claim by a depositor of an insolvent
savings and loan association ("S&L") that the depositor had a perfected security
interest in certain assets held by the S&L to secure the S&L's obligations under
certain certificates of deposit because of the depositor's failure to comply
with Section 1823(e)). In addition, the requirements serve to protect the FDIC
from private or secret agreements that were not reflected in a failed
institution's records. E.g., Aurora Shores Homeowners Ass'n v. Federal Deposit
Ins. Corp., 2 F.Supp. 2d 975, 978 (N.D. Ohio 1998); Advantage Group Inv., Inc.
v. Pacific Southwest Bank, 972 S.W.2d 866 (Tex. App. 1998).
<PAGE> 10
[ ]
Page 10
Because of the concerns prompted in the financial industry by
the decision in North Arkansas Medical Center, the FDIC promulgated the Policy
Statement, which applies to all security agreements to which an insured
depository institution is a party regardless of the date of such agreements, if
the FDIC is or was appointed conservator or receiver of such institution on or
after August 9, 1989. In 1994, after the adoption of the Policy Statement by the
FDIC, Congress amended Section 1823(e) of the FDIA to codify the Policy
Statement as it relates to deposits by government agencies.
The FDIC made the following assumptions in the Policy
Statement:
(a) the agreement was undertaken in the ordinary course of
business, not in contemplation of insolvency, and with no
intent to hinder, delay or defraud the institution or its
creditors; (b) the secured obligation represents a bona fide
and arm's length transaction; (c) the secured party or parties
are not insiders or affiliates of the Institution; (d) the
grant or creation of the security interest was for adequate
consideration; and (e) the security agreement evidencing the
security interest is in writing, was approved by the
Institution's board of directors or loan committee (which
approval is reflected in the minutes of a meeting of the board
of directors or committee), and has been, continuously from
the time of its execution, an official record of the
Institution.
58 Fed. Reg. 16834 (1993). See also Letter from Cristeena G. Naser, Attorney at
the FDIC, FDIC 94-10 (Mar. 2, 1994) (restating the assumptions). Provided that
these assumptions and all of the other statutory requirements of Section 1823(e)
are met, the Policy Statement states the FDIC's interpretation of the
"contemporaneous" requirement of Sections 1821(e) and 1823(e) and its policy
that the FDIC, acting as conservator or receiver for a depository institution,
will not seek to avoid an otherwise legally enforceable and
perfected security interest solely because the security
agreement granting or creating such security interest does not
meet the "contemporaneous" requirement of Sections
[1821](d)(9), [1821](n)(4)(I), and [1823](e) of the Act.
Specifically, the FDIC will not seek to avoid such a security
interest solely because the secured obligation or collateral
subject to the security interest (a) was not acquired by the
Institution contemporaneously with the approval and execution
of the security agreement granting the security interest
and/or (b) may change, increase, or be subject to substitution
from time to time during the period that the security interest
is enforceable and perfected.
Id.
With regard to the security interest of the Trust created by
the Pooling and Servicing Agreement, the Policy Statement precludes, in our
view, challenges by the FDIC to the enforceability of such security interest in
both (i) existing Receivables not created
<PAGE> 11
[ ]
Page 11
contemporaneously with the execution of the Pooling and Servicing Agreement
(including investment proceeds arising in the future from existing Receivables),
and (ii) Receivables that come into existence after the execution of the Pooling
and Servicing Agreement.
Moreover, in contrast to the situations in the decisions we
reviewed involving Prior Section 1823(e) or Section 1823(e), which involved the
conditioning or excusing of an obligor's obligation, the obligations of Obligors
in respect of Receivables are unaffected by the Pooling and Servicing Agreement.
The purpose of the Pooling and Servicing Agreement is not to provide for the
release or modification of Obligors' obligations but to provide for the transfer
of Receivables to the Trust in return for consideration and, to the extent such
transfer is deemed not to constitute an absolute transfer, the grant of a
security interest in such Receivables to the Trust. In that regard, we are
informed that Greenwood's grant or creation of a security interest in the
Receivables represents a bona fide and arm's length transaction for adequate
consideration. We are also informed that the Pooling and Servicing Agreement was
undertaken in the ordinary course of business, not in contemplation of
insolvency, and with no intent to hinder, delay or defraud Greenwood or its
creditors. Finally, the Pooling and Servicing Agreement is in writing and
Greenwood has informed us that such agreement was approved by the Executive
Committee of its Board of Directors as reflected in the resolutions of the
Executive Committee, and has been, continuously from the time of its execution,
an official record of Greenwood.
With regard to the FDIC's non-affiliation assumption, we are
informed that the Certificateholders (as such term is defined in the Pooling and
Servicing Agreement), the beneficiaries of the security interest in the
Receivables, are not affiliates or insiders of Greenwood. Furthermore, the
policies underlying Section 1823(e) and the Policy Statement suggest that the
FDIC, acting as conservator or receiver for Greenwood, would not seek to avoid
the security interest in the Receivables. Both Section 1823(e) and the Policy
Statement serve to prevent secret and collusive agreements between failing banks
and third parties, including their secured creditors, which are not for adequate
consideration. See Langley, 484 U.S. at 86; Thigpen, 983 F.2d at 644. Even if
the Trust is treated as an insider or affiliate of Greenwood, thereby falling
outside of the express assumptions of the Policy Statement, the above concerns
are inapplicable in the instant circumstance. The Pooling and Servicing
Agreement discloses in full the entire terms of the transaction contemplated
thereby and represents a bona fide and arm's length transaction for adequate
consideration. Moreover, as indicated above, we are informed that such
agreements have been approved by the Executive Committee of the Board of
Directors. We are also informed that Greenwood received consideration which it
believes to be reasonably equivalent and fair consideration for the transfer of
Receivables.
D. Section 1821(e)(1) of the Act permits any conservator
or receiver of an insured depository institution to
disaffirm or repudiate any contract or lease of such
insured depository institution that such conservator
or receiver determines, in its discretion, to be
burdensome and the disaffirmance or repudiation of
which will promote the orderly
<PAGE> 12
[ ]
Page 12
administration of the institution's affairs.
Nonetheless, Section 1821(e)(11) of the Act provides
that:
No provision of [Section 1821(e)] shall be construed as
permitting the avoidance of any legally enforceable or
perfected security interest in any of the assets of any
depository institution except where such an interest is taken
in contemplation of the institution's insolvency or with the
intent to hinder, delay or defraud the institution or the
creditors of such institution.
As stated above, we are aware of no facts that indicate any
transfer of Receivables by Greenwood to the Trust has been or will be made in
contemplation of Greenwood's insolvency; nor are we aware of any facts that
indicate any transfer of Receivables to the Trust has been or will be made with
the intent to hinder, delay or defraud Greenwood or the creditors of Greenwood.
Notwithstanding the above, the Policy Statement expressly
reserves the FDIC's right, "as conservator or receiver, to redeem or prepay any
secured obligation of [a depositary institution] by repudiation or otherwise."
58 Fed. Reg. 16834 (1993). We note that the Policy Statement further provides
that the FDIC will make such a decision within a reasonable period of time which
generally should not exceed 180 days from the date of appointment of the FDIC as
conservator or receiver for the depository institution.
In case of a repudiation pursuant to Section 1821(e), the
secured party is entitled to damages. The Policy Statement emphasizes, however,
that Section 1821(e) limits the liability of the FDIC as conservator or receiver
for exercising its repudiation rights to "actual direct compensatory damages"
and that the secured party's damages are to be determined as of the date of
appointment of the conservator or receiver, and not, as in certain "qualified
financial contracts," as of the date of repudiation. 58 Fed. Reg. 16834 (1993).
We note that the Resolution Trust Corporation, which has ceased to exist as of
December 31, 1995 (the FDIC has taken over its responsibilities), took the
position that it had the authority to repudiate a depository institution's
obligation to pay post-insolvency interest, but adopted a policy of not doing
so. We note that in a 1993 case involving the repudiation by the Resolution
Trust Corporation of certain secured zero-coupon bonds issued by a savings
association, a United States federal district court held that "actual direct
compensatory damages" in the case of a marketable security meant the market
value of the repudiated bonds as of the date of repudiation. See Employees'
Retirement Sys. v. Resolution Trust Corp., 840 F.Supp. 972 (S.D.N.Y. 1993).
E. If the FDIC were appointed as receiver or conservator
of Greenwood pursuant to Section 1821(c)(3) of the
Act, it would have in addition to the powers
conferred on it by Section 1821 of the Act, the
powers conferred on it under any provision of
Delaware law applicable to a conservator or receiver
of a Delaware state depository institution. However,
if the FDIC were appointed as receiver or conservator
of
<PAGE> 13
[ ]
Page 13
Greenwood pursuant to Section 1821(c)(4) of the Act,
Delaware law as a general rule does not apply to the
conservatorship or receivership.
We do not express any opinion herein:
(i) as to the creation, validity or enforceability of any
interest of Greenwood in the Receivables or the
proceeds thereof;
(ii) as to the enforceability of any of the Receivables,
or the extent to which any of the Receivables may be
subject to defenses of the related Account holder
(including, without limitation, any limitation on the
enforceability of any of the Receivables, or any
defense to which any of the Receivables may be
subject, as a result of Greenwood's alleged failure
to file with the federal bankruptcy courts, with
respect to certain Accounts, bankruptcy reaffirmation
agreements as required under applicable provisions of
Chapter 7 of the United States Bankruptcy Code);
(iii) as to Greenwood's rights in or title to any of the
Receivables or the proceeds thereof;
(iv) as to whether the transfer of Receivables to the
Trust constitutes an absolute transfer;
(v) as to whether the purported absolute transfer of all
Receivables now existing or hereafter created is
effective to convey to the Trust, as of the date of
purported absolute transfer, Receivables that do not
exist as of the date of such purported absolute
transfer, or as to whether Receivables hereafter
created in an Account are deemed to exist as of the
date hereof;
(vi) with respect to Receivables relating to Additional
Accounts or Surviving Accounts or, in each case, the
proceeds thereof;
(vii) as to whether the administrative expenses of the FDIC
or any other receiver or conservator of Greenwood
would have priority over the Trust's interest in
Receivables or proceeds thereof;
(viii) as to whether a court in an equitable proceeding
might issue a temporary restraining order or
preliminary injunction pending resolution of the
Trust's rights in the Receivables, the proceeds
thereof or rights to payment; and
(ix) as to the consequences of a discontinuation or
revocation by the FDIC or a court of the Policy
Statement or the Letter or the refusal by the FDIC or
a court to apply the Policy Statement or the Letter.
<PAGE> 14
[ ]
Page 14
This opinion is rendered only to you and is solely for your
benefit in connection with the above transactions. This opinion may not be
relied upon by you for any other purpose, or furnished to, quoted to, or relied
upon by any other person, firm or corporation for any purpose without our prior
written consent, except that each of Standard & Poor's Ratings Services, Moody's
Investors Service, Fitch IBCA, Inc., Duff & Phelps Credit Rating Co., Discover
Receivables Financing Corporation, Morgan Stanley & Co. Incorporated, and
[names of other underwriters, if any ] may rely upon the foregoing opinions to
the same extent as if this letter were addressed to it.
All of the foregoing opinions are expressly subject to there
being no material change in the law.
Very truly yours,
<PAGE> 15
[FDIC LETTERHEAD]
December 15, 1989
Ms. Frances R. Bermanzohn
Senior Vice President and General
Counsel
Public Securities Association
40 Broad Street
New York, New York 10004
Re: Self-Help Liquidation of Collateral by
Second Claimants in Insured Depository
Institution Receiverships
Dear Ms. Bermanzohn:
This is in reference to your recent inquiry regarding the rights of certain
creditors of failed insured depository institutions. Specifically, you have
requested my opinion with regard to the ability of secured creditors of an
insured depository institution to proceed with "self-help" liquidation after
the appointment of the Federal Deposit Insurance Corporation (FDIC) or the
Resolution Trust Corporation (RTC) as receiver of such institution. In
particular you have requested my views as to the "exclusivity" of the claims
process under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 (FIRREA).
As you are aware, neither FDIC nor the RTC issues binding advisory opinions as
to positions they would adopt in hypothetical situations that arise in future
receiverships of insured institutions. The FDIC's and the RTC's actions in
their capacity as receiver of a failed insured institution are determined on a
case by case basis, in accordance with applicable laws and in light of the
specific factual situation. I am willing, however, to provide my views as to
what a court would hold in response to a challenge by the FDIC or the RTC as
receiver of such an institution to a bona fide, perfected secured creditor's
actions to liquidate properly pledged collateral absent the need for the FDIC
or the RTC to be a party to the liquidation process.
In my opinion FIRREA does not contain an "automatic stay provision" similar to
the Bankruptcy Code. Assuming an arms length, bona fide transaction, not
involving an affiliate or insider; which would
<PAGE> 16
2
pass muster under appropriate fraudulent conveyance law or other applicable and
which involved a legally perfected security interest enforceable under other
applicable law, it is my opinion that such a secured creditor of an insured
depository institution for which a receiver had been appointed could liquidate
the creditor's properly pledged collateral by commercially reasonable
"self-help" methods, provided that no involvement of the receiver was required
and that there was a default other than through an ipso facto provision in the
contract. The appointment of a receiver is not a default enforceable against the
FDIC or the RTC under any contract except as specifically provided for in
FIRREA. If some action is required by the receiver or liquidation would require
judicial action, then the claims process in FIRREA would have to be followed.
Moreover, the receiver may have rights outside of the provisions of FIRREA which
may allow the receiver to seek a temporary restraining order or other injunctive
relief in a particular situation.
It is my opinion that the claims process in FIRREA is exclusive. If a "secured
creditor" liquidated its collateral; failed to file a proof of claim within the
prescribed time; and was later challenged by the receiver and lost, the creditor
would have to pay the receiver the proceeds of the liquidation; would be liable
for any damages resulting from the improper liquidation; and would have no claim
against the receivership due to having allowed the period to file a claim to
lapse. Accordingly, any "secured creditor", even one who is comfortable with its
secured position, should file a "protective" proof of claim with the receiver to
not only preserve its rights in the event of a deficiency, but also to avoid any
risk of losing its claim altogether. In situations where the creditor's contract
or claim is assumed by another institution in a resolution transaction, the new
institution would be responsible to the extent set forth in the agreements
governing the transaction and if there were a full assumption of the liability,
no proof of claim would be needed.
Sincerely,
/s/ JOHN L. DOUGLAS
John L. Douglas
General Counsel
<PAGE> 1
EXHIBIT 5.3
<TABLE>
<CAPTION>
YOUNG CONAWAY STARGATT & TAYLOR, LLP
<S> <C> <C> <C>
BRUCE M. STARGATT ROBERT S. BRADY ELEVENTH FLOOR H. ALBERT YOUNG
STUART B. YOUNG JOEL A. WAITE WILMINGTON TRUST CENTER 1929-1982
BEN T. CASTLE JAMES P. HUGHES, JR. 1100 NORTH MARKET STREET
SHELDON A. WEINSTEIN BRENT C. SHAFFER WILMINGTON, DELAWARE 19801 H. JAMES CONAWAY, JR.
SHELDON N. SANDLER DANIEL P. JOHNSON 1947-1990
RICHARD A. LEVINE CRAIG D. GREAR P.O. BOX 391
RICHARD A. ZAPPA TIMOTHY JAY HOUSEAL WILMINGTON, DELAWARE 19899-0391 ------------
FREDERICK W. IOBST BRENDAN LINEHAN
RICHARD H. MORSE SHANNON (302) 571-6600 WILLIAM F. TAYLOR
DAVID C. MCBRIDE MARTIN S. LESSNER (800) 253-2234 (DE ONLY) EDWARD B. MAXWELL, 2ND
JOSEPH M. NICHOLSON PAULINE K. MORGAN FAX: (302) 571-1253 OF COUNSEL
CRAIG A. KARSNITZ ----------
BARRY M. WILLOUGHBY M. BLAKE CLEARY ------------
JOSY W. INGERSOLL RICHARD H. CROSS,
ANTHONY G. FLYNN JR. GEORGETOWN OFFICE
JEROME K. GROSSMAN GRENVILLE R. DAY 110 WEST PINE STREET
EUGENE A. DIPRINZIO MATTHEW P. DENN P.O. Box 594
JAMES L. PATTON, JR. RICHARD A. ESTACIO* GEORGETOWN,
ROBERT L. THOMAS DREWRY NASH FENNELL DELAWARE 19947
WILLIAM D. JOHNSTON DANIELLE GIBBS (302) 856-3571
TIMOTHY J. SNYDER LISA B. GOODMAN (800) 255-2234 (DE ONLY)
BRUCE L. SILVERSTEIN EDWIN J. HARRON FAX: (302) 856-9338
WILLIAM W. BOWSER SCOTT A. HOLT
LARRY J. TARABICOS EDWARD J. KOSMOWSKI
RICHARD A. DILIBERTO, MAUREEN D. LUKE
JR. EDMON L. MORTON
MELANIE K. SHARP MICHAEL R. NESTOR
CASSANDRA FALINE NICOLE M. ORFANELLO
KAMINSKI JOHN J. PASCHETTO
RICHARD J.A. POPPER MICHAEL G. PHILLIPS
JAN R. JURDEN JOHN W. SHAW
TERESA A. CHEEK LEON L. VINOKUR
S. DAVID PERESS NATALIE S. WOLF
NEILLI MULLEN WALSH CHRISTIAN DOUGLAS
JANET Z. CHARLTON WRIGHT
* Admitted in PA only
</TABLE>
______________________ , 2000
Greenwood Trust Company
12 Read's Way
New Castle, Delaware 19720
Re: Discover Card Master Trust I
Ladies and Gentlemen:
We have acted as Delaware counsel to Greenwood Trust Company ("Greenwood")
in connection with the transactions contemplated by the Pooling and Servicing
Agreement, dated as of October 1, 1993, between Greenwood and U.S. Bank National
Association (formerly First Bank National Association, successor trustee to Bank
of America Illinois, formerly Continental Bank, National Association), as
trustee (the "Trustee") as amended (the "Pooling and Servicing Agreement"), as
supplemented by the Series Supplement (the "Series Supplement") dated as of
________________, 20__ between Greenwood and the Trustee by which the Trustee
will issue, on behalf of the Trust, Discover Card Master Trust I Series ________
______ Class A Credit Card Pass-Through Certificates (the "______ Class A
Certificates") and Discover Card Master Trust I Series _______ ______ Class B
Credit Card Pass-Through Certificates (the "______ Class B Certificates"). As
such Delaware counsel we are furnishing this opinion letter to you with respect
to matters of Delaware law. No one other than you, Latham & Watkins, Morgan
Stanley & Co. Incorporated, Standard & Poor's Ratings Services, Moody's
Investors Service, Inc., Duff & Phelps and Fitch IBCA, Inc. shall be entitled to
rely on the opinions expressed herein. This opinion letter is not intended to be
employed in any transaction other than the one described above. This opinion
letter is being delivered to you solely for your benefit in connection with the
offering and sale of the _______ Class A Certificates and the _______ Class B
Certificates on the understanding that neither it nor
<PAGE> 2
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 2
its contents may be published, communicated or otherwise made available, in
whole or in part, to any other person or entity other than as set forth above
without, in each instance, our specific prior written consent.
Pursuant to the Pooling and Servicing Agreement, Greenwood has conveyed
and will convey certain Discover Card Receivables to the Discover Card Master
Trust I (the "Trust"). The transactions contemplated by the Pooling and
Servicing Agreement and the Series Supplement are described in that certain
certificate of a senior officer of Greenwood dated _________________, 20__.
All capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the Pooling and Servicing Agreement
or the Series Supplement, as the case may be. As used herein "Lien", in addition
to the meaning ascribed to such term in the Pooling and Servicing Agreement,
means statutory and other non-consensual liens. As used herein, "Receivables"
does not include any Receivables relating to Additional Accounts, Surviving
Accounts, or the proceeds thereof. The Uniform Commercial Code as in effect in
the State of Delaware is sometimes hereinafter referred to as the "UCC".
We have reviewed copies supplied by you of the following documents and any
exhibits thereto (the "Relevant Documents") for purposes of this opinion letter:
(i) the Pooling and Servicing Agreement, as amended;
(ii) the Series Supplement;
(iii) a certificate dated ______________, 20__ of the
Assistant Secretary of Greenwood;
(iv) a certificate dated ______________, 20__ of an
authorized officer of the Trustee;
(v) a certificate dated ______________, 20__ of the
Vice President of Greenwood;
(vi) that certain financing statement dated October 25,
1993 on Form UCC-1 naming Greenwood as "debtor"
and the Trustee as "secured party", as amended
(the "UCC Financing Statement");
(vii) a certificate of the Secretary of State of the
State of Delaware, dated as of ________________,
20__ as to
<PAGE> 3
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 3
UCC financing statements with respect to Greenwood on file
with such Secretary of State; and
(viii) certain letters dated as of ________ ___________, 20__ as
to filings and notices of federal and state tax liens,
attachment liens and judgment liens with respect to
Greenwood (the certificate referred to in clause (vii) and
the letters referred to in this clause are collectively
referred to as the "Lien Searches").
We have assumed that the copies of the Relevant Documents submitted to us as
copies conform to the originals of the Relevant Documents.
We have also examined the opinion letter of Latham & Watkins to you of
even date herewith concerning creditor's rights issues relating to Greenwood.
This opinion is limited solely to matters involving the jurisdiction and
current laws of the State of Delaware as such laws may be applicable to the
opinions expressed herein and we have assumed that there will be no material
changes in such laws. We express no opinion with respect to any Federal laws or
the laws of any other state.
I. ASSUMPTIONS OF FACT
In rendering the opinions set forth in this opinion letter, we have made
no independent investigation of the facts referred to herein and have relied for
the purpose of rendering this opinion letter exclusively on the Lien Searches
(the dates of which are set forth in Schedule I to this opinion letter), facts
set forth in each of the Relevant Documents, including the representations and
warranties contained therein, and on the facts and assumptions set forth below
and which we assume have been and will continue to be true.
The Pooling and Servicing Agreement, the Series Supplement and the receipt
of the consideration for Greenwood's obligations thereunder were approved by the
Board of Directors of Greenwood and such approval is reflected in the minutes of
such Board of Directors. Each of such agreements has been and will be,
continuously from the time of execution thereof, an official record of
Greenwood.
Greenwood is not required to register as an "investment company" nor is
Greenwood controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
<PAGE> 4
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 4
The Trustee had the corporate power and authority to make, execute and
deliver the Pooling and Servicing Agreement and to perform the terms and
provisions thereof. The Pooling and Servicing Agreement was duly authorized,
executed and delivered by the Trustee and is enforceable against the Trustee in
accordance with its terms.
At the time of the filing of the UCC Financing Statement with the office
of the Secretary of State of the State of Delaware, neither the Trustee nor the
Certificateholders had any knowledge of any rights, liens or interests affecting
any Receivables or the proceeds thereof other than as contemplated by the
Pooling and Servicing Agreement.
At the present time neither the Receivables nor the proceeds thereof are
subject to any statutory or non-consensual Lien (including without limitation
any attachment or execution lien) or Lien of any kind that does not require the
filing of a financing statement.
The Receivables are created under and are evidenced solely by Credit
Agreements. None of the Receivables is or will be due from the United States or
any State of the United States or any agency or department of the United States
or any State.
There has been delivered to the Trustee a list of Accounts with respect to
the Receivables in accordance with Section 2.01(b) of the Pooling and Servicing
Agreement.
Immediately prior to the transfer of any Receivables by Greenwood to the
Trust pursuant to the Pooling and Servicing Agreement, all right, title and
interest in and to such Receivables was or will be vested in Greenwood, free and
clear of any lien, security interest, charge or encumbrance except for the
obligations to transfer such Receivables set forth in the Pooling and Servicing
Agreement.
If a third party, including a potential purchaser of Receivables, should
inquire, Greenwood will promptly identify the Receivables transferred to the
Trust pursuant to the Pooling and Servicing Agreement and will indicate that it
has transferred all of its right, title and interest in such Receivables to the
Trust.
The grant of the security interest in the Receivables in favor of the
Trust, as provided in the Pooling and Servicing Agreement, does not result,
pursuant to any agreement, judgment or order to which Greenwood is a party, or
by which its property is bound, in the creation of any Lien in favor of any
entity other than the Trust. We note that pursuant to Section 2.07 of the
Pooling and Servicing Agreement, Greenwood is obligated to repurchase any
Receivables subject to Liens from the Trust.
<PAGE> 5
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 5
In connection with the conveyance of the Receivables to the Trust,
Greenwood has indicated and will continue to indicate in its computer files that
the Receivables have been transferred to the Trust. Each Account has been
identified on the computer records of Greenwood with a "41" or "42" in the field
captioned "CHD-Portfolio - No."
All statements contained in certificates delivered to us by Greenwood or
the Trustee are accurate and correct including, without limitation, (i) the
certificate of Greenwood to the effect that (A) at the present time it owns the
Receivables free and clear of all Liens (other than statutory or non-consensual
Liens) except the interests created by the Pooling and Servicing Agreement; (B)
to the best knowledge of the person signing such certificate, neither the
Receivables nor the proceeds thereof are subject to any statutory or
non-consensual Liens (including without limitation any attachment or execution
lien) or Lien of any kind that does not require the filing of a financing
statement; (C) its chief executive office, chief place of business and office
where it keeps records concerning the Receivables are located in the State of
Delaware; (D) it has not changed its name, whether by amendment of its charter,
by reorganization or otherwise within the past four months; nor has it changed
its chief executive office, chief place of business or its office where it keeps
records concerning the Receivables within the last four months; and (E)
Greenwood has not executed as "debtor" any financing statement with respect to
Receivables except for the UCC Financing Statement; and (ii) the certificate of
the Trustee to the effect that the person signing such certificate does not have
knowledge of any Lien affecting the Receivables or the proceeds thereof except
the interests created by the Pooling and Servicing Agreement. We have further
assumed that where a certification is made to the best knowledge of a person
signing a certificate described herein, such person has knowledge of all of the
relevant facts.
All filings and notices with respect to Liens on the property of Greenwood
in the nature of the Receivables (including the UCC Financing Statement) have
been properly filed and indexed; and the Lien Search accurately and completely
reflects all such filings and notices as of the index date thereof and no
filings or notices have been subsequently filed and indexed except as provided
in the Pooling and Servicing Agreement.
II. OPINION
Based upon the foregoing, and in reliance thereon and subject to the
assumptions, qualifications, exceptions and limitations set forth in this
opinion letter, we are of the opinion that:
1. To the extent the substantive law of the State of Delaware is
applicable, the Receivables constitute "accounts", as defined in Section 9-106
of the UCC.
<PAGE> 6
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 6
2. If the transfer of the Receivables to the Trust pursuant to the Pooling
and Servicing Agreement constitutes an absolute transfer of the Receivables to
the Trust, such absolute transfer, to the extent the substantive law of the
State of Delaware is applicable, transfers all of the right, title and interest
of Greenwood in and to such Receivables and the proceeds thereof to the Trust.
The ownership interest of the Trust in such Receivables is subject to the
same limitations applicable to the perfection and priority of the security
interest created by the Pooling and Servicing Agreement in Receivables in favor
of the Trust. See UCC ss. 9-102(1). Accordingly, the ownership interest of the
Trust in Receivables is a perfected ownership interest and a first priority
ownership interest to the same extent that the security interest created by the
Pooling and Servicing Agreement is a perfected security interest and a first
priority security interest. We refer you to paragraphs 5, 6 and 7 of this
opinion letter wherein we express the respective opinions that such security
interest is a perfected security interest and is a first priority security
interest, subject, in each case, to no Liens and to the limitations and
qualifications contained in such paragraphs and the limitation contained in the
following paragraph.
We call to your attention that Section 9-318(3) of the UCC provides in
effect that the Obligor in respect of a Receivable is authorized to make
payments to Greenwood until such Obligor receives notification that such
Receivable has been assigned to the Trust and the payment thereof is to be made
to the Trust. Accordingly, unless and until such Obligor is so notified and
directed, all payments made to Greenwood (or to a second assignee if Greenwood
should make a second assignment of such Receivable and notify such Obligor of
such assignment and direct such Obligor to make payments to such second
assignee) in respect of such Receivable will discharge a corresponding amount of
such Receivable, and the amount of such payment may be recovered only from the
person not entitled to receive the same. We note that Section 4.03 of the
Pooling and Servicing Agreement provides that if at any time Greenwood is the
Servicer and any of certain other conditions occurs, Greenwood shall deposit,
with respect to Receivables for which it is the Servicer, an amount equal to the
sum of the Required Daily Deposits (as defined in the Series Supplements for
each Series then outstanding) in the Collections Account for each Series then
outstanding not later than two Business Days following the date of processing
such Collections, except, under certain circumstances, in the case of the first
such deposit.
3. To the extent the substantive law of the State of Delaware is
applicable, the Pooling and Servicing Agreement created a valid security
interest in favor of the Trust in Greenwood's right, title and interest in and
to the Receivables and the proceeds thereof.
Such security interest is enforceable against Greenwood in accordance with
its terms except as the enforceability thereof may be subject to (i) general
principles of
<PAGE> 7
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 7
equity (regardless of whether enforceability is sought in a proceeding at law or
in equity) including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and (ii) receivership, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.
4. The proper office for filing Financing Statements with respect to the
Receivables and the proceeds thereof is the Office of the Secretary of State of
the State of Delaware. The UCC Financing Statement was in proper form for filing
with the Delaware Secretary of State in order to perfect the security interest
in the Receivables and the proceeds thereof (subject to the limitations and
qualifications contained in Paragraph 5 of this opinion letter) created by the
Pooling and Servicing Agreement.
5. The security interest created by the Pooling and Servicing Agreement in
the Receivables in favor of the Trust is a perfected security interest in the
Receivables in existence on the date hereof and the proceeds thereof except that
in the case of non-identifiable cash proceeds, continuation of the Trust's
security interest therein being limited to the extent set forth in Section 9-306
of the UCC. We call to your attention that in order to maintain the
effectiveness of the UCC Financing Statement, and therefore the perfection of
the aforementioned security interest:
(i) Section 13.02 of the Pooling and Servicing
Agreement and Article 9 of the UCC require the
filing of continuation statements within the
period of six months prior to the expiration of
five years from the date of the filing of the UCC
Financing Statement and within six months prior to
the expiration of each succeeding five year
period; and
(ii) Article 9 of the UCC requires the filing of
additional and/or amended financing statements if
Greenwood changes the location of its chief
executive office from the State of Delaware or
under certain circumstances changes its name,
identity or corporate structure.
6. The security interest in favor of the Trust in the Receivables and the
proceeds thereof perfected as described in paragraph 5 is a first priority
security interest except as such priority may be subject to:
(i) Liens of any government or any agency or
instrumentality thereof that are given priority by
operation of law, including without limitation
Sections 6323(c)(2) and (d) of the Internal
Revenue Code of 1986, as amended, and the Employee
Retirement Income Security Act of 1974, as
amended;
<PAGE> 8
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 8
(ii) Liens under Section 4-208 of the UCC (relating to
the security interest of a collecting bank);
(iii) Claims of the United States under the Federal
priority statute (31 U.S.C.ss.3713); and
(iv) Statutory and non-consensual liens, claims or
other interests or rights that may arise by
operation of Delaware law and which take priority
over previously perfected security interests by
virtue of such law.
7. With respect to Receivables that come into existence after the date
hereof, when such Receivables come into existence and Greenwood acquires rights
therein, the security interest created by the Pooling and Servicing Agreement in
favor of the Trust in such Receivables and the proceeds thereof will be a
perfected security interest and a first priority security interest subject, in
each case, to the respective limitations and qualifications contained in
paragraphs 5 and 6 of this opinion letter. The opinion expressed in this
paragraph 7, as pertaining to Receivables coming into existence after the date
hereof, is also subject to the exception for Liens constituting "purchase money
security interests" (within the meaning of Section 9-107 of the UCC) created in
respect of any Receivables arising after the date hereof to the extent provided
in Section 9-312 of the UCC.
Insofar as the opinions expressed in this paragraph 7 pertain to the
relative priority of the security interest of the Trust and a "lien creditor"
(within the meaning of Section 9-301(3) of the UCC) in Receivables and the
proceeds thereof, and the enforceability of the Trust's security interest, such
opinions are based upon the considerations set forth below.
Section 9-301(1) of the UCC provides in part that "an unperfected security
interest is subordinate to the rights of . . . (b) A person who becomes a lien
creditor before the security interest is perfected". If the FDIC were appointed
as a receiver of Greenwood, a state-chartered bank, it is likely that the FDIC
would qualify as a "lien creditor" within the meaning of Section 9-301(3). See
Rockford Housing Authority v. FDIC, slip op. (N.D. Ill. December 5, 1986) (FDIC
as receiver under the National Bank Act has the status of a lien creditor under
Section 9-301(1)(b) of the Uniform Commercial Code).
It is arguable that Section 9-301 could be read to provide priority to a
lien creditor of Greenwood (such as the FDIC as a receiver of Greenwood) in
Receivables coming into existence after an entity becomes such lien creditor
(e.g., after the
<PAGE> 9
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 9
appointment of the FDIC as such receiver) and proceeds on the following basis:
(i) under Section 9-303(1), the security interest of the Trust in a Receivable
is not perfected until it has attached; (ii) under Section 9-203(1), in order
for such security interest to attach in any Receivable, Greenwood must have
rights in such Receivable; (iii) Greenwood does not have rights in any
Receivable before it comes into existence, and accordingly, at the time, for
example, the FDIC is appointed as receiver of Greenwood, the security interest
of the Trust in Receivables not then in existence is not perfected at such time;
(iv) under Section 9-301, the question of priority between the Trust and FDIC as
receiver with respect to Receivables is to be determined at the time of such
appointment; and (v) therefore, the FDIC as receiver of Greenwood has priority
with respect to Receivables not in existence at the time of the appointment of
the FDIC as such receiver.
Sperry Corp. v. Farm Implement, Inc., 760 F.2d 196 (8th Cir. 1985) is the
only reported decision we found dealing with the relative priority of a secured
party and a lien creditor in after-acquired property in those circumstances
under Section 9-301. The court in Sperry ruled in favor of the secured party on
the basis that the lien of the lien creditor does not attach prior to the time
at which the security interest is perfected. The lien attaches and the security
interest is perfected at the same time; i.e., the time at which the
after-acquired property comes into existence. 760 F.2d at 198; see also Texas
Oil & Gas Corp. v. United States, 466 F.2d 1040 (5th Cir. 1972), cert. denied,
410 U.S. 929 (1973) (dictum).
In our view, the Sperry court reached the correct result under the Uniform
Commercial Code.
* * *
We do not express any opinion herein:
(i) as to the creation, validity or enforceability of any interest
of Greenwood in the Receivables or the proceeds thereof;
(ii) as to Greenwood's rights in or title to any of the Receivables
or the proceeds thereof;
(iii) as to whether the transfer of the Receivables to the Trust
constitutes an absolute transfer;
(iv) as to whether the purported sale of all Receivables now
existing or hereafter created is effective to convey to the
Trust, as of the date of purported sale, Receivables that do
not exist as of the date of such purported sale, or as to
<PAGE> 10
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 10
whether Receivables hereafter created in an Account are deemed
to exist as of the date hereof;
(v) with respect to Receivables relating to Additional Accounts or
the proceeds thereof;
(vi) with respect to Receivables relating to Surviving Accounts or
the proceeds thereof;
(vii) whether the administrative expenses of the FDIC or any other
receiver or conservator of Greenwood would have priority over
the Trust's interest in Receivables or proceeds thereof*; and
(viii) as to whether a court in an equitable proceeding might issue
a temporary restraining order or preliminary injunction
pending resolution of the Trust's rights in the Receivables,
the proceeds thereof or rights to payment.
Very truly yours,
- ---------------------
* In addition, although the matter is not free from doubt and there
is no reported caselaw precedent, it is our view that a Delaware
Court of Chancery in a receivership of Greenwood would not apply 5
Del. C. ss. 131(d) to authorize the avoidance of the security
interests created in favor of the Trust in the Receivables or to
authorize a receiver to secure a loan by the pledge of the
Receivables which would have a preference or priority over the
security interest created in favor of the Trust in the
Receivables.
<PAGE> 11
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Greenwood Trust Company
______________, 2000
Page 11
SCHEDULE I
Lien Searches
-------------
Lien Search Dates
- ----------- -----
Secretary of State's Certificate As of ______________, 20__
Delaware Secretary of State
County of Kent, Delaware As of ______________, 20__
UCC from 10/1/89
County of New Castle, Delaware As of ______________, 20__
UCC from 10/1/89
County of Sussex, Delaware As of ______________, 20__
UCC from 10/1/89
United States District Court As of ______________, 20__
for the District of Delaware
<PAGE> 1
EXHIBIT 8.1
[LATHAM & WATKINS LETTERHEAD]
May 12, 2000
Greenwood Trust Company
12 Read's Way
New Castle, Delaware 19720
Re: Discover Card Master Trust I
Registration Statement on Form S-3
Ladies and Gentlemen:
In connection with the filing of the registration statement on Form
S-3 with the Securities and Exchange Commission on or about May 15, 2000
(the "Registration Statement") by Greenwood Trust Company ("Greenwood")
relating to the Discover Card Master Trust I (the "Trust"), you have
requested our opinion regarding the description of the material tax
consequences related to the issuance of investor certificates of a series
(the "Offering)" as described in the prospectus (the "Prospectus") included
in the Registration Statement. Capitalized terms not otherwise defined
herein have the meanings ascribed to them in the Prospectus.
Our opinion is based on our examination of the Prospectus, the
Prospectus Supplement, the Pooling and Servicing Agreement dated as of
October 1, 1993, as amended, among Greenwood as Master Servicer, Servicer
and Seller and U.S. Bank National Association (formerly First Bank National
Association, successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association) as Trustee, and such other
documents, instruments and information as we considered necessary. Our
opinion also is based on (i) the assumption that neither the Trustee nor
any affiliate thereof will become the Master Servicer, the Servicer or the
<PAGE> 2
LATHAM & WATKINS
May 12, 2000
Page 2
delegee of either the Master Servicer or the Servicer; (ii) the assumption
that all agreements relating to the issuance of the investor certificates
and the creation of the Trust will remain in full force and effect; (iii)
currently applicable provisions of the federal income tax laws, including
the Internal Revenue Code of 1986, as amended, applicable Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and practice; and (iv) a legal opinion rendered by
local tax counsel retained by Greenwood relating to the income tax laws of
Delaware (upon which we have relied for purposes of rendering our opinion
with respect to the laws of Delaware).
We also note that the documents reviewed do not relate to a specific
transaction. Accordingly, the above-referenced description of material tax
consequences of the Offering may, under certain circumstances, require
modification in the context of a specific transaction.
Based on the foregoing, it is our opinion that, as of the date hereof,
we adopt and confirm the opinion under the captions "Federal Income Tax
Consequences" and "State Tax Consequences," as our opinion of the material
tax consequences of the Offering.
Very truly yours,
/s/ Latham & Watkins
<PAGE> 1
EXHIBIT 23.2
<TABLE>
<CAPTION>
YOUNG CONAWAY STARGATT & TAYLOR, LLP
<S> <C> <C> <C>
BRUCE M. STARGATT ROBERT S. BRADY ELEVENTH FLOOR H. ALBERT YOUNG
STUART B. YOUNG JOEL A. WAITE WILMINGTON TRUST CENTER 1929-1982
BEN T. CASTLE JAMES P. HUGHES, JR. 1100 NORTH MARKET STREET
SHELDON A. WEINSTEIN BRENT C. SHAFFER WILMINGTON, DELAWARE 19801 H. JAMES CONAWAY, JR.
SHELDON N. SANDLER DANIEL P. JOHNSON 1947-1990
RICHARD A. LEVINE CRAIG D. GREAR P.O. BOX 391
RICHARD A. ZAPPA TIMOTHY JAY HOUSEAL WILMINGTON, DELAWARE 19899-0391 ------------
FREDERICK W. IOBST BRENDAN LINEHAN
RICHARD H. MORSE SHANNON (302) 571-6600 WILLIAM F. TAYLOR
DAVID C. MCBRIDE MARTIN S. LESSNER (800) 253-2234 (DE ONLY) EDWARD B. MAXWELL, 2ND
JOSEPH M. NICHOLSON PAULINE K. MORGAN FAX: (302) 571-1253 OF COUNSEL
CRAIG A. KARSNITZ ----------
BARRY M. WILLOUGHBY M. BLAKE CLEARY ------------
JOSY W. INGERSOLL RICHARD H. CROSS,
ANTHONY G. FLYNN JR. GEORGETOWN OFFICE
JEROME K. GROSSMAN GRENVILLE R. DAY 110 WEST PINE STREET
EUGENE A. DIPRINZIO MATTHEW P. DENN P.O. Box 594
JAMES L. PATTON, JR. RICHARD A. ESTACIO* GEORGETOWN,
ROBERT L. THOMAS DREWRY NASH FENNELL DELAWARE 19947
WILLIAM D. JOHNSTON DANIELLE GIBBS (302) 856-3571
TIMOTHY J. SNYDER LISA B. GOODMAN (800) 255-2234 (DE ONLY)
BRUCE L. SILVERSTEIN EDWIN J. HARRON FAX: (302) 856-9338
WILLIAM W. BOWSER SCOTT A. HOLT
LARRY J. TARABICOS EDWARD J. KOSMOWSKI
RICHARD A. DILIBERTO, MAUREEN D. LUKE
JR. EDMON L. MORTON
MELANIE K. SHARP MICHAEL R. NESTOR
CASSANDRA FALINE NICOLE M. ORFANELLO
KAMINSKI JOHN J. PASCHETTO
RICHARD J.A. POPPER MICHAEL G. PHILLIPS
JAN R. JURDEN JOHN W. SHAW
TERESA A. CHEEK LEON L. VINOKUR
S. DAVID PERESS NATALIE S. WOLF
NEILLI MULLEN WALSH CHRISTIAN DOUGLAS
JANET Z. CHARLTON WRIGHT
* Admitted in PA only
</TABLE>
May 12, 2000
Greenwood Trust Company
12 Reads Way
New Castle, Delaware 19720
Re: Discover Card Master Trust I
----------------------------
Ladies and Gentlemen:
We hereby consent to the filing of our opinion as an
Exhibit to the Registration Statement on Form S-3 of Greenwood Trust
Company and Discover Card Master Trust I on or about May 12, 2000 and
to the references to our firm in the prospectus included therein under
the captions "The Seller -- Insolvency-Related Matters" and "Legal
Matters".
Very truly yours,
YOUNG CONAWAY STARGATT & TAYLOR, LLP
By: /s/ Richard A. Levine
-----------------------------------
Richard A. Levine
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
Each of the undersigned, being a director or officer of Greenwood Trust
Company, a Delaware banking corporation (the "Corporation"), does hereby
constitute and appoint JOHN J. COANE, ALEXANDER C. FRANK and JOSEPH A. YOB with
full power to each of them to act alone, as the true and lawful attorneys and
agents of the undersigned with full power of substitution and resubstitution to
each of said attorneys, to execute, file or deliver any and all instruments and
to do any and all acts and things which said attorneys and agents, or any of
them, deem advisable to enable the Corporation to comply with the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and any requirements or regulations of the
Securities and Exchange Commission in respect thereto, in connection with the
registration under the Securities Act of Credit Card Pass-Through Certificates
(the "Certificates") to be issued by a trust originated by the Corporation, and
the registration under the Exchange Act of the Certificates, including
specifically, but without limitation of the general authority hereby granted,
the power and authority to sign his or her name in the name and on behalf of the
Corporation or as a director or officer of the Corporation, as indicated below
opposite his or her signature, to the registration statements, or any
amendments, post-effective amendments, supplements or papers supplemental
thereto, to be filed in respect of said Certificates; and each of the
undersigned does hereby fully ratify and confirm all that said attorneys and
agents, or any of them, or the substitute of any of them, shall do or cause to
be done by virtue hereof.
If this Power of Attorney is executed in counterparts, each counterpart
shall be deemed an original.
<PAGE> 2
IN WITNESS WHEREOF, each of the undersigned has duly executed this power of
attorney as of this 24th day of April, 2000.
/s/ David W. Nelms Chairman, Investment Officer and Loan Officer
- ------------------------------ (Principal Executive Officer)
David W. Nelms
/s/ John J. Coane Vice President, Chief Accounting Officer,
- ------------------------------ Treasurer and Assistant Secretary
John J. Coane (Principal Financial Officer and Principal
Accounting Officer)
/s/ Alexander C. Frank Director
- ------------------------------
Alexander C. Frank
/s/ J. Nathan Hill Director
- ------------------------------
J. Nathan Hill
/s/ Charles F. Moran Director
- ------------------------------
Charles F. Moran
/s/ Frank K. Reilly Director
- ------------------------------
Frank K. Reilly
/s/ Joseph A. Yob Director
- ------------------------------
Joseph A. Yob
