<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 2, 2000)
Discover(R) Card Master Trust I, Series 2000-4
$650,000,000 FLOATING RATE CLASS A CERTIFICATES
$34,211,000 FLOATING RATE CLASS B CERTIFICATES
Greenwood Trust Company
Master Servicer, Servicer and Seller
-------------------------
The Series 2000-4 Class A Certificates and Class B Certificates represent
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.
-------------------------
Investing in the Certificates involves risks. See "Risk Factors" beginning on
page 7 of the prospectus.
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<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
-------------------- --------------------
<S> <C> <C>
Principal amount $650,000,000 $34,211,000
Interest rate LIBOR + 0.21% LIBOR + 0.45%
Expected interest payment dates Monthly, beginning Monthly, beginning
June 15, 2000 June 15, 2000
Closing date (date of issue) May 10, 2000 May 10, 2000
Expected maturity date May 15, 2007 June 15, 2007
Series termination date November 17, 2009 November 17, 2009
Initial credit enhancement $85,526,375 (12.5% of Series) $51,315,825 (7.5% of Series)
Form of credit enhancement Subordination of Class B Certificates Cash collateral account
Expected ratings Aaa/AAA/AAA/AAA A2/A/A+/A+
(Moody's/S&P/Fitch IBCA/Duff & Phelps)
Price to public 100.000% 100.000%
Underwriting discounts and commissions 0.350% 0.375%
Proceeds to Greenwood $647,725,000 $34,082,709
</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 will purchase the Certificates from Greenwood and will offer
them to the public at the prices set forth in the table on this page. The
Underwriters expect to deliver the Certificates to purchasers on May 10, 2000
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
ABN AMRO INCORPORATED
BANC OF AMERICA SECURITIES LLC
BARCLAYS CAPITAL
CREDIT LYONNAIS SECURITIES
Underwriter of the Class B Certificates
MORGAN STANLEY DEAN WITTER
May 2, 2000
<PAGE> 2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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Series Summary........................ S-5
The Discover Card Business............ S-11
General............................. S-11
Credit-Granting Procedures.......... S-12
Collection Efforts and Charged-Off
Accounts......................... S-13
The Accounts.......................... S-14
General............................. S-14
Billing and Payments................ S-14
Effects of the Selection Process.... S-15
Composition of the Accounts......... S-16
Composition and Historical Performance
of the Discover Card Portfolio...... S-17
General............................. S-17
Composition of the Discover Card
Portfolio........................ S-17
Timing of Principal Payments........ S-20
The Certificates...................... S-21
Invested Amounts.................... S-21
Investor Interests.................. S-22
Interest Payments................... S-22
Principal Payments.................. S-23
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Investor Accounts................... S-24
Class Finance Charge Collections.... S-25
Other Income (Yield Collections,
Additional Funds and Investment
Income).......................... S-25
Class Principal Collections......... S-26
Class Charge-Offs and Investor
Losses........................... S-27
Subordination of the Class B
Certificates (Class A Credit
Enhancement)..................... S-28
The Credit Enhancement Account...... S-28
Reallocations....................... S-31
Cash Flows.......................... S-31
Amortization Events................. S-33
Clean-up Call; Termination of
Series........................... S-34
Reports to Investors.................. S-35
Underwriting.......................... S-36
Legal Matters......................... S-37
Glossary of Terms..................... S-38
ANNEX A -- Cash Flows................. S-48
ANNEX B -- Other Series............... S-56
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PROSPECTUS
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Reports to Investor
Certificateholders.................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 7
The Trust............................. 13
Formation of the Trust.............. 13
The Trustee......................... 13
Indemnification of the Trust and the
Trustee.......................... 14
Sale and Assignment of Receivables
to the Trust..................... 14
Addition of Accounts................ 14
Removal of Accounts................. 16
Termination of the Trust............ 16
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Description of the Investor
Certificates........................ 16
General............................. 16
Interest Payments................... 17
Principal Payments.................. 17
Issuance of Additional Series....... 18
Collections Account and Group
Collections Accounts............. 18
Class Percentages and Seller
Percentage....................... 19
Allocations, Reallocations and
Subordination of Collections..... 19
Adjustments to Receivables.......... 20
Distributions of Collections and
Application of Collections and
Certain Other Amounts............ 21
</TABLE>
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Additional Funds.................... 21
Final Payment of Principal;
Termination of Series............ 21
Credit Enhancement.................. 22
Repurchase of Trust Portfolio....... 22
Repurchase of Specified
Receivables...................... 23
Repurchase of a Series.............. 24
Repurchase of Investor
Certificates..................... 24
Sale of Seller Interest............. 24
Reallocation of Series Among
Groups........................... 25
Amendments.......................... 25
List of Investor
Certificateholders............... 26
Meetings............................ 26
Book-Entry Registration............. 26
Definitive Certificates............. 29
Servicing............................. 30
Master Servicer and Servicer........ 30
Servicing Compensation and Payment
of Expenses...................... 30
Certain Matters Regarding the Master
Servicer and the Servicers....... 31
Master Servicer Termination
Events........................... 31
Servicer Termination Events......... 32
Evidence as to Compliance........... 33
The Seller............................ 34
Greenwood........................... 34
Insolvency-Related Matters.......... 34
Certain Legal Matters Relating to the
Receivables......................... 35
Transfer of Receivables............. 35
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Certain UCC Matters................. 36
Consumer Protection Laws and Debtor
Relief Laws Applicable to the
Receivables...................... 36
Claims and Defenses of Cardmembers
Against the Trust................ 37
Use of Proceeds....................... 37
Federal Income Tax Consequences....... 37
General............................. 37
Tax Treatment of the Investor
Certificates as Indebtedness..... 38
United States Investor
Certificateholders............... 39
Foreign Investor
Certificateholders............... 40
Backup Withholding and Information
Reporting........................ 41
Possible Characterization of the
Investor Certificates............ 42
State Tax Consequences................ 43
ERISA Considerations.................. 44
Greenwood's Prohibited Transaction
Exemption........................ 45
The Regulation...................... 46
Plan of Distribution.................. 47
Legal Matters......................... 49
Available Information................. 49
Glossary of Terms..................... 50
ANNEX I -- Global Clearance,
Settlement and Tax Documentation
Procedures.......................... 60
</TABLE>
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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 about the Trust and
the certificates issued by the Trust, some of which may not apply to your
Certificates.
If the terms of your Certificates as described in this prospectus
supplement differ from the terms described in the prospectus, you should rely on
the information in this prospectus supplement.
We include cross-references in this prospectus supplement and the
accompanying prospectus to sections in these materials where you can find
further related discussions. The preceding Table of Contents should help you
find the pages on which these sections begin.
We have included glossaries of some 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.
We do not claim that the information contained in the prospectus and
prospectus supplement is accurate as of any date other than the dates on their
respective covers.
S-4
<PAGE> 5
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. This series summary uses terms that are defined in the "Glossary of
Terms" in this prospectus supplement and in the prospectus. 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 2000-4
Floating Rate Class A Credit Card Pass-Through
Certificates and Series 2000-4 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: $650,000,000.
Class B Certificates: $34,211,000.
INTEREST RATE.............. Class A Certificates: LIBOR + 0.21% per year.
Class B Certificates: LIBOR + 0.45% per year.
"LIBOR" means 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 June 2000.
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: May 15, 2007 (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 May
15, 2007.
Class B Certificates: June 15, 2007 (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 June
15, 2007. 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 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
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principal collections allocated to this Series on a
monthly basis to repay the remaining principal
amount of the Certificates.
SERIES CLOSING DATE........ May 10, 2000. The "Series Closing Date" is the date
on which the Trust issues the Certificates.
REVOLVING PERIOD........... The Revolving Period began on May 1, 2000. 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 June 15, 2006
(or the next business day), using collections it
receives on or after May 1, 2006, 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 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.
SERIES TERMINATION DATE.... The first business day following November 15, 2009
(or the second business day following November 15,
2009, if November 15, 2009 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"
(described below). The Trust also allocates
receivables that Greenwood has charged off as
uncollectible to series based on the Investor
Interest. The Series Supplement 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
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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.
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 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 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 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, known as 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
the Trust to the Class A Certificates.
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<PAGE> 8
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
$85,526,375. 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 Greenwood'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 $51,315,825. 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.
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, and the Class A investors can then use
the Class B Investor Interest 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
$51,315,825, but it may increase under certain
circumstances. It will generally decrease during
the Accumulation Period as the Series Investor
Interest 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-29 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 accrued on unpaid
S-8
<PAGE> 9
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. Furthermore, Greenwood 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 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
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<PAGE> 10
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 thirty 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 May 1, 2000
totaled $28,251,145,543.94.
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.
CLEARANCE AND SETTLEMENT... You may elect to hold the Certificates only through
the following clearing organizations:
- The Depository Trust Company ("DTC") in the
United States;
- Clearstream Banking, societe anonyme (in Europe)
("Clearstream Banking"); 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.
See "Annex I" to the prospectus.
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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 3.5 million
merchants and cash advance locations that accept the Discover Card. As of
February 29, 2000 there were 35.6 million Discover Card accounts with 45.1
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> 12
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. (formerly, NOVUS Services, Inc.) ("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 both classic Discover Card accounts and Discover Platinum Card accounts.
Potential applicants who are sent preselected
S-12
<PAGE> 13
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 (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.
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 (except in certain cases, such as bankruptcy, where
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
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<PAGE> 14
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 the levels for the Trust will
consistently approximate the 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 (except that a limited number of accounts that
were opened pursuant to credit scoring criteria materially different from the
credit scoring criteria generally used for Discover Card accounts were not
included in the selection process). See "The Accounts -- Effects of the
Selection Process."
The Receivables in the Accounts as of May 1, 2000 totaled
$28,251,145,543.94. The Accounts had an average balance of $1,091 and an average
credit limit of $6,591 as of May 1, 2000. For additional information on the
composition of the Accounts, see "-- Composition of the Accounts."
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.
S-14
<PAGE> 15
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 and Maturity" and "-- Ability of the Seller to Change
Terms of the Accounts" in the prospectus.
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 the 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 -- Basis Risk" in the prospectus.
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 (except
that a limited number of accounts that were opened pursuant to credit scoring
criteria materially different from the credit scoring criteria generally used
for Discover Card accounts were not included in the 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.
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<PAGE> 16
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 May 1, 2000, the following five states had
the largest Receivables balances:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL RECEIVABLES
STATE BALANCE IN THE ACCOUNTS
- ----- -------------------------------
<S> <C>
California.................................................. 11.0%
Texas....................................................... 9.4%
New York.................................................... 6.7%
Florida..................................................... 5.9%
Illinois.................................................... 5.2%
</TABLE>
Credit Limit Information. As of May 1, 2000, 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............................. $ 319,686 1.1%
$1,000.01 to $2,000.00...................................... $ 1,689,686 6.0%
$2,000.01 to $3,000.00...................................... $ 2,040,106 7.2%
Over $3,000.00.............................................. $24,201,668 85.7%
----------- ------
Total............................................. $28,251,146 100.0%
=========== ======
</TABLE>
Seasoning. As of May 1, 2000, 97.0% of the Accounts were at least 24
months old. The ages of Accounts as of May 1, 2000 were distributed as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
AGE OF ACCOUNTS OF ACCOUNTS OF BALANCES
- --------------- ----------- -----------
<S> <C> <C>
Less than 12 Months......................................... 0.0% 0.0%
12 to 23 Months............................................. 3.0% 1.4%
24 to 35 Months............................................. 6.5% 5.5%
36 Months and Greater....................................... 90.5% 93.1%
------ ------
100.0% 100.0%
====== ======
</TABLE>
WE DISCUSS THE POTENTIAL EFFECTS OF THIS SEASONING ON THE PERFORMANCE OF
THE ACCOUNTS IN "RISK FACTORS -- EFFECTS OF THE SELECTION PROCESS, SEASONING AND
PERFORMANCE CHARACTERISTICS" IN THE PROSPECTUS.
Summary Current Delinquency Information. As of May 1, 2000, the Accounts
had the following delinquency statuses:
<TABLE>
<CAPTION>
AGGREGATE
BALANCES PERCENTAGE
PAYMENT STATUS (000'S) OF BALANCES
- -------------- ----------- -----------
<S> <C> <C>
Current..................................................... $24,486,773 86.8%
1 to 29 Days................................................ $ 2,015,273 7.1%
30 to 59 Days............................................... $ 635,310 2.2%
60 to 89 Days............................................... $ 392,131 1.4%
90 to 119 Days.............................................. $ 291,512 1.0%
120 to 149 Days............................................. $ 233,079 0.8%
150 to 179 Days............................................. $ 197,068 0.7%
----------- ------
$28,251,146 100.0%
=========== ======
</TABLE>
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<PAGE> 17
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" in this prospectus supplement and "Risk Factors -- Basis Risk" and
"Risk Factors -- Effects of the Selection Process, Seasoning and Performance
Characteristics" in the prospectus. WE ALSO DISCUSS THE ECONOMIC FACTORS THAT
AFFECT THE PERFORMANCE OF THE DISCOVER CARD PORTFOLIO IN "RISK FACTORS --
SOCIAL, LEGAL AND ECONOMIC FACTORS" IN THE PROSPECTUS.
COMPOSITION OF THE DISCOVER CARD PORTFOLIO
Geographic Distribution. The Discover Card portfolio is not highly
concentrated geographically. As of February 29, 2000, the following five states
had the largest receivables balances:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL RECEIVABLES
BALANCE OF DISCOVER CARD PORTFOLIO
STATE AS OF FEBRUARY 29, 2000
- ----- ----------------------------------
<S> <C>
California............................................ 11.9%
Texas................................................. 8.9%
New York.............................................. 7.1%
Florida............................................... 5.9%
Illinois.............................................. 5.1%
</TABLE>
No other state accounted for more than 5% of the total receivables balance of
the Discover Card portfolio as of February 29, 2000.
Credit Limit Information. As of February 29, 2000, 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.......................... $ 591,306 1.5%
$1,000.01 to $2,000.00................................... $ 2,267,946 5.7%
$2,000.01 to $3,000.00................................... $ 2,610,918 6.6%
Over $3,000.00........................................... $34,246,195 86.2%
----------- ------
Total.......................................... $39,716,365 100.0%
=========== ======
</TABLE>
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<PAGE> 18
Seasoning. As of February 29, 2000, 78.6% 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 February 29, 2000 were distributed as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
AGE OF ACCOUNTS OF ACCOUNTS OF BALANCES
--------------- ----------- -----------
<S> <C> <C>
Less than 12 Months......................................... 16.5% 19.6%
12 to 23 Months............................................. 4.9% 2.9%
24 to 35 Months............................................. 5.5% 5.0%
36 Months and Greater....................................... 73.1% 72.5%
------ ------
100.0% 100.0%
====== ======
</TABLE>
Summary Yield Information. The annualized aggregate monthly yield for the
Discover Card portfolio is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS
ENDED ENDED ENDED ENDED
FEBRUARY 29, 2000 NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Aggregate Monthly Yields(1)
Excluding Recoveries(2)..... 16.23% 17.48% 18.02% 18.19%
Including Recoveries(3)..... 16.99% 18.26% 18.76% 18.90%
</TABLE>
- ---------------
(1) Greenwood calculates the "Monthly Yield" 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. "Aggregate Monthly Yield" is the average of Monthly Yields
annualized for each period shown.
(2) Aggregate Monthly Yield excluding any recoveries received with respect to
charged-off accounts.
(3) Aggregate Monthly Yield including recoveries received with respect to
charged-off accounts. 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.
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<PAGE> 19
Summary Current Delinquency Information. As of February 29, 2000, 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..................................................... $35,146,615 88.5%
1 to 29 Days................................................ $ 2,332,096 5.9%
30 to 59 Days............................................... $ 776,917 2.0%
60 to 89 Days............................................... $ 544,712 1.4%
90 to 119 Days.............................................. $ 376,871 0.9%
120 to 149 Days............................................. $ 288,070 0.7%
150 to 179 Days............................................. $ 251,084 0.6%
----------- ------
$39,716,365 100.0%
=========== ======
</TABLE>
Summary Historical Delinquency Information. The accounts in the Discover
Card portfolio had the following historical delinquency rates:
<TABLE>
<CAPTION>
AVERAGE OF THREE MONTHS AVERAGE OF TWELVE MONTHS AVERAGE OF TWELVE MONTHS
ENDED FEBRUARY 29, 2000 ENDED NOVEMBER 30, 1999 ENDED NOVEMBER 30, 1998
--------------------------- --------------------------- ---------------------------
DELINQUENT DELINQUENT DELINQUENT
AMOUNT AMOUNT AMOUNT
(000'S) PERCENTAGE(1) (000'S) PERCENTAGE(1) (000'S) PERCENTAGE(1)
---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
30-59 Days........... $ 836,449 2.2% $ 791,325 2.6% $ 759,521 2.6%
60-89 Days........... $ 542,413 1.4% $ 471,838 1.5% $ 456,059 1.5%
90-179 Days.......... $ 930,743 2.4% $ 815,619 2.6% $ 853,961 2.9%
---------- ---- ---------- ---- ---------- ----
Total............ $2,309,605 6.0% $2,078,782 6.7% $2,069,541 7.0%
========== ==== ========== ==== ========== ====
<CAPTION>
AVERAGE OF ELEVEN MONTHS
ENDED NOVEMBER 30, 1997
---------------------------
DELINQUENT
AMOUNT
(000'S) PERCENTAGE(1)
---------- -------------
<S> <C> <C>
30-59 Days........... $ 743,464 2.6%
60-89 Days........... $ 432,410 1.5%
90-179 Days.......... $ 803,204 2.8%
---------- ----
Total............ $1,979,078 6.9%
========== ====
</TABLE>
- ---------------
(1) Greenwood calculates the percentages 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 -- SOCIAL, LEGAL AND
ECONOMIC FACTORS" IN THE PROSPECTUS.
Summary Charge-Off Information. The accounts in the Discover Card
portfolio have had the following historical charge-offs:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS
ENDED ENDED ENDED ENDED
FEBRUARY 29, 2000 NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
------------------ ------------------- ------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average Receivables
Outstanding(1).................... $38,796,192 $31,554,086 $29,749,158 $28,403,076
Gross Charge-offs................... $ 520,433 $ 1,955,514 $ 2,215,002 $ 1,891,601
Gross Charge-offs as an Annualized
Percentage of Average Receivables
Outstanding(2).................... 5.37% 6.20% 7.45% 7.27%
</TABLE>
- ---------------
(1) "Average Receivables Outstanding" is the average of the monthly average
amount of receivables outstanding during the periods indicated.
(2) Recoveries 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 property of the
Trust and are treated as Finance Charge Collections.
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<PAGE> 20
WE DISCUSS THE ECONOMIC FACTORS THAT AFFECT THE PERFORMANCE OF THE DISCOVER
CARD PORTFOLIO, INCLUDING CHARGE-OFFS, IN "RISK FACTORS -- SOCIAL, LEGAL AND
ECONOMIC FACTORS" IN THE PROSPECTUS.
Summary Payment Rate Information(1). The accounts in the Discover Card
portfolio have had the following historical monthly payment rates:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS TWELVE MONTHS ELEVEN MONTHS
ENDED ENDED ENDED ENDED
FEBRUARY 29, 2000 NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Average Monthly Payment Rate(2).............. 16.61% 16.73% 15.42% 14.51%
Highest Monthly Payment Rate................. 17.02% 17.83% 17.01% 16.31%
Lowest Monthly Payment Rate.................. 15.90% 15.19% 13.90% 12.41%
</TABLE>
- ---------------
(1) Greenwood calculates the "Monthly Payment Rate" by dividing monthly
cardmember remittances by the cardmember receivable balance outstanding as
of the beginning of the month.
(2) 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.
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 9.17% to pay Class A principal in full on May 15, 2007 (or the next
business day) and a minimum payment rate of 6.33% in May 2007 to pay Class B
principal in full on June 15, 2007 (or the next business day), in each case
assuming:
- a yield of 16.99% per year (including recoveries);
- a charge-off rate of 5.37% 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;
S-20
<PAGE> 21
- 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 will be 4.82% for the Distribution Date in May 2000 (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 February 1, 2000
through April 30, 2000, its three-month rolling average Series Excess Spread for
the Distribution Date in May 2000 as a percentage of the Series Investor
Interest would have been approximately the same as the Group Excess Spread
Percentage because the interest rates for this Series would have been
approximately the same as 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
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 $650,000,000, and the
"Class B Invested Amount" will initially be $34,211,000. 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
S-21
<PAGE> 22
subordination provisions for this Series), 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 June 2000.
Your interest payment for the June 2000 interest payment date will include
accrued interest from and including May 10, 2000 to but excluding June 15, 2000.
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. 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 (i.e., LIBOR plus 0.21% for Class A and
LIBOR plus 0.45% 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.
S-22
<PAGE> 23
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. These funds
will generally include:
- Series Principal Collections, minus
- Series Yield Collections (described 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, and
- Class B Principal Collections used to reimburse Class A charge-offs
in step (7) of the Cash Flows;
- 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;
- 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.
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. These funds will
generally include:
- Series Principal Collections, minus
- Series Yield Collections (described 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, and
- Class B Principal Collections used to reimburse Class A charge-offs
in step (7) of the Cash Flows;
- 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; and
- any similar funds retained in the Collections Account on the previous
Distribution Date in step (38) of the Cash Flows.
S-23
<PAGE> 24
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 May 2007;
- the Accumulation Period will start no later than April 1, 2007, 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 "-- Timing of Principal
Payments -- Economic Early Amortization Events" above.
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 in the prospectus). 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
S-24
<PAGE> 25
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 in the prospectus.
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:
- the Class Investor Interest as of the first day of the prior calendar
month (in the Revolving Period, in the Accumulation Period and, if
Greenwood has made an Effective Alternative Credit Support Election, in
the Amortization Period), or
- 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 (in the Amortization Period, if Greenwood has not made an
Effective Alternative Credit Support Election),
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. Pursuant to the Pooling and Servicing Agreement,
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.
S-25
<PAGE> 26
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;
- 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.
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<PAGE> 27
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.
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 Ineligible
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, and
- the amount of the Class B Investor Interest used to reimburse Class A
charge-offs in step (13) of the Cash Flows.
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, and as part of Class B interest in steps (8), (9),
(14), (17) and (23) of the Cash Flows. If the Class Investor Interest is reduced
to zero on any Distribution Date, it will not be reinstated.
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<PAGE> 28
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 $85,526,375 (12.5% of $684,211,000).
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; and
- the Trust reallocates Class B Investor Interest to reimburse Class A
charge-offs in step (13) of the Cash Flows.
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,
- to reimburse Class B charge-offs in step (24) of the Cash Flows, and
- to increase the Available Class B Credit Enhancement Amount in step
(27) of the Cash Flows; and
- $3,421,055 after a Supplemental Credit Enhancement Event, if Greenwood
has not made an Effective Alternative Credit Support Election.
- $30,789,495 after an Effective Alternative Credit Support Election, if a
Supplemental Credit Enhancement Event has occurred; and
- $34,210,550 after an Effective Alternative Credit Support Election, if a
Supplemental Credit Enhancement Event has not occurred.
However, the Available Subordinated Amount will never exceed:
- $85,526,375 before Greenwood has made an Effective Alternative Credit
Support Election and before a Supplemental Credit Enhancement Event
occurs;
- $88,947,430 after a Supplemental Credit Enhancement Event occurs but
before Greenwood has made an Effective Alternative Credit Support
Election; or
- $119,736,925 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 (collectively, the "Credit
Enhancement Provider") will enter into a Credit Enhancement Agreement on the
Series Closing Date. The Credit Enhancement Provider will deposit $51,315,825
into a cash collateral account (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
Institution -- i.e., a bank satisfying certain rating agency criteria, as
described in the Glossary of Terms in the prospectus.) The funds on deposit in
the Credit Enhancement
S-28
<PAGE> 29
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. 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, 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 $51,315,825
Revolving Period --
Before an Effective Alternative $51,315,825 (which is 7.5% of
Credit Support Election or a $684,211,000)
Supplemental Credit Enhancement Event
After a Supplemental Credit $54,736,880 (which is 8.0% of
Enhancement Event but before an $684,211,000)
Effective Alternative Credit Support
Election
After an Effective Alternative Credit $85,526,375 (which is 12.5% of
Support Election $684,211,000)
Accumulation Period --
Before an Effective Alternative 7.5% of the Series Investor Interest as
Credit Support Election or a of the end of the preceding month (but
Supplemental Credit Enhancement Event not less than $6,842,110)
After a Supplemental Credit 8.0% of the Series Investor Interest as
Enhancement Event but before an of the end of the preceding month (but
Effective Alternative Credit Support not less than $6,842,110)
Election
</TABLE>
S-29
<PAGE> 30
<TABLE>
<S> <C>
After an Effective Alternative Credit 12.5% of the Series Investor Interest
Support Election as of the end of the preceding month
(but not less than $6,842,110)
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 the 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 (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.
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.
S-30
<PAGE> 31
However, if the replacement credit enhancement is Funded Credit Enhancement
(e.g., 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 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 Class 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);
- 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.
S-31
<PAGE> 32
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 (Class
B Principal Collections only);
- Second, to reimburse Class A charge-offs after Series Finance Charge
Collections and other income have been used (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.
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.
S-32
<PAGE> 33
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;
(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.
S-33
<PAGE> 34
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
$34,210,550 (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 November 2009. If the Trust owes you
principal after the Distribution Date in October 2009, the Trustee will sell
Receivables (proportionate to the remaining Series Investor Interest in the
Trust) to repay the principal. If the 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.
S-34
<PAGE> 35
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 this
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 amount of investor losses for the prior calendar month (total and per
$1,000 of initial Class Investor Interest), the amount of reimbursements
of investor losses for the prior calendar month and the aggregate amount
of unreimbursed investor losses as of the end of the prior calendar month
(total and 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
(total and 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;
- delinquency information with respect to the Receivables (total and 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).
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.
S-35
<PAGE> 36
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions of the Underwriting Agreement, dated January 29, 1999, and the
Terms Agreement, dated May 2, 2000, 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........................... $550,000,000 $34,211,000
ABN AMRO Incorporated....................................... $ 25,000,000 --
Banc of America Securities LLC ............................. $ 25,000,000 --
Barclays Capital Inc........................................ $ 25,000,000 --
Credit Lyonnais Securities (USA) Inc........................ $ 25,000,000 --
------------ -----------
Total.................................................. $650,000,000 $34,211,000
============ ===========
</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 six 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 0.2100% 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 0.1050% 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 0.2250% 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 0.1125% 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, ABN AMRO Incorporated, Banc of America
Securities LLC, Barclays Capital Inc. and Credit Lyonnais Securities (USA) Inc.
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.
S-36
<PAGE> 37
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 $750,000.
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.
S-37
<PAGE> 38
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."
"ACCUMULATION PERIOD" will mean the period beginning on May 1, 2006 and
ending on the earlier to occur of:
- June 15, 2007 (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 June 15, 2006
(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:
- $34,210,550 (before a Supplemental Credit Enhancement Event occurs);
- $30,789,495 (after a Supplemental Credit Enhancement Event occurs); and
- the difference between the Maximum Class B Credit Enhancement Amount
(after giving effect to the Alternative Credit Support Election) and the
Available Class B Credit Enhancement Amount (immediately before giving
effect to the Alternative Credit Support Election).
"ADDITIONAL FUNDS" will have the meaning set forth in "Description of the
Investor Certificates -- Additional Funds" in the prospectus. The initial amount
of Additional Funds will be zero.
"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.
"AVAILABLE CLASS B CREDIT ENHANCEMENT AMOUNT" will mean, with respect to
the first Distribution Date, $51,315,825, 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
S-38
<PAGE> 39
- the amount of all payments made to the Trustee as administrator of the
Credit Enhancement with respect to the Available Class B Credit
Enhancement Amount pursuant to the Series Supplement, plus
- following an Effective Alternative Credit Support Election, the
Additional Credit Support Amount, 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, $85,526,375 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 $3,421,055. (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) $34,210,550 if a Supplemental Credit Enhancement Event has not occurred, or
(b) $30,789,495 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, $85,526,375 (if a Supplemental Credit Enhancement Event
has not occurred);
- through the last Distribution Date before an Effective Alternative Credit
Support Election, $88,947,430 (if a Supplemental Credit Enhancement Event
has occurred); and
- after the Distribution Date immediately after an Effective Alternative
Credit Support Election, $119,736,925.
"CASH FLOWS" will mean the allocation, payment and reimbursement priorities
for this Series as summarized in Annex A.
"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.
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"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.
"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 related Due Period.
"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).
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"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 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.
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<PAGE> 42
"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.
"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.
"DISTRIBUTION DATE" will mean June 15, 2000 and the 15th day of each
following calendar month, or, if the 15th is not a business day, the next
business day.
"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%.
"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.
"FUNDED CREDIT ENHANCEMENT" will mean any credit enhancement that consists
of funds on deposit in one or more segregated trust accounts in the corporate
trust department of an office or branch of the Trustee or a Qualified
Institution for the benefit of the certificateholders of a series, including,
without limitation, a reserve account or a cash collateral account.
"GROUP AVAILABLE PRINCIPAL AMOUNT" will mean, with respect to each
Distribution Date, the amount remaining on deposit in the Group One Principal
Collections Reallocation Account on that Distribution Date after all withdrawals
have been made from that account for the benefit of any series in Group One, but
before
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<PAGE> 43
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 FINANCE CHARGE COLLECTIONS REALLOCATION ACCOUNT" will mean the
non-interest bearing segregated trust account for reallocated Finance Charge
Collections and other income for a Group established and maintained by the
Trustee with an office or branch of the Trustee or a Qualified Institution for
the benefit of the certificateholders of each series that is a member of that
Group.
"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.
"GROUP PRINCIPAL COLLECTIONS REALLOCATION ACCOUNT" will mean the
non-interest bearing segregated trust account for reallocated Principal
Collections for a Group established and maintained by the Trustee with an office
or branch of the Trustee or a Qualified Institution for the benefit of the
investor certificateholders of each series that is a member of that Group.
"GROUP REQUIRED PRINCIPAL AMOUNT" will mean, with respect to Group One, for
any Distribution Date, the Series Required Principal Amount for this Series,
plus the series required principal amount for each other series that is a member
of Group One, for that Distribution Date.
"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.
"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:
- $6,842,110; and
- if a Supplemental Credit Enhancement Event has not occurred, an
amount equal to 7.5% of the Series Investor Interest as of the last
day of the prior calendar month; or
- if a Supplemental Credit Enhancement Event has occurred, an amount
equal to 8.0% 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:
- $6,842,110; and
- an amount equal to 12.5% 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.
"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.
"PAYING AGENT" will mean any paying agent appointed pursuant to the Pooling
and Servicing Agreement, and will initially be the Corporate Trust Office of the
Trustee.
"PORTFOLIO YIELD" will mean, with respect to any 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.
"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, amounts that will be
available to pay interest and principal, as applicable, under the Cash Flows, 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.
"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, an amount calculated as
follows: for each series in Group One (including this 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 until its latest class expected final payment date
or, if none, the last scheduled day of its Accumulation Period (assuming that no
Amortization Event or Early Accumulation Event occurs with respect to that
series)), an amount equal to:
(x) the Group Available Principal Amount; less
(y) the Series Required Principal Amount less the principal amount for that
series for that Distribution Date, if any, that was funded on that
Distribution Date (including any portion of that amount that was funded
by amounts withdrawn from the applicable Group Principal Collections
Reallocation Account pursuant to the Series Supplement for that
series).
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<PAGE> 45
For purposes of calculating the Series Available Principal Amount for each other
such series, the Group Available Principal Amount will be reduced by the amount
calculated in clause (y) above for the prior series for which the Series
Available Principal Amount was calculated.
"SERIES CLOSING DATE" will mean May 10, 2000.
"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.
"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 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 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 $684,211,000.
"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
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<PAGE> 46
- 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;
provided, however, that Greenwood may, upon 30 days' prior notice to the
Trustee, the rating agencies and the Credit Enhancement Provider, reduce the
Series Minimum Principal Receivables Balance by increasing the divisors set
forth above (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
divisors set forth above to more than 0.98.
"SERIES PERCENTAGE" will mean, with respect to any specified category
(which categories are 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, for this Series, with respect
to each Distribution Date of the Accumulation Period:
- if the Distribution Date is not in March, 125%; or
- if the Distribution Date is in March, 105%,
of the scheduled principal deposit (plus prior shortfalls) for that Distribution
Date.
"SERIES TERMINATION DATE" will mean the first business day following
November 15, 2009 (or, if November 15, 2009 is not a business day, the second
business day following November 15, 2009).
"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.
"SUPPLEMENTAL CREDIT ENHANCEMENT AMOUNT" will mean the lesser of:
- $3,421,055 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:
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<PAGE> 47
- $3,421,055 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 the Dow
Jones Telerate Service (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).
"TRUSTEE" will mean U.S. Bank National Association (formerly First Bank
National Association, successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), its successors and assigns.
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<PAGE> 48
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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<PAGE> 49
(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.)
S-49
<PAGE> 50
(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)
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)
S-50
<PAGE> 51
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.)
(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)
S-51
<PAGE> 52
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).
(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.
S-52
<PAGE> 53
(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)
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
S-53
<PAGE> 54
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
- 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.
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<PAGE> 55
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.
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 May 15, 2007 (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 June 15, 2007 (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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<PAGE> 56
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 unless otherwise indicated.
For more specific information with respect to any series, you should contact the
Servicer at (813) 288-3418. The 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(4) 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(3) Cont Liq(5) 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 monthly
payments. "Bullet" means that the Trust is scheduled to repay principal in
one payment.
(3) The Trust is scheduled to repay principal in 12 equal monthly payments.
(4) Based on the cost of commercial paper that is issued by the holder of the
Class A Certificate.
(5) The amount of principal the Trust will repay in any month varies.
S-56
<PAGE> 57
<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(6) 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>
- -------------------------
(6) 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.
S-57
<PAGE> 58
<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>
S-58
<PAGE> 59
PROSPECTUS
Discover(R) Card Master Trust I
Credit Card Pass-Through Certificates
Greenwood Trust Company
Master Servicer, Servicer and Seller
------------------------
Greenwood Trust Company ("Greenwood") intends to sell from time to time up
to $7,605,269,000 aggregate principal amount of Credit Card Pass-Through
Certificates ("investor certificates") consisting of one or more series,
representing an undivided interest in the Discover Card Master Trust I (the
"Trust "), formed pursuant to a Pooling and Servicing Agreement between
Greenwood as Master Servicer, Servicer and Seller and 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, as amended. The property of the Trust
includes a pool of receivables (the "Receivables") arising under selected
Discover Card accounts in the portfolio of Discover Card accounts originated by
Greenwood and all monies due or to become due in payment of the Receivables.
Investor certificates will be sold from time to time under this Prospectus on
terms determined for each series at the time of sale and described in the
related Prospectus Supplement. Each series will consist of one or more classes
of investor certificates. Each investor certificate will represent an undivided
interest in the Trust and the interest of the investor certificateholders of
each class of a series will include the right to receive a varying percentage of
each month's collections with respect to the Receivables at the times, in the
manner and to the extent described herein and in the related Prospectus
Supplement.
Although the specific terms of each series in respect to which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such series will not be subject to prior review by, or
consent of, the holders of the investor certificates of any previously issued
series.
Interest and principal payments with respect to each series will be made as
specified in the related Prospectus Supplement. One or more classes of a series
may be entitled to the benefits of a form of credit enhancement as specified in
the related Prospectus Supplement. In addition, each series may include one or
more classes that are subordinated in right and priority to payment of principal
of, and/or interest on, one or more other classes of such series or another
series, in each case, to the extent described in the related Prospectus
Supplement.
------------------------
THE INVESTOR CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF GREENWOOD TRUST COMPANY. NEITHER THE
INVESTOR CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The investor certificates may be sold through underwriting syndicates
represented by one or more managing underwriters, which may include Morgan
Stanley & Co. Incorporated ("MS & Co."), Morgan Stanley International Limited
("MSIL"), Dean Witter Reynolds Inc. ("DWR") or other affiliates of Greenwood, by
underwriters without a syndicate, through agents designated from time to time,
or directly to purchasers. If underwriters or agents are involved in the
offering of investor certificates, the name of the managing underwriter or
underwriters or agents will be set forth in the related Prospectus Supplement.
If an underwriter, agent or dealer is involved in the offering of investor
certificates, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from the information
contained in, the related Prospectus Supplement, and the net proceeds to
Greenwood from such offering will be the public offering price of such investor
certificates less such discount in the case of an underwriter, the purchase
price of such investor certificates less such commission in the case of an
agent, or the purchase price of such investor certificates in the case of a
dealer, and less, in each case, the other expenses of Greenwood associated with
the issuance and distribution of such investor certificates. See "Plan of
Distribution."
Following the initial distribution of a series of investor certificates, MS
& Co., MSIL, DWR and other affiliates of Greenwood may offer and sell previously
issued investor certificates in the course of their businesses as
broker-dealers. MS & Co., MSIL, DWR and such other affiliates may act as a
principal or agent in such transactions. This Prospectus and the accompanying
Prospectus Supplement may be used by MS & Co., MSIL, DWR and such other
affiliates in connection with such transactions. Such sales, if any, will be
made at varying prices relating to market prices prevailing at the time of sale.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
INVESTOR CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
MORGAN STANLEY DEAN WITTER
May 2, 2000
<PAGE> 60
TABLE OF CONTENTS
<TABLE>
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<S> <C>
Reports to Investor Certificateholders.................. 2
Incorporation of Certain Documents by Reference......... 2
Prospectus Summary...................................... 3
Risk Factors............................................ 7
The Trust............................................... 13
Formation of the Trust................................ 13
The Trustee........................................... 13
Indemnification of the Trust and the Trustee.......... 14
Sale and Assignment of Receivables to the Trust....... 14
Addition of Accounts.................................. 14
Removal of Accounts................................... 16
Termination of the Trust.............................. 16
Description of the Investor Certificates................ 16
General............................................... 16
Interest Payments..................................... 17
Principal Payments.................................... 17
Issuance of Additional Series......................... 18
Collections Account and Group Collections Accounts.... 18
Class Percentages and Seller Percentage............... 19
Allocations, Reallocations and Subordination of
Collections......................................... 19
Adjustments to Receivables............................ 20
Distributions of Collections and Application of
Collections and Certain Other Amounts............... 20
Additional Funds...................................... 21
Final Payment of Principal; Termination of Series..... 21
Credit Enhancement.................................... 22
Repurchase of Trust Portfolio......................... 22
Repurchase of Specified Receivables................... 23
Repurchase of a Series................................ 24
Repurchase of Investor Certificates................... 24
Sale of Seller Interest............................... 24
Reallocation of Series Among Groups................... 25
Amendments............................................ 25
List of Investor Certificateholders................... 26
Meetings.............................................. 26
Book-Entry Registration............................... 26
Definitive Certificates............................... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Servicing............................................... 30
Master Servicer and Servicer.......................... 30
Servicing Compensation and Payment of Expenses........ 30
Certain Matters Regarding the Master Servicer and the
Servicers........................................... 31
Master Servicer Termination Events.................... 31
Servicer Termination Events........................... 32
Evidence as to Compliance............................. 33
The Seller.............................................. 34
Greenwood............................................. 34
Insolvency-Related Matters............................ 34
Certain Legal Matters Relating to the Receivables....... 35
Transfer of Receivables............................... 35
Certain UCC Matters................................... 36
Consumer Protection Laws and Debtor Relief Laws
Applicable to the Receivables....................... 36
Claims and Defenses of Cardmembers Against the
Trust............................................... 37
Use of Proceeds......................................... 37
Federal Income Tax Consequences......................... 37
General............................................... 37
Tax Treatment of the Investor Certificates as
Indebtedness........................................ 38
United States Investor Certificateholders............. 39
Foreign Investor Certificateholders................... 40
Backup Withholding and Information Reporting.......... 41
Possible Characterization of the Investor
Certificates........................................ 42
State Tax Consequences.................................. 43
ERISA Considerations.................................... 44
Greenwood's Prohibited Transaction Exemption.......... 45
The Regulation........................................ 46
Plan of Distribution.................................... 47
Legal Matters........................................... 49
Available Information................................... 49
Glossary of Terms....................................... 50
ANNEX I -- Global Clearance, Settlement and Tax
Documentation Procedures.............................. 60
</TABLE>
REPORTS TO INVESTOR CERTIFICATEHOLDERS
Monthly and annual reports with respect to each outstanding series of
investor certificates containing information concerning the Trust and such
outstanding series of investor certificates, prepared by the Master Servicer,
will be made available to certificate owners free of charge upon request by
calling 302-323-7434. 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 any of its financial reports to investor certificateholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
by Greenwood on behalf of the previously formed Trust are incorporated in this
Prospectus by reference: the Trust's Annual Reports on Form 10-K for the years
ended December 31, 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, the Trust's Annual Report on Form 10-K for the year
ended November 30, 1999 and 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 (the "Securities Exchange Act of 1934"), subsequent to the date
of this Prospectus and prior to the termination of the offering of the investor
certificates shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Master Servicer will provide without charge to each person, including
any beneficial owner of investor certificates, to whom a copy of this Prospectus
is delivered, a copy of any and all the documents incorporated herein by
reference (other than exhibits to such documents) upon request by calling
302-323-7434.
2
<PAGE> 61
PROSPECTUS SUMMARY
The following summary is qualified in its entirety with respect to any
series of investor certificates issued by the Trust by the more detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement. Reference is made to the Glossary of Terms contained in this
Prospectus and in the related Prospectus Supplement for the definitions of
certain capitalized terms. Unless the context requires otherwise, capitalized
terms used in this Prospectus relate separately to individual series of investor
certificates issued by the Trust.
OVERVIEW OF TRUST............ Discover Card Master Trust I has issued, and is
expected to issue, series of investor
certificates from time to time. The securities
offered in each series will represent a
Fractional Undivided Interest in the Trust. The
assets of the Trust include the accounts
receivable arising under certain Discover(R) Card
accounts selected from the Discover Card
Portfolio of accounts originated by Greenwood,
the cash received in payment of those Receivables
(including recoveries on charged-off
Receivables), Participation Interests, if any,
included in the Trust, funds available with
respect to the Credit Enhancement for any
outstanding series of investor certificates,
investment income on funds on deposit in Investor
Accounts, if any, any additional funds that are
included in the Trust, interest rate swaps,
currency swaps for any outstanding series of
investor certificates that has one or more
classes denominated in a foreign currency, and
interest rate cap or other interest rate
protection agreements for any outstanding series
of investor certificates that has one or more
classes with a floating certificate rate that is
not capped at a specified maximum rate.
The Trust was formed pursuant to the Pooling and
Servicing Agreement between Greenwood and the
Trustee. Upon formation of the Trust, Greenwood
transferred to the Trust all the Receivables in
the Accounts selected for inclusion in the Trust
prior to the Initial Closing Date. In addition,
Greenwood has transferred the Receivables in
Additional Accounts to the Trust, and may do so
again in the future. Greenwood also transfers
additional Receivables generated in the Accounts
to the Trust on an ongoing basis. Greenwood, the
originator of the Accounts, will continue to
service the Accounts. U.S. Bank National
Association (formerly First Bank National
Association, successor trustee to Bank of America
Illinois, formerly Continental Bank, National
Association), is Trustee for the Trust.
The Trust, as a master trust, has issued series
of investor certificates, and is expected to
issue additional series of investor certificates
in the future, subject to certain requirements
and restrictions set forth in the Pooling and
Servicing Agreement. The consent of the
certificateholders of outstanding series will not
be required or requested in order for the Trust
to issue additional series of investor
certificates.
The terms governing each particular series of
investor certificates are set forth in the
Pooling and Servicing Agreement (which applies to
all series issued from the Trust) and will be set
forth in a Series Supplement (which will be
specific to each particular series). The Series
Supplement for each series will specify, among
other things, the number of classes of investor
certificates in the series, the size of the
series, its payment terms, and the kind and size
of the Credit Enhancement for the series.
The investor certificates of each series issued
from the Trust will represent a Fractional
Undivided Interest in the Trust and will be
entitled to receive a specified portion of funds
received in payment of the Receivables,
investment income on funds on deposit in Investor
Accounts, if any, plus the benefits of the Credit
Enhancement for that
3
<PAGE> 62
series, the currency swap and interest rate cap
or other interest rate protection agreements for
that series, if any. An investor's right to
receive any of these amounts will be limited by
the amount of interest accrued on the applicable
investor certificate and the principal amount of
such investor certificate. The remaining
Fractional Undivided Interest in the Trust not
represented by investor certificates of any
series is represented by the Seller Certificate,
which is owned by Greenwood.
SELLER....................... Greenwood Trust Company ("Greenwood"). The
executive office of Greenwood (302-323-7434) is
located at 12 Read's Way, New Castle, Delaware
19720.
MASTER SERVICER AND
SERVICER..................... Greenwood.
TRUSTEE...................... U.S. Bank National Association (formerly First
Bank National Association, successor trustee to
Bank of America Illinois, formerly Continental
Bank, National Association), its successors and
assigns.
INTEREST ON INVESTOR
CERTIFICATES............... Interest on the investor certificates will accrue
at the per annum rate either specified in, or
determined in the manner specified in, the
related Prospectus Supplement.
See "Description of the Investor Certificates --
Interest Payments" herein and "The Certificates
-- Interest Payments" in the related Prospectus
Supplement.
PRINCIPAL ON INVESTOR
CERTIFICATES................. The principal of the investor certificates of
each series will be scheduled to be paid either
in full on a date specified in the related
Prospectus Supplement (the "Expected Final
Payment Date"), in which case such series will
have an Accumulation Period as described below
under "-- Accumulation Period," or in
installments commencing on the Principal
Commencement Date with respect to such series, in
which case such series will have a Controlled
Liquidation Period as described below under "--
Controlled Liquidation Period." Certain series
may have both a Controlled Liquidation Period and
an Accumulation Period. If a series has more than
one class of investor certificates, a different
method of paying principal, Expected Final
Payment Date and/or Principal Commencement Date
may be specified for each class. The payment of
principal with respect to the investor
certificates of a series or class may commence
earlier than the Expected Final Payment Date or
Principal Commencement Date with respect to such
series and the final principal payment with
respect to the investor certificates of a series
or class may be made earlier or later than the
Expected Final Payment Date or other expected
date specified in the related Prospectus
Supplement, if an Amortization Event occurs with
respect to such series or class or under certain
other circumstances described herein and in the
related Prospectus Supplement.
See "Description of the Investor Certificates --
Principal Payments" herein and "The Certificates
-- Principal Payments" in the related Prospectus
Supplement.
REVOLVING PERIOD............. The investor certificates of each series will
have a Revolving Period, which will commence on
the Series Cut-Off Date with respect to such
series and continue to, but not including, the
earlier of (i) the Principal Commencement Date,
(ii) the Amortization Commencement Date with
respect to such series and (iii) if applicable,
the Early Accumulation Commencement Date with
respect to such series.
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<PAGE> 63
CONTROLLED LIQUIDATION
PERIOD....................... If the related Prospectus Supplement specifies
that a series will have a Controlled Liquidation
Period, unless an Amortization Event or, if
applicable, an Early Accumulation Event has
occurred during the Revolving Period, the
Controlled Liquidation Period will begin on the
Principal Commencement Date with respect to such
series and continue until the earliest of (i) the
payment in full of the Series Invested Amount,
(ii) the Amortization Commencement Date with
respect to such series, (iii) if applicable, the
Early Accumulation Commencement Date with respect
to such series and (iv) the Series Termination
Date.
ACCUMULATION PERIOD.......... If the related Prospectus Supplement specifies
that a series will have an Accumulation Period,
unless an Amortization Event or, if applicable,
an Early Accumulation Event has occurred during
the Revolving Period, the Accumulation Period
will begin on the Principal Commencement Date
specified in such Prospectus Supplement and
continue until the earliest of (i) the payment in
full of the Series Invested Amount, (ii) the
Amortization Commencement Date with respect to
such series, (iii) if applicable, the Early
Accumulation Commencement Date with respect to
such series and (iv) the Series Termination Date.
EARLY ACCUMULATION PERIOD.... If the related Prospectus Supplement specifies
that a series may have an Early Accumulation
Period, unless an Amortization Event has occurred
prior to the Early Accumulation Commencement
Date, the Early Accumulation Period will begin on
the Early Accumulation Commencement Date and
continue until the earliest of (i) the payment in
full of the Series Invested Amount, (ii) the
Amortization Commencement Date with respect to
such series and (iii) the Series Termination
Date.
AMORTIZATION PERIOD.......... The Amortization Period with respect to a series,
if any, will begin on the Amortization
Commencement Date and continue until the earlier
of (i) the payment in full of the Series Invested
Amount and (ii) the Series Termination Date.
CREDIT ENHANCEMENT........... The Credit Enhancement with respect to a series
may include a cash collateral account, a letter
of credit, a surety bond, an insurance policy or
any other form of credit enhancement described in
the related Prospectus Supplement. The Credit
Enhancement may also be provided to a series or
class of a series by subordination provisions
that require distributions of principal and/or
interest to be made with respect to the investor
certificates of such series or class before
distributions are made to one or more other
series or other classes of such series.
See "Risk Factors -- Credit Enhancement" herein
and "Description of the Investor Certificates --
Principal Payments" and "-- Credit Enhancement"
herein and "The Certificates -- Principal
Payments" and "-- The Credit Enhancement Account"
in the related Prospectus Supplement.
5
<PAGE> 64
CLEARANCE AND SETTLEMENT..... Unless otherwise specified in the Series
Supplement, investor certificateholders may elect
to hold their investor certificates through any
of DTC (in the United States) or Clearstream
Banking or Euroclear (in Europe). Transfers
within DTC, Clearstream Banking or Euroclear, as
the case may be, will be in accordance with the
usual rules and operating procedures of the
relevant system. Cross-market transfers between
persons holding directly or indirectly through
DTC, on the one hand, and counterparties holding
directly or indirectly through Clearstream
Banking or Euroclear, on the other hand, will be
effected in DTC through the relevant Depositaries
of Clearstream Banking or Euroclear. See
"Description of the Investor Certificates --
Book-Entry Registration."
6
<PAGE> 65
RISK FACTORS
Limited Liquidity. Morgan Stanley & Co. Incorporated and Dean Witter
Reynolds Inc. may, from time to time, make a market in the investor certificates
of any series and may deliver this Prospectus and any Prospectus Supplements
hereto in connection with such market-making activity. There can be no
assurance, however, that a secondary market will develop or, if a secondary
market does develop, that it will provide holders of investor certificates of
any particular series with adequate liquidity or that it will continue until the
termination of any such series.
Certain Legal Aspects. Greenwood has agreed in the Pooling and Servicing
Agreement to repurchase all of the Receivables in the event that the transfer of
the Receivables by Greenwood or any Additional Seller to the Trust is neither a
sale of the Receivables to the Trust nor a grant to the Trust of a security
interest in the Receivables, or, if the transfer by a Seller to the Trust is
deemed to be a grant to the Trust of a security interest in the Receivables, the
Trustee does not have a perfected security interest therein of first priority
under the Uniform Commercial Code (the "UCC") as in effect in the state in which
the chief executive office of each Seller is located (the "Applicable State"
with respect to each Seller). See "Description of the Investor Certificates --
Repurchase of Trust Portfolio." Greenwood has taken certain actions to perfect
and will (along with Additional Sellers, if any) continue the perfection of the
Trust's interest in the Receivables. Unless continuation statements are filed
within the time specified in the UCC in respect of the security interest of the
Sellers or the Trust in the Receivables, the perfection of the security interest
will lapse. A tax or statutory lien on property of a Seller may have priority
over the Trust's interest in the Receivables.
It is anticipated that Greenwood will be the only Servicer until such time
as receivables in credit accounts other than accounts originated by Greenwood
are added to the Trust. See "The Trust -- Addition of Accounts." A Servicer may
generally use Collections received by it in each Due Period until the related
Distribution Date. If certain conditions are not met, however, the Servicer will
pay from Collections with respect to Receivables serviced by such Servicer for
any day an amount equal to the sum of the Required Daily Deposits for each
series then outstanding with respect to such Servicer to, or at the direction
of, Greenwood as Master Servicer, for deposit into the Collections Account,
within two business days following the date of processing of such Collections.
Any such Collections not required to be deposited into the Collections Account
will be used by the Servicer for its own benefit until the related Distribution
Date. If Greenwood or any other future Servicer is so entitled to use
Collections received by it and becomes insolvent, the Trust may not have a
perfected interest in such Collections. See "The Seller -- Insolvency-Related
Matters," "Certain Legal Matters Relating to the Receivables -- Transfer of
Receivables" and "Description of the Investor Certificates -- Collections
Account and Group Collections Accounts."
Effect of Subordination. With respect to any series having a class of
subordinated certificates (referred to herein as the "Class B Certificates"),
although the Class B Certificates may have the benefit of Credit Enhancement,
which may include the exclusive direct benefit of all or a portion of such
Credit Enhancement, the Class B Certificates will be subordinated in right of
payment to the senior certificates (the "Class A Certificates") to the extent
described herein and in the related Prospectus Supplement. See "Description of
the Investor Certificates -- Allocations, Reallocations and Subordination of
Collections -- Subordination of Class B Certificates" herein and, if applicable
"The Certificates -- Subordination of the Class B Certificates (Class A Credit
Enhancement)," "-- Reallocations" and "-- Cash Flows" and "Annex A -- Cash
Flows" in the related Prospectus Supplement. If the Class B Investor Interest
suffers a reduction as a result of such subordination, the Class B Percentage of
Finance Charge Collections and Principal Collections on future Distribution
Dates may be reduced and future interest payments, as well as final payment of
principal, also may be reduced or delayed.
Consumer Protection Laws and Regulations. The Accounts and the Receivables
are subject to numerous federal and state consumer protection laws and
regulations that impose requirements on the making and enforcement of consumer
loans. Such laws, as well as any new laws or new rulings regarding new or
existing laws that may be adopted, may adversely affect a Servicer's ability to
collect on the Receivables or maintain previous levels of monthly periodic
finance charges, and failure by any Servicer to comply with such requirements
could adversely affect such Servicer's ability to collect the Receivables with
respect to which it is
7
<PAGE> 66
the Servicer. Greenwood has agreed in the Pooling and Servicing Agreement that
if a Receivable was not created in compliance in all material respects with all
Requirements of Law applicable to a Seller with respect to such Receivable, and
if such noncompliance continues beyond a specified cure period and has a
material adverse effect on the interest of the Trust in all the Receivables,
Greenwood will repurchase all Receivables in the Accounts containing the
Receivables affected by such noncompliance. See "Description of the Investor
Certificates -- Repurchase of Specified Receivables." It is not anticipated that
the Trustee will make any examination of the Receivables or the records relating
thereto for the purpose of establishing the presence or absence of defects in
the Accounts, or for any other purpose. See "Certain Legal Matters Relating to
the Receivables -- Consumer Protection Laws and Debtor Relief Laws Applicable to
the Receivables."
Consumer Protection Laws and Regulations; Litigation. Greenwood is involved
from time to time in various legal proceedings that arise in the ordinary course
of its business. Greenwood does not believe that the resolution of any of these
proceedings will have a material adverse effect on Greenwood's financial
condition or on the Receivables. There can be no assurance, however, regarding
any of these effects.
Legislation. The Competitive Equality Banking Act of 1987 ("CEBA"), as
amended by the Gramm-Leach-Bliley Financial Modernization Act of 1999, contains
provisions that limit the ability of nonbanking companies, such as Morgan
Stanley Dean Witter & Co. ("MSDW") and NOVUS Credit Services Inc. ("NOVUS"), to
own banks. However, the legislation permits any nonbanking company that owned a
bank on March 5, 1987 to retain control of the bank. MSDW and NOVUS are
permitted to retain control of Greenwood under CEBA, as amended. CEBA, as
amended, provides that if MSDW, NOVUS or 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 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. See "The Seller -- Greenwood."
Social, Legal and Economic Factors. Changes in account use and payment
patterns by cardmembers may result from a variety of social and economic
factors, as well as from legislative initiatives. Economic factors, including
the rate of inflation and relative interest rates offered for various types of
loans, also may be reflected in changes in account use and payment patterns,
including increased risk of defaults by cardmembers. Discover Card accounts from
all of the states of the United States and from the United States' territories
and possessions are represented in the Accounts. Greenwood is unable to
determine and has no basis to predict whether, or to what extent, economic or
social factors will affect future credit use or payment patterns. However,
heightened levels of consumer debt, large numbers of personal bankruptcies and a
weakened national economy may cause increases in delinquencies in, and
charge-offs of, credit card receivables underlying securities such as the
investor certificates.
Competition in the Credit Card Industry. The credit card industry in which
the Discover Card competes is highly competitive. This competition focuses on
features and financial incentives of credit cards such as annual fees, finance
charges, rebates and other enhancement features. The market includes (a)
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 (b) charge cards issued by travel and entertainment
companies. The vast majority of the bank-issued credit cards bear the Visa or
MasterCard service mark and are issued by the many banks that participate in one
or both of the national bank card networks operated by Visa U.S.A. Inc. and
MasterCard International Incorporated. The Visa and MasterCard associations have
been in existence for approximately 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 (e.g., 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
8
<PAGE> 67
often provide other benefits, both currently represent a large segment of the
bank-issued credit card market. The majority of travel and entertainment cards
are issued by American Express Company, which has been issuing cards since 1958.
Travel and entertainment cards differ in many cases from bank cards in that they
generally have no pre-established credit limits and have limited provisions for
repayment in installments. American Express Company, through a subsidiary bank,
also issues cards with both a pre-established credit limit and provisions for
repayment in installments. The Discover Card was introduced nationwide in 1986
and competes with general purpose credit cards issued by other banks and with
travel and entertainment cards. 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. Greenwood currently is the only
issuer of the Discover Card. Greenwood has also issued, and may from time to
time introduce, additional general purpose credit cards; however, none of the
accounts associated with these cards is included in the Discover Card Portfolio.
Many bank credit card issuers have instituted balance transfer programs.
Generally, under these transfer programs, cardholders are offered a favorable
annual percentage rate or other financial incentives for a specified length of
time on any portion of their account balances arising from the transfer to their
accounts of outstanding account balances maintained on another credit card. The
annual percentage rates for balance transfers often are more favorable to
cardholders than the annual percentage rates for account balances arising from
purchases or cash advances.
This competition affects Greenwood's ability to obtain applicants for
Discover Card accounts, to encourage usage of the accounts by cardmembers and to
obtain participation in the Discover Card program by merchants. A significant
adverse change in any of these factors could result in a decrease in the level
of the Receivables, and of the receivables in the Discover Card Portfolio. If
there is a decrease in the level of Receivables, and if sufficient Receivables
in Additional Accounts or sufficient Participation Interests are not available
to be added to the Trust or are not added, an Amortization Event with respect to
one or more series could result, causing the commencement of the Amortization
Period with respect to such series. See "-- Payments and Maturity" herein and
"The Certificates -- Amortization Events" in the related Prospectus Supplement.
Ability of the Seller to Change Terms of the Accounts. Pursuant to the
Pooling and Servicing Agreement, a Seller does not transfer Accounts to the
Trust, but only the Receivables arising in the Accounts. As owner of any
Account, the Seller has the right to determine the periodic finance charges
applicable from time to time to the Account, to alter the minimum monthly
payment required under the Account, to change the credit limit with respect to
the Account and to change various other terms with respect to the Account. A
decrease in the periodic finance charges or other fees with respect to an
Account could decrease the Finance Charge Collections, which would decrease the
effective yield on the Receivables and could also cause commencement of the
Amortization Period with respect to one or more series, as well as decreased
protection to investor certificateholders against shortfalls in Certificate
Interest and against charged-off Receivables. In addition, an increase in credit
limits could result in increases in Charged-Off Amounts, which could result in a
decrease in the level of the Receivables, and of the receivables in the Discover
Card Portfolio. If there is a decrease in the level of Receivables, and if
sufficient Receivables in Additional Accounts or sufficient Participation
Interests are not available to be added to the Trust or are not added, an
Amortization Event with respect to one or more series could result, causing the
commencement of the Amortization Period with respect to such series. The newly
introduced Discover Platinum Card offers cardmembers credit limits that may be
substantially higher, and imposes periodic finance charges that are generally
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, there can be no assurance 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. See "The
Certificates -- Cash Flows" and "-- Amortization Events" and "Annex A -- Cash
Flows" in the related Prospectus Supplement.
The Pooling and Servicing Agreement provides that each Servicer must
administer, process and enforce the Accounts with respect to which it is the
Servicer in accordance with its customary and usual servicing procedures for
servicing credit accounts comparable to the Accounts and in accordance with its
Credit
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Guidelines. Each Seller also must agree that the terms governing an Account will
not be changed unless the change is also made to the terms of other accounts of
such Seller of the same general type, obligors of which are resident in a
particular affected state or similar jurisdiction. There can be no assurance
that any such change may not affect the Accounts to a greater or lesser degree
than other such accounts. Except as set forth above, there are no restrictions
on the ability of any Seller to change the terms of the Accounts or the
Receivables.
There can be no assurance that changes in applicable laws, changes in the
marketplace or prudent business practice might not result in a determination by
Greenwood to take actions that would result in other changes in the terms of
some or all of the Greenwood Discover Card Accounts.
Payments and Maturity. The Receivables may be paid at any time, and there
is no assurance that there will be additional Receivables created in the
Accounts or that any particular pattern of payments will occur. Changes in
credit use and payment patterns may result from a variety of social, legal and
economic factors. A significant decline in the amount of Receivables generated
could result in a decline in the Seller Interest to an amount that would require
Greenwood to transfer to the Trust the Receivables in Additional Accounts or
Participation Interests in order to avoid an Amortization Event with respect to
one or more series and commencement of the Amortization Period with respect to
such series. Greenwood's ability to continue to compete in the current industry
environment will affect the generation of new Receivables to be conveyed to the
Trust and also may affect payment patterns. In addition, increased convenience
use, where cardmembers pay their Receivables within the grace period to avoid
all finance charges on purchases of merchandise and services, would decrease the
effective yield on the Receivables and also could cause commencement of the
Amortization Period with respect to one or more series, as well as decreased
protection to the investor certificateholders against shortfalls in Certificate
Interest and against charged-off Receivables. Conversely, the terms governing
the Accounts require only a minimum monthly payment, and a significant decrease
in the percentage of repayment by cardmembers or in the usage of the Accounts
could delay the payment of principal to the investor certificateholders of one
or more series. Any delay in the payment of principal with respect to any series
will extend the period during which charged-off Receivables may be allocated to
the investor certificates of such series. See "The Certificates -- Amortization
Events" and "Composition and Historical Performance of the Discover Card
Portfolio" in the related Prospectus Supplement.
Basis Risk. Accounts in the Discover Card portfolio will accrue periodic
finance charges at fixed rates or at a variable rate based on the prime rate.
See "The Accounts -- Billing and Payments" in the related Prospectus Supplement.
As a result, a significant portion of the Receivables will bear interest at
certain fixed rates, while the investor certificates of a series may bear
interest at a floating rate and may not be subject to a maximum rate. Similarly,
a significant portion of the Receivables will bear interest at the prevailing
prime rate plus a margin, while the investor certificates of a series may bear
interest at fixed rates or rates that float against a different index. If there
is an increase in the index on which the Certificate Rate of such investor
certificates is based, and the resulting increase in the Certificate Rate is not
offset by increases in Series Finance Charge Collections, or if there is a
decrease in the prime rate, Series Excess Spread may be reduced, which could
cause the commencement of the Amortization Period with respect to such series,
and, in the event that the Available Class B Credit Enhancement Amount of such
series has been reduced to zero, shortfalls of Certificate Interest or losses to
the investor certificateholders of such series may result.
Rating of the Investor Certificates. Any rating assigned to the investor
certificates of a series or class of a series by a Rating Agency will not be a
recommendation to purchase, hold or sell such investor certificates, inasmuch as
the ratings do not reflect market price or suitability for a particular
investor. There is no assurance that any rating will remain in effect for any
given period of time or that such rating will not be lowered or withdrawn
entirely if, in the judgment of the applicable Rating Agency, circumstances in
the future so warrant.
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the investor certificates of each class of a series will
be represented initially by one or more certificates registered in the name of
Cede & Co., the nominee for The Depository Trust Company ("DTC"), and will not
be registered in the names of the certificate owners or their nominees. Because
of this, unless and until definitive certificates are issued, certificate owners
will not be recognized by the Trustee as holders of such investor certificates,
as
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the term is used in the Pooling and Servicing Agreement or any Series
Supplement. Hence, until such time, certificate owners only will be able to
exercise the rights of investor certificateholders indirectly through DTC,
Clearstream Banking or Euroclear and their participating organizations. See
"Description of the Investor Certificates -- Book-Entry Registration" and "--
Definitive Certificates."
Issuance of Additional Series. The Trust, as a master trust, has issued,
and in the future is expected to issue, from time to time, additional series of
investor certificates. Although the terms of any such series will be specified
in a Series Supplement with respect to such series, the provisions of each
Series Supplement and, therefore, terms of any additional series will not be
subject to the prior review or consent of holders of the investor certificates
of any previously issued series. Such terms may include methods for determining
applicable Class Percentages and allocating Collections, provisions creating
different or additional security or other Credit Enhancement, provisions
establishing one or more classes of investor certificates (including one or more
classes subordinated to other classes of such series), provisions subordinating
such series to one or more other series (if the Series Supplement relating to
such series provides for such subordination), and any other amendment or
supplement to the Pooling and Servicing Agreement that is made applicable to
that series.
The Trustee will authenticate and deliver a new series of investor
certificates only upon satisfaction of certain conditions, including
confirmation from the Rating Agencies that the issuance of the new series will
not result in the reduction or withdrawal of the rating of any class of investor
certificates of any series outstanding at the time of such new issuance. See
"Description of the Investor Certificates -- Issuance of Additional Series."
There can be no assurance, however, that the issuance of one or more additional
series from time to time hereafter might not have an impact on the timing and
amount of payments received by an investor certificateholder of any previously
issued series.
The Pooling and Servicing Agreement permits the issuance of one or more
series that would be subordinate in right of payment to another series. The
terms of any such subordination will be set forth in the Series Supplement for
the Subordinate Series. Unless otherwise specified in the related Prospectus
Supplement, a series will not be subordinated to any other series. The Seller
may, but is under no obligation to, issue a series in the future that is
subordinate in right of payment to one or more series. See "Description of the
Investor Certificates -- Allocations, Reallocations and Subordination of
Collections -- Subordinate Series."
Credit Enhancement Account. Although Credit Enhancement may be provided
with respect to a series of investor certificates or any class thereof, the
amount available from such Credit Enhancement will be limited and may be subject
to certain reductions. If the amount under any Credit Enhancement is reduced to
zero, investor certificateholders of the series or class thereof covered by the
Credit Enhancement will bear directly the credit and other risks associated with
their Fractional Undivided Interest in the Trust. See "Description of the
Investor Certificates -- Adjustments to Receivables" herein, and "The
Certificates -- Cash Flows" and "Annex A -- Cash Flows" in the related
Prospectus Supplement and "Description of the Investor Certificates -- Credit
Enhancement" herein and "The Certificates -- The Credit Enhancement Account" in
the related Prospectus Supplement.
Addition of Accounts. Greenwood has designated, and may voluntarily, and in
certain circumstances may be obligated to, designate Additional Accounts to be
included as Accounts, the receivables in which will be transferred to the Trust,
or to add Participation Interests to the Trust. Additional Accounts may be
Discover Card accounts originated by Greenwood or any other type of credit
account originated by Greenwood or an affiliate of Greenwood. Additional
Accounts also may be newly originated accounts. All assignments of Additional
Accounts or Participation Interests to the Trust are subject to certain
conditions set forth in the Pooling and Servicing Agreement, including, with
respect to Additional Accounts, the condition that the assignment of Additional
Accounts to the Trust comply with the conditions established by the Rating
Agencies or that the assignment of such Additional Accounts to the Trust will
not cause the rating of any class of any series of investor certificates then
outstanding to be lowered or withdrawn. See "The Trust -- Addition of Accounts."
However, because any such Additional Accounts, or the accounts underlying any
Participation Interests, need not be accounts of the same type as the Accounts
already included in the Trust, may contain a different proportion of newly
originated accounts than the Accounts already included in the Trust or be
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composed entirely of newly originated accounts, and may include accounts
originated using criteria different from those that were applied to the Accounts
already included in the Trust, there can be no assurance that any Additional
Accounts, or the accounts underlying any Participation Interests, will be of the
same credit quality as the Accounts already included in the Trust. Also, any
Additional Accounts, or the accounts underlying any Participation Interests, may
consist of credit accounts that have different terms than the Accounts already
included in the Trust, including lower periodic finance charges, which may have
the effect of reducing the average yield on the Accounts.
Historical Information and Performance Characteristics. All of the
information describing the composition and historical performance of the
Discover Card accounts in the related Prospectus Supplement reflects the
composition and historical performance of the Discover Card Portfolio (except as
presented under "The Accounts -- Composition of the Accounts" and where
otherwise noted), and not that of the Accounts. See "The Accounts -- Effects of
the Selection Process" in the related Prospectus Supplement. There can be no
assurance that the historical performance of the Discover Card Portfolio will be
representative of its performance in the future in all material respects. In
addition, there can be no assurance that the payment performance of the Obligors
on the Accounts will be representative of the Discover Card Portfolio in all
material respects.
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THE TRUST
FORMATION OF THE TRUST
The Trust was formed pursuant to the Pooling and Servicing Agreement
between Greenwood and the Trustee. As discussed below, the property of the Trust
currently includes, among other things, Receivables arising under certain
Greenwood Discover Card Accounts. Greenwood, pursuant to the Pooling and
Servicing Agreement, has transferred and will transfer to the Trust all
Receivables existing as of the Cut-Off Date and any Additional Account Cut-Off
Date. On a daily basis as the Receivables arise, Greenwood is obligated to
transfer and will continue to transfer to the Trust all Receivables arising in
the Accounts (including any Additional Accounts) from time to time until the
termination of the Trust. In exchange for the transfer of Receivables, Greenwood
received the Seller Certificate. As additional Receivables are transferred, the
Seller Interest increases. Greenwood also received the net cash proceeds from
the sale of the investor certificates of each previously issued series and will
receive the net cash proceeds from each future sale of investor certificates.
The property of the Trust includes the Receivables, all monies due or to
become due thereunder, all proceeds of the Receivables, including Collections
that may be used by Greenwood or any other Servicer for its own benefit prior to
each Distribution Date, all monies on deposit in the Investor Accounts,
Participation Interests included in the Trust, if any, any additional funds that
may be added to the Trust from time to time, any Credit Enhancement and any
interest rate swap, currency swap or interest rate cap or other interest rate
protection agreements with respect to any outstanding series of investor
certificates. Pursuant to the Pooling and Servicing Agreement, Greenwood has the
right, and in some circumstances the obligation, to designate Additional
Accounts, which may be Greenwood Discover Card accounts or credit accounts
originated by Greenwood or an affiliate of Greenwood, to be included as
Accounts, or to add Participation Interests to the Trust, subject to certain
conditions. See "-- Addition of Accounts." In addition, Greenwood has the right,
subject to certain conditions, to designate Accounts for removal from the Trust.
See "-- Removal of Accounts."
The Trust was formed for the purpose of issuing investor certificates of
various series pursuant to the Pooling and Servicing Agreement and a Series
Supplement for each series. The Trust, as a master trust, has issued and is
expected to issue additional series from time to time and to continue as a trust
after the Series Termination Date of any particular series. The Trust will not
engage in any business activity other than acquiring and holding the Receivables
and the proceeds therefrom, issuing investor certificates and the Seller
Certificate and making payments thereon, selling receivables in Charged-Off
Accounts, investing funds on deposit in the Investor Accounts pursuant to the
Pooling and Servicing Agreement and the relevant Series Supplements and entering
into interest rate swap, currency swap or interest rate cap or other rate
protection agreements and other agreements with third parties for the benefit of
the investor certificateholders of one or more series. As a consequence, the
Trust is not expected to have any need for additional capital resources except
for the Receivables in Additional Accounts or Participation Interests, if
applicable.
THE TRUSTEE
U.S. Bank National Association (formerly First Bank National Association,
successor trustee to Bank of America Illinois, formerly Continental Bank,
National Association), is the Trustee under the Pooling and Servicing Agreement.
Greenwood and its affiliates may from time to time enter into normal banking and
trustee relationships with the Trustee. The Trustee, Greenwood and any of their
respective affiliates may hold investor certificates in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee has the power to appoint a co-trustee or separate
trustees of all or any part of the Trust. In the event of such an appointment,
all rights, powers, duties and obligations conferred or imposed upon the Trustee
by the Pooling and Servicing Agreement or any Series Supplement will be
conferred or imposed upon the Trustee and such separate trustee or co-trustee
jointly or, in any jurisdiction in which the Trustee will be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee, who will exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.
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The Trustee may resign at any time, in which event the Master Servicer will
be obligated to appoint a successor Trustee. The Master Servicer also may remove
the Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Master Servicer may be obligated to appoint a successor
Trustee. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the appointment
by the successor Trustee.
INDEMNIFICATION OF THE TRUST AND THE TRUSTEE
The Pooling and Servicing Agreement provides that the Holder of the Seller
Certificate will indemnify the Trust and the Trustee from and against any loss,
liability, expense, damage or injury suffered or sustained arising out of the
activities of the Sellers with respect to the Trust or the Trustee; provided,
however, that the Holder of the Seller Certificate will not indemnify (a) the
Trustee for liabilities imposed by reason of fraud, negligence, breach of
fiduciary duty or misconduct by the Trustee in the performance of its duties
under the Pooling and Servicing Agreement or any Series Supplement, (b) the
Trust or the investor certificateholders for liabilities arising from actions
taken by the Trustee at the request of investor certificateholders or (c) the
Trust or the investor certificateholders with respect to any federal, state or
local income or franchise taxes (or any interest or penalties with respect
thereto) required to be paid by the Trust or the investor certificateholders.
Any such indemnification only will be from the assets of the related Seller,
will be subordinate to the security interest of the Trust in the Receivables and
will not constitute a claim against such Seller in excess of the lesser of (i)
that Seller's assets available to pay such claim or (ii) the amount of such
claim multiplied by a fraction the numerator of which is the aggregate amount of
Principal Receivables in the Trust that were transferred to the Trust by that
Seller and the denominator of which is the aggregate amount of Principal
Receivables in the Trust.
SALE AND ASSIGNMENT OF RECEIVABLES TO THE TRUST
On the Initial Closing Date and the Addition Dates to date, Greenwood sold
and transferred to the Trust, and as of any future Addition Date Greenwood will
sell and transfer to the Trust, all of its right, title and interest in and to
existing Receivables and in and to all Receivables created thereafter, on a
daily basis as they arise, until the termination of the Trust, in exchange for
the Seller Certificate and the right to direct the issuance of, and receive the
proceeds from the sale of, new series of investor certificates. See "--
Formation of the Trust."
In connection with the transfer of the Receivables to the Trust by
Greenwood, Greenwood has indicated in its computer files that the Receivables
have been transferred to the Trust. In addition, Greenwood has provided (and,
with respect to any Additional Accounts, will provide) to the Trustee a computer
file containing a true and complete list of each Account (including each
Additional Account) identified by account number. Greenwood is not obligated to
deliver to the Trustee any other records or agreements relating to the Accounts
or the Receivables. Greenwood will not segregate the records and agreements that
it maintains relating to the Accounts and the Receivables from records and
agreements relating to other credit accounts and receivables, nor will Greenwood
mark these records or agreements to reflect the sale of the Receivables to the
Trust, except insofar as an electronic or other indicator is necessary to
service the Accounts in accordance with the Pooling and Servicing Agreement and
any Series Supplement. The Trustee will have reasonable access to these records
and agreements as required by applicable law and to enforce the rights of the
certificateholders. Greenwood filed a UCC-1 financing statement in accordance
with applicable state law to perfect the Trust's interest in the Receivables,
and will file any continuation statements with respect thereto which may be
necessary to maintain such perfection. See "Certain Legal Matters Relating to
the Receivables."
ADDITION OF ACCOUNTS
Pursuant to the Pooling and Servicing Agreement, Greenwood, in its sole
discretion, has designated, and may again in the future designate, credit
accounts originated by Greenwood or an affiliate of Greenwood as Additional
Accounts, the receivables in which have been or will be transferred to the
Trust, or may convey
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Participation Interests to the Trust. In addition, Greenwood will be required to
designate Additional Accounts or convey Participation Interests if the aggregate
amount of Principal Receivables in the Trust on the last day of any Due Period
is less than the Minimum Principal Receivables Balance.
Additional Accounts may consist of additional Discover Card accounts
originated by Greenwood or other credit accounts originated by Greenwood or an
affiliate of Greenwood, including, in each case, newly originated accounts. Each
assignment of Additional Accounts will be subject to certain conditions,
including the execution and delivery of a written assignment and an Opinion or
Opinions of Counsel relating to the Trust's security interest in the Receivables
in the Additional Accounts and insolvency and related matters, and delivery of a
certificate of a Servicing Officer regarding the selection criteria used to
select such Additional Accounts. Each assignment of Additional Accounts will
also be subject to the condition that either (i) the Rating Agencies confirm
that the proposed assignment of Additional Accounts will not cause the rating of
any class of any series of investor certificates then outstanding to be lowered
or withdrawn or (ii) the proposed assignment of Additional Accounts complies
with any limitations established by the Rating Agencies on the ability of
Greenwood to designate Additional Accounts. Unless each Rating Agency otherwise
consents, as of the last day of any calendar year, the number of Accounts
designated as Additional Accounts in reliance on clause (ii) of the preceding
sentence with respect to such calendar year or the amount of Principal
Receivables in those Accounts, as applicable, will not exceed a number equal to
20% of the number of Accounts in the Trust or the amount of Principal
Receivables in the Trust, as applicable, in each case as of the first day of
that calendar year; and, as of the last day of any three calendar month period,
the number of Accounts designated as Additional Accounts in reliance on clause
(ii) of the preceding sentence with respect to such three-month period or the
amount of Principal Receivables in those Accounts, as applicable, will not
exceed a number equal to 15% of the number of Accounts in the Trust or the
amount of Principal Receivables in the Trust, as applicable, in each case as of
the first day of such three-month period.
Additional Accounts will be selected on the basis of selection criteria
that are believed by the Servicer of such accounts to be not materially adverse
to the interests of the holders of any class of any series of investor
certificates then outstanding or any Credit Enhancement Provider.
The Trust will receive all Collections in respect of Receivables in
Additional Accounts in the same manner as Collections in respect of other
Receivables, except that Finance Charge Receivables deemed billed on the
Receivables in the Additional Accounts for the Due Period during which the
Additional Accounts were added to the Trust may be an estimate of such amount
prepared by the Servicer with respect to the Additional Accounts.
The terms governing any Additional Accounts or Participation Interests may
differ from the terms governing the Accounts initially included in the Trust,
including the possibility that some or all Additional Accounts or Participation
Interests will have lower periodic finance charges or fees than the initial
Accounts, which may have the effect of reducing the percentage of Finance Charge
Collections relative to the amount of Principal Collections.
The addition of Participation Interests to the Trust will be effected by an
amendment to the Pooling and Servicing Agreement that will not require the
consent of any investor certificateholders. Each conveyance of Participation
Interests to the Trust will be subject to certain conditions, including delivery
of a certificate of Greenwood stating that Greenwood reasonably believes that
the addition of the Participation Interests will not be materially adverse to
the interests of the holders of any class of any series of investor certificates
then outstanding or any Credit Enhancement Provider, delivery of an Opinion of
Counsel relating to the Trust's security interest in Participation Interests and
insolvency and related matters and confirmation from the Rating Agencies that
the proposed conveyance of Participation Interests will not cause the rating of
any class of any series of investor certificates then outstanding to be lowered
or withdrawn.
Additional Accounts or accounts underlying Participation Interests need not
be Discover Card accounts or accounts originated by Greenwood, may be composed
entirely of newly originated accounts or contain a higher proportion of newly
originated accounts than the Accounts currently included in the Trust and may
contain accounts originated using criteria different from those applied to the
Accounts currently included in
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the Trust. Accordingly, there can be no assurance that any Additional Accounts
or accounts underlying Participation Interests will be of the same credit
quality as the Accounts currently included in the Trust.
REMOVAL OF ACCOUNTS
Pursuant to the Pooling and Servicing Agreement, Greenwood may, but will
not be obligated to, designate Accounts for removal from the Trust (such
Accounts being referred to hereinafter as the "Removed Accounts"). Such removal
will be effective as of the last day of the Due Period in which Greenwood
designates Accounts for removal from the Trust.
Each removal of Accounts will be subject to certain conditions, including
the delivery of an Officer's Certificate confirming that (i) the aggregate
amount of Principal Receivables in the Trust less the aggregate amount of
Principal Receivables in the Removed Accounts is not less than the Minimum
Principal Receivables Balance, (ii) the removal of the Removed Accounts will
not, in the reasonable belief of Greenwood, cause either (A) an Amortization
Event to occur with respect to any series then outstanding or (B) the Deficit
Accumulation Amount or Deficit Liquidation Amount, as applicable, with respect
to any series then outstanding to be greater than zero on any Distribution Date
with respect to that series, (iii) no selection procedures believed by Greenwood
to be materially adverse to the investor certificateholders were utilized in
selecting the Removed Accounts and (iv) the Rating Agencies have advised
Greenwood that the removal will not cause the rating of any class of any
outstanding series of investor certificates to be lowered or withdrawn.
TERMINATION OF THE TRUST
The Pooling and Servicing Agreement provides that the Trust will terminate
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 (the "Final Trust Termination Date") or, if earlier, at the option of the
Sellers, on the day after the Distribution Date on which funds have been
deposited into the Series Distribution Accounts sufficient to pay in full the
Aggregate Investor Interest plus all accrued and unpaid Certificate Interest on
all series then outstanding.
DESCRIPTION OF THE INVESTOR CERTIFICATES
The investor certificates of a series will be issued pursuant to the
Pooling and Servicing Agreement, which was filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and a Series
Supplement. The following summary of the investor certificates does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the Pooling and Servicing Agreement and the applicable Series Supplement. On
written request to the Trustee at its principal corporate trust office, the
Trustee will provide to any investor certificateholder without charge a copy of
the Pooling and Servicing Agreement (without exhibits or schedules) and the
applicable Series Supplement (without exhibits).
GENERAL
Each series will be issued pursuant to the Pooling and Servicing Agreement
and a Series Supplement. The Series Supplement will consist of two parts, a
Series Term Sheet and an Annex. The Series Term Sheet will set forth the basic
terms pertaining to the series. The Annex will constitute the bulk of the Series
Supplement and will contain the detailed provisions regarding allocations of
Collections and payments to the investor certificateholders of the series. The
Annex is designed to be used for a variety of different types of series, and,
accordingly, contains some provisions that will not be applicable to all series.
The Series Term Sheet, in conjunction with the Annex, will set forth all of the
specific terms of the series.
Each series will consist of one or more classes of investor certificates.
Each investor certificate will represent a Fractional Undivided Interest in the
Trust, including the right to a percentage of all Collections on the Receivables
in the Trust. See "-- Class Percentages and Seller Percentage." Each investor
certificate of a series will represent the right to receive payments of interest
on Interest Payment Dates with respect to such series at the applicable
Certificate Rate on the Class Invested Amount with respect to such investor
certificate. If a series has a Controlled Liquidation Period, each investor
certificate of such series will represent
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the right to receive monthly payments of principal from the Principal
Commencement Date and during the Amortization Period, if any, with respect to
such series. If a series has an Accumulation Period, each investor certificate
of such series will represent the right to receive repayment of principal on an
applicable Expected Final Payment Date and monthly payments of principal during
the Amortization Period, if any, with respect to such series. See "Description
of the Investor Certificates -- Interest Payments" and "-- Principal Payments"
herein and "The Certificates -- Interest Payments" and "-- Principal Payments"
in the related Prospectus Supplement. With respect to a series having a class of
subordinated certificates, the rights of the Class B Certificateholders to
receive payments will be subordinated to the rights of the Class A
Certificateholders with respect to such series to the extent described in the
related Prospectus Supplement. See "Description of the Investor Certificates --
Allocations, Reallocations and Subordination of Collections -- Subordination of
Class B Certificates" herein and "The Certificates -- Subordination of the Class
B Certificates (Class A Credit Enhancement)" in the related Prospectus
Supplement.
Greenwood holds a residual interest in the Trust (the "Seller Interest"),
which is represented by the Seller Certificate. The Seller Interest represents
the interest in the Principal Receivables not represented by the investor
certificates of any series outstanding at any given time. The Seller Certificate
represents an undivided interest in the Principal Receivables, including the
right to a varying percentage (the "Seller Percentage") of all Collections on
the Receivables in the Trust. See "-- Class Percentages and Seller Percentage."
The amount of Principal Receivables in the Trust will vary each day as new
Principal Receivables are created and others are paid. The amount of the Seller
Interest, therefore, will fluctuate each day to reflect the changes in the
amount of Principal Receivables in the Trust. The amount of the Seller Interest
also will change when additional series are issued, when the Series Investor
Interest for any series declines as principal payments are made to, or
segregated into Investor Accounts for the benefit of, the investor
certificateholders of that series, and when Receivables in Additional Accounts
are added to the Trust or Receivables in Removed Accounts are removed from the
Trust.
INTEREST PAYMENTS
Interest will accrue on the Invested Amount of the investor certificates of
a series or class at the per annum rate either specified in or determined in the
manner specified in the related Prospectus Supplement. Except as otherwise
provided herein or in the related Prospectus Supplement, Finance Charge
Collections and certain other amounts allocable to the investor
certificateholders of a series will be used to make interest payments to
investor certificateholders of such series on each Interest Payment Date
specified in the related Prospectus Supplement. If the Interest Payment Dates
for a series or class occur less frequently than monthly, such Finance Charge
Collections or other amounts (or the portion thereof allocable to such series or
class) will be deposited in one or more Series Interest Funding Accounts and
used to make interest payments to investor certificateholders of such series or
class on the following Interest Payment Date. If a series has more than one
class of investor certificates, each such class may have a separate Interest
Funding Account. Funds on deposit in a Series Interest Funding Account will be
invested in Permitted Investments. Any earnings (net of losses and investment
expenses) on funds in a Series Interest Funding Account will be paid to, or at
the direction of, Greenwood except as otherwise specified in the Prospectus
Supplement. Interest with respect to the investor certificates of each series
will accrue and be calculated on the basis described in the related Prospectus
Supplement.
PRINCIPAL PAYMENTS
The investor certificates of each series will have a Revolving Period
during which no distributions of Principal Collections will be made to the
investor certificateholders unless otherwise specified in the related Prospectus
Supplement. Principal Collections allocable to the investor certificates during
the Revolving Period will first be made available, under certain circumstances,
to fund Certificate Principal with respect to other series then outstanding in
the Group to which such series belongs that are eligible for such reallocation.
Any remaining Principal Collections generally will be paid to Greenwood, up to
the amount of the Seller Interest. See "-- Allocations, Reallocations and
Subordination of Collections -- Allocations Among Series and to Sellers."
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Unless otherwise specified in the related Prospectus Supplement, following
the Revolving Period, unless an Amortization Period or an Early Accumulation
Period commences with respect to a series, each series will have either an
Accumulation Period or a Controlled Liquidation Period. If a series has an
Accumulation Period, the principal of the investor certificates of the series
will be scheduled to be paid in full on an Expected Final Payment Date. If a
series has a Controlled Liquidation Period, the principal of the investor
certificates of the series will be paid in installments commencing on the
Principal Commencement Date. If a series has more than one class of investor
certificates, a different method of paying principal, Expected Final Payment
Date and/or Principal Commencement Date may be specified for each class. If an
Early Accumulation Event occurs, principal will be paid as scheduled unless an
Amortization Event occurs subsequently. If an Amortization Event occurs with
respect to a series, the payment of principal with respect to the investor
certificates of such series may commence earlier than the Expected Final Payment
Date or Principal Commencement Date, as applicable, and the final principal
payment with respect to the investor certificates of such series may be made
earlier or later than the Expected Final Payment Date or other expected date.
See "The Certificates -- Cash Flows" and "Annex A -- Cash Flows" in the related
Prospectus Supplement.
ISSUANCE OF ADDITIONAL SERIES
Series of investor certificates have previously been issued and are
outstanding. The Pooling and Servicing Agreement provides that Greenwood may
direct the Trustee from time to time to issue additional series of investor
certificates, subject to certain conditions (each such issuance, a "New
Issuance"). Each New Issuance will be pursuant to the Pooling and Servicing
Agreement and a Series Supplement. Unless otherwise specified in the related
Prospectus Supplement, each New Issuance will have the effect of reducing the
amount of the Seller Interest by an amount equal to the Series Initial Investor
Interest for the new series.
Pursuant to the Pooling and Servicing Agreement, Greenwood will designate
the terms of any New Issuance including, but not limited to, its Series Initial
Investor Interest, the number of classes, the Class Initial Investor Interest
for each class, the Certificate Rate for each class, the Payment Dates, the
Series Termination Date and the Group to which the series will belong. The
Pooling and Servicing Agreement does not require the consent of investor
certificateholders of any series to issue a new series, and Greenwood, any
Additional Sellers, the Master Servicer, the Servicer and the Trustee do not
intend to request the consent of investor certificateholders of any series to
the issuance of a new series.
Greenwood and any Additional Sellers may offer for sale any series under a
prospectus or other disclosure document in transactions either registered under
the Securities Act of 1933, as amended (the "Securities Act of 1933"), or exempt
from registration thereunder. Such offerings may be direct, through one or more
underwriters or placement agents, in fixed price offerings or in negotiated
transactions or otherwise. Any such series may be issued in fully registered or
book-entry form (or in bearer form, if offered outside the United States), in
minimum denominations determined by the Sellers. Greenwood intends to offer
additional series from time to time, but is under no obligation to do so. See
"Plan of Distribution."
COLLECTIONS ACCOUNT AND GROUP COLLECTIONS ACCOUNTS
The Trustee has established and maintains in the name of the Trust a
"Collections Account" and, for each Group of series, a "Group Collections
Account." Each such account is a segregated trust account established with the
Trustee or a "Qualified Institution," defined as a depository institution
organized under the laws of the United States or any one of the states thereof
that at all times has a short-term certificate of deposit rating of A-1/P-1 or
better from the Rating Agencies and whose deposits are insured by the FDIC.
Funds on deposit in the Collections Account or any Group Collections Account are
invested in Permitted Investments pursuant to the Pooling and Servicing
Agreement. The Master Servicer has the revocable power to instruct the Trustee
to make withdrawals from the Collections Account and each Group Collections
Account for the purpose of carrying out its duties under the Pooling and
Servicing Agreement and any Series Supplement.
Greenwood 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
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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 generally will
use for its own benefit any Collections with respect to the Accounts serviced by
that Servicer until the Distribution Date on which those Collections are to be
allocated to investors. However, if such additional Servicer's short-term debt
rating falls below a specified level, such additional Servicer will 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. 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.
On or before each Distribution Date with respect to each Group, Greenwood
as Master Servicer directs the Trustee, first, to withdraw that portion of the
amount of Collections allocable to the Seller Interest with respect to that
Distribution Date from the Collections Account and pay such amount to the Holder
of the Seller Certificate and second, to withdraw all remaining Collections from
the Collections Account and deposit such Collections in each Group Collections
Account, on or before the Distribution Date with respect to that Group, in an
amount equal to the sum of (x) the sum of the Series Finance Charge Collections
for each series that is a member of that Group and (y) the sum of the Series
Principal Collections for each series that is a member of that Group. However,
allocations to Investor Accounts may be deemed to be made and payments to the
Holder of the Seller Certificate or to the Master Servicer may be made, prior to
a Distribution Date, on the date the Master Servicer delivers the monthly master
servicer statement and the information required to be included in the monthly
investor certificateholders' statement with respect to each series then
outstanding to the Trustee. With respect to each Group, Collections in the Group
Collections Account for such Group will be allocated, deposited or paid on or
prior to each Distribution Date with respect to such Group according to the
terms of each Series Supplement relating to the outstanding series in such
Group.
Any earnings (net of losses and investment expenses) on funds on deposit in
the Collections Account or any Group Collections Account will be paid to the
Holder of the Seller Certificate.
CLASS PERCENTAGES AND SELLER PERCENTAGE
Pursuant to the Pooling and Servicing Agreement and all Series Supplements
for series then outstanding, the Master Servicer will allocate among the Class
Investor Interests for each class of each series then outstanding, the Seller
Interest, and any other interests in the Receivables (such as, under certain
circumstances, the CCA Investor Interest with respect to certain outstanding
series), all Finance Charge Collections, all Principal Collections and the
Charged-Off Amount. The Master Servicer will make each allocation by multiplying
the amount of Finance Charge Collections, Principal Collections and the Charged-
Off Amount by the applicable Class Percentage, Seller Percentage or other
percentage.
For convenience, this Prospectus refers to the Class Percentage for each
class (and certain other percentages with respect to outstanding series) with
respect to Finance Charge Collections, Principal Collections and the Charged-Off
Amount as if those percentages will not in each case vary. The Class Percentages
(and certain other percentages), however, may vary in each case as detailed in
the "Glossary of Terms" contained in the related Prospectus Supplement. The
method of calculating Class Percentages and other percentages with respect to
each series of investor certificates will be set forth in the applicable Series
Supplement. The Seller Percentage, in all cases, will equal 100% minus the sum
of the Series Percentages for each series then outstanding.
ALLOCATIONS, REALLOCATIONS AND SUBORDINATION OF COLLECTIONS
Allocations Among Series and to Sellers. On or before each Distribution
Date, the Master Servicer will deposit into the Collections Account that portion
of Collections with respect to the related Due Period that are to be allocated
on that Distribution Date and that have not previously been deposited into the
Collections
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Account and direct the Trustee to withdraw from the Collections Account and pay
to Greenwood that portion of the sum of (x) the total amount of Finance Charge
Collections for the related Due Period less the sum of the amount of Series
Finance Charge Collections for each series then outstanding for the related Due
Period and (y) the total amount of Principal Collections for the related Due
Period less the sum of the amount of Series Principal Collections for each
series then outstanding for the related Due Period that is to be allocated to
the Holder of the Seller Certificate for that Distribution Date. The Master
Servicer will direct the Trustee to withdraw from the Collections Account and
pay to each Group Collections Account, on or before the Distribution Date with
respect to that Group, the sum of (x) the Series Finance Charge Collections for
each series that is a member of that Group and (y) the Series Principal
Collections for each series that is a member of that Group. Allocations of
Collections to the series within each Group will be as set forth in the Series
Supplements for each series within such Group. With respect to each Group,
Collections in the Group Collections Account for such Group will be allocated,
deposited or paid on or prior to each Distribution Date with respect to such
Group according to the terms of each Series Supplement relating to the
outstanding series of such Group.
Subordinate Series. The Pooling and Servicing Agreement permits the
issuance of series of investor certificates that are subordinate in right of
payment, in whole or in part, to one or more other series (any such subordinate
series, a "Subordinate Series"). Unless otherwise specified in the related
Prospectus Supplement, a series will not be subordinate to any other series.
Unless otherwise specified in the related Prospectus Supplement, the Series
Supplement for each series, however, will provide for the possibility that a
Subordinate Series with respect to such series may be issued in the future. The
Seller may, but is under no obligation to, issue a series that is subordinate to
one or more series at any time. The extent to which such Subordinate Series, if
issued, will be subordinated to one or more series will be set forth in the
Series Supplement with respect to such Subordinate Series.
Subordination of Class B Certificates. Unless otherwise specified in the
related Prospectus Supplement, in the case of a series of investor certificates
issued with two classes, the Class B Certificates will be subordinated to the
Class A Certificates. Certain amounts originally allocable to the Class B
Certificates may be reallocated to the extent necessary to fund certain amounts
with respect to the Class A Certificates. If these reallocations are not
reimbursed, the Investor Interest with respect to the Class B Certificates will
be reduced. If applicable, see "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 the case
may be, to the extent any Receivable is adjusted without payment by or on behalf
of a cardmember. Such adjustments include, but are not limited to, any
Receivable that was created as a result of a fraudulent or counterfeit charge
that the Servicer with respect to such Receivable adjusts, increases, reduces,
modifies or cancels in accordance with its Credit Guidelines, or any Receivable
that was created in respect of merchandise returned by the cardmember. If the
exclusion of the amount of an adjustment from the calculation of the Seller
Interest would cause the Seller Interest to be an amount less than zero,
Greenwood is obligated to make, no later than the business day following the
last day of the Due Period during which the adjustment is made, a deposit into
the Collections Account in immediately available funds in an amount equal to the
amount by which the adjustment exceeds the Seller Interest.
In addition, under certain limited circumstances, a credit account that is
not an Account may be combined with an Account. Such a combination may result in
an increase or decrease in the amount of Receivables, depending on whether the
Account is the account surviving the combination. Greenwood has no reason to
believe that such account combinations will have a material effect on the
aggregate amount of Receivables in the Trust.
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DISTRIBUTIONS OF COLLECTIONS AND APPLICATION OF COLLECTIONS AND CERTAIN OTHER
AMOUNTS
Distribution Among Series. On or before each Distribution Date, Greenwood
as Master Servicer will direct the Trustee to withdraw from the Collections
Account and pay to each Group Collections Account, on or before the Distribution
Date with respect to that Group, an amount equal to the sum of (x) the sum of
the Series Finance Charge Collections for each series that is a member of that
Group and (y) the sum of the Series Principal Collections for each series that
is a member of that Group. On or before each Distribution Date with respect to
each Group, amounts on deposit in the Group Collections Account with respect to
that Group will be distributed in accordance with the terms of the Series
Supplements for each series in that Group. With respect to each Group,
Collections in the Group Collections Account for such Group will be allocated,
deposited or paid on or prior to each Distribution Date with respect to the
series in such Group according to the terms of each Series Supplement relating
to the outstanding series in such Group.
Net Payments. All payments made pursuant to the Pooling and Servicing
Agreement or any Series Supplement on any Trust Distribution Date or
Distribution Date on which Greenwood is the Master Servicer, between the Master
Servicer or the Holder of the Seller Certificate and the Investor Accounts, may
be aggregated for such Trust Distribution Date or Distribution Date. Therefore,
Greenwood, acting as Master Servicer and as agent of the Holder of the Seller
Certificate, may make only one payment to each account in satisfaction of all
payments of the 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 such Trust
Distribution Date or Distribution Date.
ADDITIONAL FUNDS
The Pooling and Servicing Agreement provides that Greenwood may, from time
to time, elect to add certain funds to the Trust ("Additional Funds") by
delivering a written notice of the election to the Trustee, the Master Servicer
and the Rating Agencies, which notice will specify the method of calculating the
amount of such funds to be added to the Trust as of any Distribution Date and
the source of those funds. No election will become effective until Standard &
Poor's has advised the Master Servicer and Greenwood that the election will not
cause the rating of any class of any series then outstanding to be lowered or
withdrawn. During any time that Additional Funds are being added to the Trust,
with respect to each series then outstanding, on or before the Distribution Date
with respect to each such series, the Master Servicer will cause an amount equal
to the product of (i) a fraction the numerator of which will be the Series
Investor Interest and the denominator of which will be the Aggregate Investor
Interest and (ii) the amount of Additional Funds for the preceding Due Period,
to be deposited into the Series Collections Account for each series. The amount
of Additional Funds allocated to each series will be further allocated in
accordance with the provisions of each Series Supplement. Unless otherwise
specified in the related Prospectus Supplement, the Series Supplement for each
series will specify that any Additional Funds allocated to such series will be
further allocated between the classes of such series based on the Class Investor
Interest of each class as of the relevant Distribution Date (the "Class
Additional Funds" for each class). Unless otherwise specified in the related
Prospectus Supplement, no Additional Funds have been added to the Trust as of
any Series Closing Date, and Greenwood is under no obligation to add Additional
Funds to the Trust at any time in the future.
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF SERIES
The final payment of principal and interest on investor certificates of a
series will be due and payable no later than the Series Termination Date
specified in the related Prospectus Supplement.
The final payment of principal of and interest on any investor certificate
will be made only upon presentation and surrender of such investor certificate
at the office or agency specified in the notice from the Trustee to the investor
certificateholders regarding the final distribution. The Trustee will provide
such notice to the investor certificateholders not later than the tenth day of
the month of the final distribution.
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Each series will terminate on the earlier of (i) the Series Termination
Date with respect to such series and (ii) the day following the Distribution
Date on which the final payment of principal is made to the investor
certificateholders of such series.
If, as of the Distribution Date in the month preceding the Series
Termination Date with respect to a series (after giving effect to all transfers,
withdrawals and deposits to occur on such Distribution Date), the Series
Investor Interest with respect to such series would be greater than zero,
Receivables (or interests therein) in an amount sufficient to yield proceeds
equal to the Series Investor Interest plus any accrued but unpaid Certificate
Interest will be sold; provided, however, that the amount of Receivables to be
sold will not exceed the product of (i) the aggregate amount of Receivables in
the Trust and (ii) a fraction, the numerator of which is the Series Investor
Interest and the denominator of which is the Aggregate Investor Interest, in
each case on the Distribution Date in the month preceding the Series Termination
Date; and provided, further, that the Receivables selected to be sold will not
be materially different from the Receivables remaining in the Trust as of that
Distribution Date. The proceeds from this sale will be deposited into the Series
Distribution Account and paid to the investor certificateholders of such series
on the Distribution Date immediately following the deposit. The payment will be
deemed to be the final distribution with respect to the investor certificates of
such series.
CREDIT ENHANCEMENT
The Credit Enhancement with respect to a series may include a cash
collateral account, a letter of credit, a surety bond, an insurance policy or
any other form of credit enhancement described in the related Prospectus
Supplement. Credit Enhancement also may be provided to a series or class of a
series by subordination provisions that require distributions of principal
and/or interest be made with respect to the investor certificates of such series
or class before distributions are made to one or more other series or other
classes of such series.
A description of any Credit Enhancement provided with respect to a series
will be set forth in the related Prospectus Supplement. The description will
include such information as (a) the amount payable under the Credit Enhancement,
(b) any conditions to such payment, (c) the circumstances under which the Credit
Enhancement will be available, (d) the class or classes of the series that will
receive the direct benefit of the Credit Enhancement, (e) the conditions (if
any) under which the amount payable under the Credit Enhancement may be
terminated, reduced or replaced and (f) other material provisions of the related
Credit Enhancement Agreement.
REPURCHASE OF TRUST PORTFOLIO
A Trust Portfolio Repurchase Event will occur upon discovery that as of the
Initial Closing Date or, with respect to any Additional Accounts, as of any date
on which there is an assignment of the Receivables in such Additional Accounts
to the Trust, (a) the Pooling and Servicing Agreement or appropriate assignment,
as the case may be, does not constitute a valid and binding obligation of each
Seller, subject to usual and customary exceptions relating to bankruptcy,
insolvency and general equity principles, (b) the Pooling and Servicing
Agreement or appropriate assignment, as the case may be, does not constitute (1)
a valid transfer and assignment to the Trust of all right, title and interest of
each Seller in and to the Receivables, whether then existing or thereafter
created, and the proceeds thereof, or (2) the grant of a perfected security
interest of first priority under the UCC as in effect in the Applicable State
with respect to each Seller in such Receivables and proceeds thereof effective
as to each Receivable upon the creation thereof, (c) any Seller or a Person
claiming through or under any Seller has any claim to or interest in any
Investor Account, other than the interests of the investor certificateholders or
the interest of any Seller as a debtor for purposes of the UCC as in effect in
the Applicable State with respect to each Seller, or (d) certain representations
and warranties of any Seller regarding (1) its corporate status, authority with
regard to the assignment of Receivables and performance of such Seller's
obligations under the Pooling and Servicing Agreement and any Series Supplement
and (2) the accuracy of information furnished by such Seller to the Trustee, are
not true and the breach is not cured within a specified time period.
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Upon the occurrence of a Trust Portfolio Repurchase Event, either the
Trustee or holders of investor certificates evidencing undivided interests in
the Trust aggregating not less than 51% of the Aggregate Invested Amount may
direct Greenwood to purchase Receivables transferred to the Trust on or before
the Distribution Date with respect to each series then outstanding within 60
days of such notice; provided, however, that if an assignment of Additional
Accounts results in a Trust Portfolio Repurchase Event, only the Receivables in
those Additional Accounts will be repurchased. Greenwood will not be required to
make such a purchase, however, if, on any day during the applicable period, the
Trust Portfolio Repurchase Event does not adversely affect in any material
respect the interests of the investor certificateholders as a whole. The
determination of materiality referred to above will be made by an officer of the
Master Servicer in his sole reasonable judgment.
The price for any such purchase with respect to each series then
outstanding will be equal to the sum of the Series Investor Interest and all
accrued but unpaid Certificate Interest with respect to the series; provided,
however, that if an assignment of Additional Accounts results in a Trust
Portfolio Repurchase Event, only the Receivables in those Additional Accounts
shall be repurchased at a price with respect to each series equal to the product
of (i) the Series Investor Percentage with respect to Principal Collections for
the next following Distribution Date with respect to the series and (ii) the
amount of Receivables attributable to the Additional Accounts, and the purchase
price shall be applied as Collections in respect of those Receivables in
accordance with each applicable Series Supplement and deposited in the Group
Collections Account relating to that series. In the event that the obligation of
Greenwood to repurchase the Trust portfolio is at any time the subject of
concurrent obligations of one or more other parties to the Seller Certificate
Ownership Agreement then Greenwood's obligation to repurchase the Trust
portfolio will be conditioned on Greenwood's ability to enforce those concurrent
obligations against one or more other parties to the Seller Certificate
Ownership Agreement.
REPURCHASE OF SPECIFIED RECEIVABLES
A Receivable Repurchase Event will occur in the event that each Receivable
that is transferred to the Trust is not, as of the time of such transfer, an
Eligible Receivable and such event has a material adverse effect on the investor
certificateholders' interest in the Receivables as a whole and is not cured
within 60 days of the earlier of (i) actual knowledge of the breach by the
relevant Seller or (ii) receipt by such Seller of written notice of any such
event given by the Trustee. The determination of materiality referred to above
will be made by an officer of the Master Servicer in his sole reasonable
judgment. "Eligible Receivable" means each Receivable (a) that is payable in
United States dollars, (b) that was created in compliance, in all material
respects, with all Requirements of Law applicable to the Seller and the Servicer
with respect to the Receivable and pursuant to a Credit Agreement that complies,
in all material respects, with all Requirements of Law applicable to the Seller
and Servicer, (c) as to which, if the Receivable was created before the Initial
Closing Date or the relevant Addition Date, as applicable, (i) at the time of
the creation of the Receivable, the applicable Seller had good and marketable
title thereto free and clear of all liens ("Liens") arising under or through the
Seller and (ii) at the time of the conveyance of such Receivable to the Trust,
the Seller had, or the Trust will have, good and marketable title thereto free
and clear of all Liens arising under or through the Seller, (d) as to which, if
the Receivable was created on or after the Initial Closing Date or the relevant
Addition Date, as applicable, at the time of the creation of the Receivable, the
Trust will have good and marketable title thereto free and clear of all Liens
arising under or through the Seller and (e) which constitutes, or would have
constituted, an "account" or "general intangible" under and as defined in
Article 9 of the UCC as then in effect in the Applicable State with respect to
the Receivable. Greenwood will purchase all the Receivables in each Account in
which there is any Receivable to which the Receivable Repurchase Event relates
("Ineligible Receivables") on the terms and conditions set forth below.
Greenwood will purchase the Receivables in those Accounts by directing the
Master Servicer to deduct the amount of the Receivables that are Principal
Receivables from the aggregate amount of Principal Receivables in the Trust. In
the event that the exclusion of those Receivables from the calculation of the
Seller Interest would cause the Seller Interest to be an amount less than zero,
on the following Trust Distribution Date, Greenwood will deposit into the
Collections Account in immediately available funds an
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amount equal to the amount by which the Seller Interest would be reduced below
zero. The deposit will be considered a repayment in full of the Receivables, and
will be treated as Collections in respect of Principal Receivables for such Due
Period. See "Description of the Investor Certificates -- Distributions of
Collections and Application of Collections and Certain Other Amounts" herein and
"The Certificates -- Cash Flows" and "Annex A -- Cash Flows" in the related
Prospectus Supplement. In the event that the obligation of Greenwood to
repurchase Receivables is at any time the subject of concurrent obligations of
one or more other parties to the Seller Certificate Ownership Agreement, then
Greenwood's obligation to repurchase Receivables will be conditioned on
Greenwood's ability to enforce those concurrent obligations against one or more
other parties to the Seller Certificate Ownership Agreement.
REPURCHASE OF A SERIES
A Series Repurchase Event with respect to a series will occur upon
discovery that as of the Series Closing Date, the applicable Series Supplement
does not constitute a legal, valid and binding obligation of each Seller
enforceable against each Seller in accordance with its terms, subject to usual
and customary exceptions relating to bankruptcy, insolvency and general equity
principles.
Upon the occurrence of a Series Repurchase Event with respect to a series,
either the Trustee or holders of investor certificates of such series evidencing
undivided interests in the Trust aggregating not less than 51% of the Series
Invested Amount with respect to such series may direct Greenwood to purchase the
investor certificates of such series within 60 days after Greenwood receives a
direction to purchase the investor certificates. Greenwood will not be required
to make the purchase, however, if, on any day during the 60-day period, the
Series Repurchase Event does not adversely affect in any material respect the
interests of the investor certificateholders of such series as a whole.
On the Distribution Date set for the purchase, Greenwood will deposit into
the Series Distribution Account with respect to such series an amount equal to
the sum of the Series Investor Interest and all accrued but unpaid Certificate
Interest. The amount on deposit in the Series Distribution Account will be paid
to the investor certificateholders of such series upon presentation and
surrender of their investor certificates.
REPURCHASE OF INVESTOR CERTIFICATES
The Pooling and Servicing Agreement provides that Sellers may become
holders of investor certificates and that Greenwood may cancel any investor
certificates owned by a Seller by providing notice of such cancellation to the
Trustee; provided, however, that Class B Certificates of any series may not be
cancelled unless Greenwood has been advised by the Rating Agencies that such
cancellation will not cause the ratings of any investor certificates then
outstanding to be lowered or withdrawn. Simultaneously with any cancellation of
investor certificates of a series, the Class Invested Amount of the applicable
class of such series and the Series Invested Amount with respect to such series
will be reduced, and the Seller Interest will be increased, by the aggregate
Class Invested Amount represented by the cancelled investor certificates of such
series. No reduction of Class Invested Amount as described in the preceding
sentence will result in a decrease in any Class Percentage with respect to the
affected class if a Fixed Principal Allocation Event with respect to such series
has previously occurred.
SALE OF SELLER INTEREST
The Seller Certificate is owned by Greenwood. Any Additional Sellers also
will either 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. In such event, all references to actions
taken by Greenwood as Holder of the Seller Certificate shall be deemed to be
taken by Greenwood on behalf of the Holders of the Seller Certificate. Pursuant
to the Pooling and Servicing Agreement, neither Greenwood nor any Additional
Seller (if any) may transfer, assign, sell or otherwise convey, pledge or
hypothecate or otherwise grant a security interest in any portion of the Seller
Interest represented by the Seller Certificate, except for the transfer of all
or part of any Seller's interest in the Seller Certificate to an affiliate of
Greenwood that is included in the same "affiliated group" as Greenwood for
United States federal income tax purposes; provided, however, that any Seller
may transfer a portion of the Seller Interest on terms substantially similar to
the terms of the Pooling and Servicing Agreement so long as the agreements and
other documentation relating
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thereto are consistent with, and subject to, the terms of the Pooling and
Servicing Agreement and any Series Supplement and do not require any action
prohibited or prohibit any action that is either required on the part of the
Master Servicer, any Seller, the Trustee or any Servicer by the terms of the
Pooling and Servicing Agreement and any Series Supplement or necessary to
protect the interests of the investor certificateholders; and provided, further,
that the Seller is advised by the Rating Agencies that the rating of any class
of any series then outstanding would not be lowered or withdrawn as a result of
such transfer. Notwithstanding the above, no such advice from the Rating
Agencies is required if the transfer is made to comply with certain regulatory
requirements.
REALLOCATION OF SERIES AMONG GROUPS
The Pooling and Servicing Agreement provides that the Master Servicer may
elect, at any time, subject to certain conditions, to move any series from the
Group of which it is then a member to any other Group, including without
limitation to a new Group established at such time of which the series to be
moved is the only series. A series may be moved from one Group to another only
if the following conditions are satisfied: (i) the Group from which the series
is moved and the Group to which the series is moved have the same Distribution
Date; (ii) the Master Servicer shall have certified to the Trustee that the
Master Servicer reasonably believes that the movement of the applicable series
would not (a) result in any delay in the payment of principal to the investor
certificateholders of any series then outstanding, or (b) cause an Amortization
Event to occur with respect to any series then outstanding; and (iii) the Rating
Agencies shall have advised the Master Servicer and Greenwood that the movement
of the applicable series would not cause the rating of any class of any series
then outstanding to be lowered or withdrawn.
AMENDMENTS
The Pooling and Servicing Agreement and any Series Supplement may be
amended from time to time by the Master Servicer, the Sellers, the Trustee and
the Servicers, without the consent of the investor certificateholders of any
outstanding series, for any of the following purposes: (i) to add to the
covenants and agreements contained therein or to surrender any right or power
therein reserved to or conferred upon the Sellers, the Master Servicer or any
Servicer; provided, however, that such action will not adversely affect in any
material respect the interests of the holders of any class of any series then
outstanding; (ii) to add provisions to or change or eliminate any of the
provisions of the Pooling and Servicing Agreement or any Series Supplement;
provided, however, that any such addition, change or elimination will not
adversely affect in any material respect the interests of the holders of any
class of any series then outstanding; (iii) to add provisions to or change any
of the provisions of the Pooling and Servicing Agreement or any Series
Supplement for the purpose of accommodating the addition of Participation
Interests to the Trust; or (iv) to cure any ambiguity or to correct or
supplement any defective or inconsistent provision contained in the Pooling and
Servicing Agreement, in any Series Supplement or in any amendment to the Pooling
and Servicing Agreement or any Series Supplement.
The Pooling and Servicing Agreement and the Series Supplement for any
series also may be amended from time to time by the Master Servicer, the
Sellers, the Trustee and the Servicers with the consent of the holders of
investor certificates evidencing Fractional Undivided Interests aggregating not
less than 66 2/3% of the Class Invested Amount of each class of such series
adversely affected for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, the Pooling and Servicing
Agreement or the applicable Series Supplement, or of modifying in any manner the
rights of the investor certificateholders of such series; provided, however,
that the Trustee will have been advised by each Rating Agency that such
amendment will not result in the withdrawal or lowering of the ratings assigned
to the investor certificates of such series by that Rating Agency; and,
provided, further, that no such amendment will materially and adversely affect
the interests of the investor certificateholders of any class of such series by
reducing in any manner the amount of, or delaying the timing of, distributions
that are required to be made to any investor certificate without the consent of
the affected investor certificateholders, or by reducing the aforesaid
percentage required to consent to any such amendment, without the consent of
each investor certificateholder of each affected class. For purposes of
calculating whether a 66 2/3% consent has been
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achieved, the applicable Class Invested Amount or Series Invested Amount will be
calculated without taking into account the Class Invested Amount represented by
any investor certificates beneficially owned by any Seller or any affiliate of
any Seller, and no Seller or affiliate of a Seller will be entitled to vote on
any amendment described in this paragraph. If any such amendment to the Pooling
and Servicing Agreement would adversely affect the interests of any class of any
other series of investor certificates then outstanding the consent of the
investor certificateholders of each class adversely affected by such amendment
to the Pooling and Servicing Agreement also will be required. Promptly after the
execution of any amendment or consent described in this paragraph, the Trustee
will notify the investor certificateholders of the substance of the amendment.
None of the execution and delivery of any Series Supplement, the addition
of Receivables to the Trust, the removal of Receivables from the Trust, the
addition or removal of any Seller or Servicer in connection with an addition to
or removal from the Trust of Receivables, or the replacement of any Servicer,
Master Servicer or Trustee will constitute an amendment to the Pooling and
Servicing Agreement or any Series Supplement for the purposes of the preceding
two paragraphs, provided that any such action described in this sentence is
completed in accordance with the provisions of the Pooling and Servicing
Agreement and/or any applicable Series Supplement, as applicable.
LIST OF INVESTOR CERTIFICATEHOLDERS
In the event that Definitive Certificates are issued with respect to the
investor certificates of any series, upon written request of three or more
investor certificateholders of record of any class of such series representing
Fractional Undivided Interests in the Trust aggregating not less than 5% of the
Class Invested Amount, after having been adequately indemnified by those
investor certificateholders for its costs and expenses, the Trustee will afford
those investor certificateholders access during business hours to the current
list of investor certificateholders of such series for purposes of communicating
with other investor certificateholders of such series with respect to their
rights under the Pooling and Servicing Agreement and the applicable Series
Supplement. See "-- Definitive Certificates."
MEETINGS
The Pooling and Servicing Agreement does not provide for any annual or
other meetings of investor certificateholders of any series.
BOOK-ENTRY REGISTRATION
The information in this section concerning DTC, Clearstream Banking and
Euroclear and their book-entry systems and procedures has been obtained from
sources that Greenwood and the Trust believe to be reliable, but Greenwood and
the Trust take no responsibility for the accuracy of the information in this
section.
Unless otherwise provided in the Series Supplement, Certificate Owners may
hold their investor certificates through DTC (in the United States) or
Clearstream Banking or Euroclear (in Europe). The investor certificates will be
registered in the name of the nominee of DTC. Clearstream Banking and Euroclear
will hold omnibus positions on behalf of its customers ("Clearstream Banking
Customers") and the Euroclear Participants, respectively, through customers'
securities accounts in Clearstream Banking's and Euroclear's names on the books
of their respective depositaries (collectively, the "Depositaries") which in
turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC. Greenwood has been informed by DTC that
DTC's nominee will be Cede & Co. ("Cede"). Accordingly, Cede is expected to be
the holder of record of the investor certificates. Unless otherwise provided in
the Series Supplement, the investor certificates will be available for purchase
in book-entry form in minimum denominations of $1,000 and integral multiples
thereof. No person acquiring an interest in the investor certificates (each, a
"Certificate Owner") will be entitled to receive a certificate representing that
person's interest in the investor certificates. Unless and until Definitive
Certificates are issued under the limited circumstances described herein, all
references herein to actions by investor certificateholders will refer to
actions taken by DTC upon instructions from its Participants, as hereinafter
defined, and all references herein to distributions and notices to investor
certificateholders will refer to distributions and notices to
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DTC or Cede, as the registered holder of the investor certificates, for
distribution to Certificate Owners 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 ("Participants") and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movements of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Clearstream Banking Customers and Euroclear Participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Banking Customers or Euroclear Participants, on the other hand, will be effected
in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream Banking Customers and Euroclear Participants may not deliver
instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Clearstream
Banking or Euroclear as a result of a transaction with a DTC Participant will be
made during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the relevant
Clearstream Banking Customer or Euroclear Participant on such business day. Cash
received in Clearstream Banking or 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
regarding clearance and settlement procedures for the investor certificates, see
Annex I, hereto, and for information with respect to tax documentation
procedures relating to the investor certificates, see Annex I, hereto and
"Federal Income Tax Consequences -- Non-United States Investor
Certificateholders."
Certificate Owners that are not Participants or Indirect Participants may
purchase, sell or otherwise transfer ownership of, or other interests in, the
investor certificates only through Participants and Indirect Participants. In
addition, Certificate Owners will receive all distributions of principal and
Certificate Interest from the Trustee through the Participants. Under a
book-entry format, Certificate Owners may experience some delay in their receipt
of payments, since the payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward the payments to its Participants, which
thereafter will forward them to Indirect Participants or Certificate Owners. It
is anticipated that the only investor certificateholder will be Cede, as nominee
of DTC. Certificate Owners will not be recognized by the Trustee as investor
certificateholders, as that term is used in the Pooling and Servicing Agreement,
and Certificate Owners only will be permitted to exercise the rights of investor
certificateholders indirectly through the Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the
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investor certificates and is required to receive and transmit distributions of
the principal of and interest on the investor certificates. Participants and
Indirect Participants with which Certificate Owners have accounts with respect
to the investor certificates similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective Certificate
Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge investor certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of those
investor certificates, may be limited due to the lack of a physical certificate
for those investor certificates.
DTC has advised Greenwood that it will take any action permitted to be
taken by an investor certificateholder under the Pooling and Servicing Agreement
or any applicable Series Supplement only at the direction of one or more
Participants to whose account with DTC the investor certificates are credited.
DTC may take conflicting action with respect to other undivided interests in the
investor certificates to the extent that those actions are taken on behalf of
Participants whose holdings include those undivided interests.
Clearstream Banking holds securities for Clearstream Banking 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 Customers are world-wide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. In the U.S., Clearstream Banking 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.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of 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
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and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms
and Conditions govern transfers of securities and cash within the Euroclear
System, withdrawal of securities and cash from the Euroclear System, and
receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants and has no record of or relationship with persons holding
through Euroclear Participants.
Distributions with respect to investor certificates held through
Clearstream Banking or Euroclear will be credited to the cash accounts of
Clearstream Banking Customers or Euroclear Participants in accordance with the
relevant system's rules and procedures, to the extent received by its
Depositary. Such distributions will be subject to tax reporting in accordance
with relevant United States tax laws and regulations. See "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 an investor
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 Depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, Clearstream Banking and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of investor certificates
among participants of DTC, Clearstream Banking and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise provided in the Series Supplement, a class of investor
certificates will be issued in fully registered, certificated form to
Certificate Owners or their nominees ("Definitive Certificates"), rather than to
DTC or its nominees, only if (i) the Master Servicer advises the Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to such class, and the Trustee or
the Master Servicer is unable to locate a qualified successor, (ii) the Master
Servicer, at its option, elects to terminate the book-entry system through DTC,
or (iii) after the occurrence of a Master Servicer Termination Event,
Certificate Owners representing in the aggregate not less than 51% of the
respective Class Invested Amount advise the Trustee and DTC through Participants
in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the best interest of the Certificate Owners
of such class.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates of such class affected by
the event. Upon surrender by DTC of the applicable definitive certificates and
upon the issuance of instructions for re-registration, the Trustee will issue
the applicable investor certificates as Definitive Certificates. Thereafter the
Trustee will recognize the registered holders of such Definitive Certificates as
investor certificateholders under the Pooling and Servicing Agreement and the
applicable Series Supplement.
The Trustee will distribute principal and interest on the investor
certificates directly to Holders of Definitive Certificates in accordance with
the procedures set forth in the Pooling and Servicing Agreement and the
applicable Series Supplement. Distributions on each Distribution Date will be
made to Holders in whose names the Definitive Certificates were registered at
the close of business on the related Record Date by check mailed to the address
of such Holder as it appears on the register maintained by the Trustee. The
final payment on any investor certificate (whether Definitive Certificates or
one of the investor certificates registered in the name of Cede representing the
investor certificates), however, will be made only upon presentation and
surrender of the investor certificate at the office or agency specified in the
notice of final distribution to investor certificateholders. The Trustee will
provide the notice to registered investor certificateholders not later than the
tenth day of the month of such final payment.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee, or at such other office as Greenwood designates. No
service charge will be imposed for any registration of transfer or exchange,
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but the Transfer Agent may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith.
SERVICING
MASTER SERVICER AND SERVICER
Greenwood acts as Master Servicer with respect to the Trust. In addition to
the Master Servicer, there also may be one or more Servicers, each of which will
be a "Servicer" for purposes of the Trust with respect to the Accounts which
that Servicer services. Currently, Greenwood, as Servicer with respect to the
Greenwood Discover Card Accounts, is the only Servicer. Additional Servicers may
be added to the Trust at a later date if receivables in accounts other than
credit accounts originated by Greenwood are added to the Trust. Each Servicer
will perform servicing functions with respect to the Accounts for which it is
the Servicer. The Master Servicer, in its role as Master Servicer, will
coordinate the activities of the various Servicers with respect to the Trust.
The duties of the Master Servicer include aggregating Collections from the
Servicers and distributing such Collections to the various Investor Accounts,
directing the investment of funds on deposit in the Investor Accounts and the
Credit Enhancement Accounts in Permitted Investments, receiving the Monthly
Servicing Fee and allocating it among the Servicers, preparing reports for
investor certificateholders and making any filings on behalf of the Trust with
the Securities and Exchange Commission or other governmental agencies. The
Master Servicer has no duty to pay any amount in lieu of Collections from its
own funds in the event of a failure on the part of any Servicer to transfer
Collections to the Master Servicer or to the Trust, at the direction of the
Master Servicer. Upon the appointment of any additional Servicer, Greenwood as
Master Servicer and Servicer and the additional Servicer will enter into a
Master Servicing Agreement, which will govern the relationship among the Master
Servicer and the Servicers.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer is paid a monthly servicing fee, on behalf of the
investor certificateholders of each series then outstanding and the Sellers, in
respect of each Due Period in an amount equal to no less than 2% per annum
(calculated on the basis of a 360-day year of twelve 30-day months) of the
amount of Principal Receivables in the Trust on the first day of such Due Period
(the "Monthly Servicing Fee"), as compensation for its activities as Master
Servicer and reimbursement for its expenses. In the event that there is more
than one Servicer, the Master Servicer's expenses will include the payment of a
servicing fee to each Servicer, pursuant to the terms of a Master Servicing
Agreement to be entered into by Greenwood as Master Servicer and Servicer and
any other Servicer. The Monthly Servicing Fee is allocated among the Seller
Interest and each series then outstanding. The share of each Monthly Servicing
Fee allocable to the Holder of the Seller Certificate (the "Seller Servicing
Fee") on any Trust Distribution Date is equal to the product of (i) the product
of (x) the Investor Servicing Fee Percentage and (y) and the amount of Principal
Receivables in the Trust as of the first day of the Due Period related to that
Trust Distribution Date and (ii) a fraction the numerator of which is the amount
of the Seller Interest and the denominator of which is the greater of (a) the
amount of Principal Receivables in the Trust and (b) the Aggregate Investor
Interest, and is paid to the Master Servicer by the Holder of the Seller
Certificate on or before each Trust Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, the portion of the fee allocated
to the Class Investor Interest for each class of each series (the "Class Monthly
Servicing Fee") is equal to the product of the amount of the Investor Servicing
Fee for a given Due Period and a fraction the numerator of which is the Class
Investor Interest and the denominator of which is the Series Investor Interest,
in each case on the first day of that Due Period. The Investor Servicing Fee for
any given Due Period with respect to each Series will be equal to the product of
the Investor Servicing Fee Percentage and the Series Investor Interest on the
first day of the Due Period (or in the case of the first Distribution Date, on
the Series Cut-Off Date). The Class Monthly Servicing Fee for each class will be
funded from Class Finance Charge Collections and may be funded from certain
other sources as described in "The Certificates -- Cash Flows" and "Annex A --
Cash Flows" in the related Prospectus Supplement. The remainder of the Monthly
Servicing Fee will be allocated
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to each other outstanding series. Neither the Trustee nor the investor
certificateholders of any series will have any obligation to pay that portion of
the Monthly Servicing Fee that is payable by any class of any other series
issued by the Trust or that is payable by the Sellers.
The Master Servicer pays from its servicing compensation the servicing fees
for each Servicer and certain other expenses incurred in connection with
servicing the Receivables. These include, without limitation, payment of the
fees and disbursements of the Trustee and independent accountants and other fees
and expenses of the Trust not expressly stated in the Pooling and Servicing
Agreement or any Series Supplement to be for the account of the
certificateholders; provided that neither the Master Servicer nor any Servicer
will be liable for any federal, state or local income or franchise tax, or any
interest or penalties with respect thereto, assessed on the Trust, the Trustee
or the certificateholders.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE SERVICERS
Pursuant to the Pooling and Servicing Agreement, neither the Master
Servicer nor any Servicer may resign from its obligations and duties as Master
Servicer or Servicer under the Pooling and Servicing Agreement or any Series
Supplement, except upon determination that such duties are no longer permissible
under applicable law and under certain other limited circumstances. No such
resignation will become effective until the Trustee or a successor to the Master
Servicer or Servicer, as applicable, has assumed such Master Servicer's or
Servicer's responsibilities and obligations under the Pooling and Servicing
Agreement and such Series Supplements.
The Master Servicer or any Servicer may delegate any of its duties under
the Pooling and Servicing Agreement or any Series Supplement; provided, however,
that the delegation of any duties will not relieve the Master Servicer or such
Servicer of its liabilities and responsibilities with respect to such duties and
will not constitute a resignation under the Pooling and Servicing Agreement.
Any corporation into which, in accordance with the Pooling and Servicing
Agreement, the Master Servicer or any Servicer may be merged or consolidated, or
any corporation resulting from any merger or consolidation to which the Master
Servicer or any Servicer is a party, or any corporation succeeding to the
business of the Master Servicer or any Servicer will be, upon execution of a
supplement to the Pooling and Servicing Agreement and each Series Supplement
then outstanding, the successor to the Master Servicer or that Servicer, as
applicable, under the Pooling and Servicing Agreement and those Series
Supplements.
MASTER SERVICER TERMINATION EVENTS
If any Master Servicer Termination Event occurs, either the Trustee or
investor certificateholders evidencing Fractional Undivided Interests
aggregating not less than 51% of the Class Invested Amount for any class of any
series then outstanding that is materially adversely affected thereby, by
written notice to Greenwood as Master Servicer (and to the Trustee if given by
the investor certificateholders), may terminate all of the rights and
obligations of Greenwood as Master Servicer under the Pooling and Servicing
Agreement and any Series Supplement then outstanding. The Trustee will appoint a
successor Master Servicer as promptly as possible. If the Trustee has not
appointed a successor Master Servicer who has accepted the appointment by the
time Greenwood ceases to act as Master Servicer, all authority, power and
obligations of Greenwood as Master Servicer under the Pooling and Servicing
Agreement and any Series Supplement then outstanding will pass to and be vested
in the Trustee.
A "Master Servicer Termination Event" refers to any of the following
events:
(a) failure by the Master Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any withdrawal, on
the date it is required to do so under the Pooling and Servicing Agreement,
any Series Supplement or the Master Servicing Agreement (or within the five
business days thereafter);
(b) failure on the part of the Master Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Master Servicer set forth in the Pooling and Servicing Agreement, any
Series Supplement or the Master Servicing Agreement that continues
unremedied for a period of 60
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days after written notice of the failure requiring the same to be remedied
has been given to the Master Servicer by the Trustee or to the Master
Servicer and the Trustee by holders of investor certificates evidencing
Fractional Undivided Interests aggregating not less than 25% of the Class
Invested Amount for any class of any series materially adversely affected
thereby;
(c) any representation, warranty or certification made by the Master
Servicer in the Pooling and Servicing Agreement, any Series Supplement, the
Master Servicing Agreement or in any certificate delivered pursuant to the
Pooling and Servicing Agreement, any Series Supplement or the Master
Servicing Agreement proves to have been incorrect when made, which has a
material adverse effect on the rights of the investor certificateholders of
any class of any series then outstanding, and which continues to be
incorrect in any material respect for a period of 60 days after written
notice of such failure requiring the same to be remedied has been given to
the Master Servicer by the Trustee or to the Master Servicer and the
Trustee by holders of investor certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Class Invested Amount for
any class of any series materially adversely affected thereby; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Master Servicer. However, the FDIC may have the power
to prevent the Trustee or investor certificateholders from effecting a
transfer of servicing if the relevant Master Servicer Termination Event
relates only to the appointment of a conservator or receiver or the
insolvency of Greenwood, or any other FDIC-insured depository institution,
as Master Servicer. Similarly, if a Master Servicer Termination Event
occurs with respect to a Master Servicer subject to Title 11 of the United
States Code, and no Master Servicer Termination Event exists other than the
filing of a bankruptcy petition by or against such Master Servicer, the
Trustee or investor certificateholders may be prevented from effecting a
transfer of servicing.
SERVICER TERMINATION EVENTS
If any Servicer Termination Event occurs with respect to any Servicer,
either the Trustee or investor certificateholders evidencing Fractional
Undivided Interests aggregating not less than 51% of the Class Invested Amount
for any class of any series then outstanding that is materially adversely
affected thereby, by written notice to Greenwood as Master Servicer and to the
Servicer to which any such Servicer Termination Event relates (and to the
Trustee if given by the investor certificateholders), may terminate all of the
rights and obligations of that Servicer under the Pooling and Servicing
Agreement, any Series Supplement then outstanding and the Master Servicing
Agreement. The Trustee will appoint a successor Servicer with respect to the
Servicer as promptly as possible. If the Trustee has not appointed a successor
Servicer who has accepted the appointment by the time the Servicer ceases to act
as a Servicer, all authority, power and obligations of that Servicer under the
Pooling and Servicing Agreement, any Series Supplement then outstanding and the
Master Servicing Agreement will pass to and be vested in the Trustee.
A "Servicer Termination Event," with respect to any Servicer, refers to any
of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit
on the date it is required to do so under the Pooling and Servicing
Agreement, any Series Supplement or the Master Servicing Agreement (or
within the five business days thereafter);
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set
forth in the Pooling and Servicing Agreement, any Series Supplement or the
Master Servicing Agreement which continues unremedied for a period of 60
days after written notice of the failure requiring the same to be remedied
has been given to that Servicer by the Trustee or to the Servicer and the
Trustee by holders of investor certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Class Invested Amount for
any class of any series materially adversely affected thereby;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement, any Series Supplement, the Master
Servicing Agreement or in any certificate delivered pursuant to the Pooling
and Servicing Agreement, any Series Supplement or the Master Servicing
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Agreement proves to have been incorrect when made, which has a material
adverse effect on the rights of the investor certificateholders of any
class of any series then outstanding, and which continues to be incorrect
in any material respect for a period of 60 days after written notice of the
failure requiring the same to be remedied has been given to that Servicer
by the Trustee or to the Servicer and the Trustee by holders of investor
certificates evidencing Fractional Undivided Interests aggregating not less
than 25% of the Class Invested Amount for any class of any series
materially adversely affected thereby; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer. However, the FDIC may have the power to
prevent the Trustee or investor certificateholders from effecting a
transfer of servicing if the relevant Servicer Termination Event relates
only to the appointment of a conservator or receiver or the insolvency of
that Servicer, or any other FDIC-insured depository institution, as
Servicer. Similarly, if a Servicer Termination Event occurs with respect to
a Servicer subject to Title 11 of the United States Code, and no Servicer
Termination Event exists other than the filing of a bankruptcy petition by
or against that Servicer, the Trustee or investor certificateholders may be
prevented from effecting a transfer of servicing.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or about 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 (i) to the effect that those accountants
are of the opinion that the system of internal accounting controls in effect on
the date of such report relating to the servicing procedures performed by the
Master Servicer and each Servicer under the Pooling and Servicing Agreement and
any Series Supplement during the preceding fiscal year ending November 30 were
sufficient for the prevention of errors and irregularities that would be
material to the assets of the Trust and that nothing has come to the
accountants' attention that would cause them to believe such servicing has not
been conducted in compliance with the Pooling and Servicing Agreement and any
Series Supplement, except for such exceptions as the accountants believe to be
immaterial and such other exceptions as will be set forth in such report and
(ii) to the effect that those accountants have compared the mathematical
calculations of the amounts set forth in the Master Servicer's monthly
certificates delivered during the preceding fiscal year ending November 30
covered by such report with the computer reports of the Master Servicer and each
Servicer that generated those amounts, confirming that those amounts are in
agreement, except for such exceptions as the accountants believe to be
immaterial and such other exceptions as will be set forth in the report. The
procedures to be followed by those accountants will not constitute an audit
conducted in accordance with generally accepted auditing standards.
The Pooling and Servicing Agreement provides for delivery to the Trustee,
Greenwood on behalf of the Holder of the Seller Certificate and the Rating
Agencies on or before March 15 of each calendar year of an annual statement
signed by an officer of the Master Servicer to the effect that (a) in the course
of the officer's duties as an officer of the Master Servicer, the officer would
normally obtain knowledge of any Master Servicer Termination Event and (b)
whether or not the officer has obtained knowledge of any such Master Servicer
Termination Event during the preceding fiscal year ending November 30 and, if
so, specifying each Master Servicer Termination Event of which the signing
officer has knowledge and the nature of such Master Servicer Termination Event.
The Pooling and Servicing Agreement also provides for delivery of a similar
annual statement by each Servicer with respect to Servicer Termination Events.
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THE SELLER
GREENWOOD
Greenwood is a wholly owned subsidiary of NOVUS and an indirect subsidiary
of MSDW. Greenwood was acquired by NOVUS in January 1985. Greenwood was
chartered as a banking corporation under the laws of the State of Delaware in
1911, and its deposits are insured by the FDIC. Greenwood is not a member of the
Federal Reserve System. The executive office of Greenwood is located at 12
Read's Way, New Castle, Delaware 19720. In addition to the experience obtained
by Greenwood in the bank card business since 1985, a majority of the senior
management of the credit, operations and data processing functions for the
Discover Card at Greenwood and Discover Financial Services, Inc. ("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.
By virtue of the enactment of CEBA, there are certain limitations placed on
Greenwood. See "Risk Factors -- Legislation." 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.
INSOLVENCY-RELATED MATTERS
It is possible that a receiver or conservator of Greenwood may argue that
the transaction between Greenwood and the Trust, whereby Greenwood has
transferred to the Trust all of its right, title and interest in and to the
Receivables, whether existing on the Cut-Off Date or thereafter arising, is a
pledge of the Receivables rather than an absolute transfer. Accordingly,
Greenwood has granted to the Trustee, on behalf of the Trust, a security
interest in the Receivables. To the extent that this security interest is
validly perfected prior to an insolvency of Greenwood and not taken in
contemplation of such insolvency or with the intent to hinder, delay or defraud
Greenwood or its creditors, this security interest should not be subject to
avoidance by a receiver or conservator of Greenwood, and payments made in
respect of the Receivables (other than payments made to Greenwood by the Trust
with respect to Greenwood's interest in the Seller Certificate) should not be
subject to recovery by a receiver or conservator of Greenwood. If, however, a
receiver or conservator of Greenwood were to assert a contrary position or were
to require the Trust to establish its right to cash Collections in the
possession of Greenwood as Servicer or otherwise by submitting a claim and
completing the administrative claims procedure established under the Federal
Deposit Insurance Act, as amended, delays in payments on the Certificates and
possible reductions in the amount of those payments could occur. In addition,
the Federal Deposit Insurance Corporation, if appointed as conservator or
receiver for Greenwood, has the power under the Federal Deposit Insurance Act,
as amended, to repudiate contracts, including contracts of Greenwood such as the
Pooling and Servicing Agreement. The Federal Deposit Insurance Act, as amended,
provides that a claim for damages arising from the repudiation of a contract is
limited to "actual direct compensatory damages." In the event the Federal
Deposit Insurance Corporation were to be appointed as conservator or receiver of
Greenwood and were to repudiate the Pooling and Servicing Agreement, then the
amount payable out of available collateral to the Certificateholders could be
lower than the outstanding principal and accrued interest on the Certificates.
In a 1993 case involving the repudiation by the Resolution Trust Corporation,
which has ceased to exist as of December 31, 1995 (the Federal Deposit Insurance
Corporation has taken over its responsibilities), of certain secured zero-coupon
bonds issued by a savings association, a United States federal district court
held that "actual direct compensatory damages" in the case of a marketable
security meant the market value of the repudiated bonds as of the date of
repudiation.
Unless otherwise specified in the related Prospectus Supplement, Greenwood
will receive, on each Series Closing Date, an opinion of Latham & Watkins,
counsel to Greenwood, concluding on a reasoned basis (although there is no
precedent based on directly similar facts) that subject to certain facts,
assumptions and qualifications specified therein (including matters set forth
under "Certain Legal Matters Relating to the Receivables -- Transfer of
Receivables" and "-- Certain UCC Matters"), (i) under New York law, the
perfection and the effect of perfection or nonperfection of a security interest
in the Receivables are governed by the law of the jurisdiction in which the
debtor is located, (ii) if the transfer of the Receivables to the Trust
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by Greenwood constitutes an absolute transfer, then the transfer is a transfer
of all right, title and interest of Greenwood in and to those Receivables to the
Trust and (iii) if the transfer is deemed not to be an absolute transfer, it
would be treated as a security interest created by the Pooling and Servicing
Agreement in favor of the Trust in Greenwood's right, title and interest in and
to the Receivables. Unless otherwise specified in the related Prospectus
Supplement, Greenwood also will receive, on each Series Closing Date, an opinion
of Young Conaway Stargatt & Taylor, LLP, Delaware counsel to Greenwood,
concluding on a reasoned basis that, subject to certain facts, assumptions and
qualifications specified therein (including matters set forth under "Certain
Legal Matters Relating to the Receivables -- Transfer of Receivables" and "--
Certain UCC Matters"), (i) to the extent Delaware law applies, the security
interest created by the Pooling and Servicing Agreement in favor of the Trust is
a valid security interest in all right, title and interest of Greenwood in and
to the Receivables, (ii) the security interest is a perfected security interest
and (iii) the security interest is a first priority security interest.
The above descriptions are qualified in their entirety by reference to the
forms of opinions filed as exhibits to the Registration Statement of which this
Prospectus is a part.
CERTAIN LEGAL MATTERS RELATING TO THE RECEIVABLES
TRANSFER OF RECEIVABLES
Upon formation of the Trust, Greenwood conveyed to the Trust without
recourse, all Receivables existing under the Accounts as of the Cut-Off Date. In
addition, Greenwood conveyed to the Trust all Receivables existing under
Additional Accounts as of the applicable Additional Account Cut-Off Date, and
may do so again in the future. Greenwood also transfers additional Receivables
generated in the Accounts to the Trust on an ongoing basis. In exchange,
Greenwood received the Seller Certificate and the right to direct the issuance
of, and receive the proceeds from the sale of, new series of investor
certificates. Greenwood has agreed to repurchase Receivables if either the sale
of the Receivables is not a valid transfer of all right, title and interest of
Greenwood or any Additional Seller in and to the Receivables or, if the transfer
of Receivables by Greenwood or any Additional Seller to the Trust is deemed to
be a pledge of Receivables, the Trust does not have a first priority perfected
security interest in the Receivables. In the event that the obligation of
Greenwood to repurchase Receivables is at any time the subject of concurrent
obligations of one or more other parties to the Seller Certificate Ownership
Agreement, then Greenwood's obligation to repurchase Receivables will be
conditioned on Greenwood's ability to enforce those concurrent obligations
against one or more parties to the Seller Certificate Ownership Agreement. A tax
or statutory lien on property of Greenwood arising before Receivables came into
existence may have priority over the Trust's interest in those Receivables. In
addition, subject to certain conditions, each Servicer will be permitted to use
all or a portion of the cash Collections received by it during any given Due
Period until the applicable Distribution Date for those Collections. In the
event of the receivership, custodianship or bankruptcy of any such Servicer, the
Trust may not have a perfected interest in such Collections held by such
Servicer. See "Description of the Investor Certificates -- Repurchase of the
Trust Portfolio."
The Receivables are "accounts" or "general intangibles" as defined in
Article 9 of the UCC as in effect in the Applicable State with respect to each
Receivable. To the extent the Receivables constitute accounts, both the absolute
transfer of such Receivables and the transfer of such Receivables as security
for an obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions, including the filing of
financing statements to perfect the Trust's security interest. To the extent
Receivables constitute general intangibles and the transfer of such Receivables
is deemed to be a transfer as security for an obligation, Article 9 of the UCC
is applicable to the same extent as it is applicable to Receivables constituting
accounts. A financing statement has been filed, and continuation statements
covering the Receivables will be filed, under the UCC as in effect in Delaware
to protect the Trust in the event the transfer of Receivables to the Trust by
Greenwood is subject to Article 9 of the UCC. If a transfer of Receivables
constituting general intangibles is deemed to be an absolute transfer, then the
UCC is not applicable, and no further action is required to perfect the Trust's
interest in such Receivables from third-party claims. However, if the FDIC were
appointed as receiver of Greenwood, certain administrative expenses of the
receiver might have priority
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over the interest of the Trust in Receivables originated by Greenwood, whether
such Receivables are accounts or general intangibles.
CERTAIN UCC MATTERS
Unless continuation statements are filed within the time specified in the
UCC in respect of the security interest of the Sellers or the Trust in the
Receivables, the perfection of the security interest will lapse.
There are also certain limited circumstances under the UCC under which
Receivables could be subject to an interest that has priority over the interest
of the Sellers or the Trust. Under the Pooling and Servicing Agreement, however,
Greenwood has agreed to repurchase the Receivables in any Account containing a
Receivable that has been transferred to the Trust and that is not free and clear
of the lien of any third party, if the existence of such liens has a material
adverse effect on the certificateholders' interest in the Receivables as a
whole. In the event that the obligation of Greenwood to repurchase Receivables
is at any time the subject of concurrent obligations of one or more other
parties to the Seller Certificate Ownership Agreement, then Greenwood's
obligation to repurchase Receivables will be conditioned on Greenwood's ability
to enforce those concurrent obligations against one or more parties to the
Seller Certificate Ownership Agreement. See "Description of the Investor
Certificates -- Repurchase of Specified Receivables." Each Seller also will
covenant that it will not sell, pledge, assign, transfer or grant any lien on
any of the Receivables transferred by it (or any interest therein) other than to
the Trust. A tax or other statutory lien on property of a transferor also may
have priority over the interest of the Sellers or the Trust in the Receivables.
Because the Trust's interest in the Receivables is dependent upon the
relevant Seller's interest in the Receivables, any adverse change in the
priority or perfection of a Seller's security interest would correspondingly
affect the Trust's interest in the affected Receivables.
As set forth under "Risk Factors -- Certain Legal Aspects," under certain
circumstances all or a portion of the cash Collections of Receivables received
by each Servicer may be used by such Servicer before those Collections are
distributed on each Distribution Date. In the event of the insolvency or
receivership of any such Servicer or, in certain circumstances, the lapse of
certain time periods, the Trust may not have a perfected interest in those cash
Collections.
CONSUMER PROTECTION LAWS AND DEBTOR RELIEF LAWS APPLICABLE TO THE RECEIVABLES
The relationships among credit cardmembers, credit card issuers and sellers
of merchandise and services in transactions financed by the extension of credit
under credit accounts are extensively regulated by federal and state consumer
protection laws and regulations. Such laws and regulations include the Federal
Truth-in-Lending Act and Fair Credit Billing Act (and the provisions of the
Federal Reserve Board's Regulation Z issued under each of them), Equal Credit
Opportunity Act (and the provisions of the Federal Reserve Board's Regulation B
issued thereunder), Fair Credit Reporting Act and Fair Debt Collection Practices
Act. These statutes and regulations require credit disclosures on credit card
applications and solicitations, on an initial disclosure statement required to
be provided when a credit card account is first opened, and with each monthly
billing statement. They also prohibit certain discriminatory practices in
extending credit, impose certain limitations on the charges that may be imposed
and regulate practices utilized in collections. In addition, cardmembers are
entitled, under these laws and regulations, to have payments and credits
promptly applied on credit accounts and to require billing errors to be promptly
resolved. A cardmember may be entitled to assert violations of certain of these
consumer protection laws and, in certain cases, claims against the lender or
seller, by way of set-off against his obligation to pay amounts owing on his
account. For example, under the Federal Truth-in-Lending Act, a credit card
issuer is subject to all claims (other than tort claims) and defenses arising
out of transactions in which a credit card is used to purchase merchandise or
services, if certain conditions are met. These conditions include requirements
that the cardmember make a good faith attempt to obtain satisfactory resolution
of the dispute from the person honoring the credit card and meet certain
jurisdictional requirements. Where the seller of the goods or services is the
same party as the card issuer, or controls or is controlled by the card issuer
directly or indirectly, these jurisdictional requirements are not applicable.
These statutes further provide that in certain cases a cardmember's liability
may not exceed $50 with respect to charges to the credit card account that
resulted from unauthorized use of the credit card. The application of
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federal and state consumer protection, bankruptcy and debtor relief laws would
affect the interests of the investor certificate-holders if those laws result in
any Receivables being charged off as uncollectible. Greenwood has agreed in the
Pooling and Servicing Agreement that if a Receivable was not created in
compliance in all material respects with all Requirements of Law with respect to
such Receivable, and if such noncompliance continues beyond a specified cure
period and has a material adverse effect on the interest of the Trust in all the
Receivables, Greenwood will repurchase all Receivables in the Accounts
containing the Receivable affected by such noncompliance. Greenwood also has
agreed in the Pooling and Servicing Agreement to indemnify the Trust, among
other things, for any liability arising from such violations. For a discussion
of the Trust's rights arising from the breach of these warranties, see "The
Trust -- Indemnification of Trust and Trustee." See also "Risk Factors --
Consumer Protection Laws and Regulations; Litigation."
CLAIMS AND DEFENSES OF CARDMEMBERS AGAINST THE TRUST
The UCC provides that (a) unless an obligor has made an enforceable
agreement not to assert defenses or claims arising out of a sale, the rights of
the Trust, as assignee, are subject to all the terms of the contract between
Greenwood and the obligor and any defense or claim arising therefrom and to any
other defense or claim of the obligor against Greenwood that accrues before the
obligor receives notification of the assignment and (b) any obligor is
authorized to continue to pay Greenwood until (i) the obligor receives
notification, reasonably identifying the rights assigned, that the amount due or
to become due has been assigned and that payment is to be made to the Trustee
and (ii) if requested by the obligor, the Trustee has furnished reasonable proof
of the assignment.
USE OF PROCEEDS
The net proceeds from the sale of each series of the investor certificates
will be paid to Greenwood. Unless otherwise specified in the related Prospectus
Supplement, Greenwood will add the proceeds received by it to its general funds
and initially will use the proceeds to effect a reduction of short-term
borrowings.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of the material federal income tax
consequences to holders of the investor certificates of a series (which may be
superseded, in whole or in part, by a discussion of federal income tax
consequences in the applicable Prospectus Supplement), which is based on the
opinion of Latham & Watkins ("Tax Counsel") as counsel to Greenwood. This
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), currently applicable Treasury Regulations and judicial
and administrative rulings and decisions ("Current Law"). There can be no
assurance that the Internal Revenue Service (the "IRS") will not take a contrary
view, and no ruling from the IRS has been or will be sought. Legislative,
judicial or administrative changes may be forthcoming that could alter or modify
the statements and conclusions set forth herein. Any legislative, judicial or
administrative changes or interpretations may or may not be retroactive and
could affect tax consequences to investor certificateholders of one or more
series.
This discussion does not purport to deal with all aspects of federal income
taxation that may affect particular investor certificateholders in light of
their individual circumstances, and, except for certain limited discussions of
particular topics, is not intended for investor certificateholders subject to
special treatment under the federal income tax laws (e.g., life insurance
companies, tax-exempt organizations, financial institutions, broker-dealers and
investors that have a functional currency other than the United States dollar or
hold their investor certificates as part of a hedge, straddle or conversion
transaction). IT IS RECOMMENDED THAT PROSPECTIVE INVESTOR CERTIFICATEHOLDERS
CONSULT THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY
OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
INVESTOR CERTIFICATES.
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The discussion assumes that an investor certificate (i) is issued in
registered form, (ii) has all payments denominated in United States dollars and
not determined by reference to the value of any other currency, and (iii) has a
term that exceeds one year. Moreover, the discussion assumes that, unless
Section 1272(a)(6) applies to the investor certificate, the interest formula for
the investor certificate meets the requirements for "qualified stated interest"
under Treasury Regulations relating to original issue discount ("OID"), and that
any OID on the investor certificate arising from any excess of the principal
amount of the investor certificate over its issue price is de minimis (i.e., is
less than 1/4% of its principal amount multiplied by the number of full years
until its maturity date). If these conditions are not satisfied, additional tax
considerations will be disclosed in the applicable Prospectus Supplement.
TAX TREATMENT OF THE INVESTOR CERTIFICATES AS INDEBTEDNESS
Greenwood will treat the investor certificates of a series as indebtedness
for federal, state and local income and franchise tax purposes and the investor
certificateholders, by acceptance of the investor certificates, have committed
to treat such investor certificates of a series as indebtedness of Greenwood for
federal, state and local income and franchise tax purposes. However, the Pooling
and Servicing Agreement and the Series Supplement of a series generally refer to
the transfer of the Receivables as a "sale," and Greenwood has informed Tax
Counsel (i) that different criteria are used in determining the non-tax
accounting treatment of the transaction and (ii) that, for regulatory and
financial accounting purposes, Greenwood will treat the transfer of the
Receivables under the Pooling and Servicing Agreement and the Series Supplement
with respect to such series as a transfer of an ownership interest in the
Receivables and not as the creation of a debt obligation.
In general, whether for federal income tax purposes a transaction
constitutes a sale or a loan secured by the transferred property is a question
of fact, the resolution of which is based on the economic substance of the
transaction, rather than its form. In the case of the investor certificates, the
issue is whether the investor certificates constitute a loan by the investor
certificateholders to Greenwood or a sale of Receivables by Greenwood to the
investor certificateholders (through ownership of the investor certificates). In
some instances, 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, Tax Counsel is of the view that the rationale of
such cases will not apply to this transaction, based, in part, upon (i) the
expressed intent of Greenwood to treat the investor certificates for federal,
state and local income and franchise tax purposes as indebtedness secured by the
Receivables and other assets held in the Trust and (ii) the commitment of each
investor certificateholder, by the acceptance of an investor certificate,
similarly to treat the investor certificates for federal, state and local income
and franchise tax purposes as indebtedness.
While the IRS and the courts have established several factors to be
considered in determining whether in substance a transaction constitutes a sale
or a loan secured by the transferred property (including the form of the
transaction), it is Tax Counsel's opinion that the primary factor is whether the
investor certificateholders (through ownership of the investor certificates)
have assumed the benefits and burdens of ownership of the Receivables. Unless
otherwise specified in the related Prospectus Supplement, 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 investor certificateholders (through ownership of the
investor certificates).
Unless otherwise specified in the related Prospectus Supplement, for the
reasons described above, Tax Counsel will advise Greenwood that, in their
opinion, under Current Law the investor certificates of a series will be treated
as indebtedness 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 Investor Certificates" for a discussion of the
federal income tax consequences if the investor certificates of a series are not
treated as indebtedness of Greenwood for federal income tax purposes. Except for
such discussion, the following discussion assumes that investor certificates
will be treated as indebtedness of Greenwood for federal income tax purposes.
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UNITED STATES INVESTOR CERTIFICATEHOLDERS
The rules set forth below apply to investor certificateholders who are
"United States Persons." A "United States Person" is (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
the United States or under the laws of the United States or of any state, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust, and one or more United States persons have the authority to control all
substantial decisions of the trust (or, under certain circumstances, a trust the
income of which is subject to United States federal income taxation regardless
of its source).
Stated Interest on Investor Certificates. Subject to the discussion below,
interest paid on the investor certificates will be taxable as ordinary income
when received or accrued by investor certificateholders in accordance with their
method of accounting. Generally, interest received on the investor certificates
will constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
Original Issue Discount. The investor certificates of a series will not be
issued with OID unless the excess of the stated redemption price at maturity of
the investor certificates of a series over their issue price equals or exceeds a
statutorily-defined de minimis amount. The applicable Prospectus Supplement will
advise investors if the investor certificates of a series have been issued with
OID that equals or exceeds such de minimis amount.
If the investor certificates of a series are issued with OID, investor
certificateholders generally will be required to include OID in income for each
accrual period in advance of receipt of the cash representing such OID. A holder
of a debt instrument issued with OID is required to recognize as ordinary income
the amount of OID on the debt instrument as such discount accrues, in accordance
with a constant yield method. Under Section 1272(a)(6) of the Code, special
provisions apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments or, to the
extent provided in Treasury Regulations, by reason of other events. Under these
provisions, the computation of OID (and market discount, see "-- Market
Discount") on such debt instruments must be determined by taking into account
both the prepayment assumptions used in pricing the debt instrument and the
actual prepayment experience. As a result, the amount of OID on such debt
instruments that will accrue in any given accrual period may either increase or
decrease depending upon the actual prepayment rate. Because no Treasury
Regulations have been issued interpreting Section 1272(a)(6), investor
certificateholders should consult their own tax advisors regarding the impact of
the OID rules in the event the investor certificates of a series are issued with
OID.
Market Discount. Investor certificateholders should be aware that the
resale of an investor certificate may be affected by the market discount
provisions of the Code. These rules generally provide that, subject to a
statutorily-defined de minimis exception, if an investor certificateholder
acquires an investor certificate at a market discount (i.e., at a price below
its stated redemption price at maturity or its revised issue price if it was
issued with OID) and thereafter recognizes gain upon a disposition of the
investor certificate (or disposes of it in certain non-recognition transactions
such as a gift), the lesser of such recognized gain (or in the case of an
applicable non-recognition transaction, the deemed gain based on the fair market
value of the investor certificate at the time of the nonrecognition transaction)
or the portion of the market discount that accrued while the investor
certificate was held by such investor certificateholder will be treated as
ordinary interest income at the time of the disposition. An investor
certificateholder who acquired an investor certificate at a market discount
would be required to treat as ordinary interest income the portion of any
principal payment (including a payment on maturity) attributable to accrued
market discount on such investor certificate. The market discount rules also
provide that an investor certificateholder who acquires an investor certificate
at a market discount may be required to defer a portion of any interest expense
that otherwise may be deductible on any indebtedness incurred or maintained to
purchase or carry the investor certificate until the investor certificateholder
disposes of the investor certificate in a taxable transaction.
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An investor certificateholder who acquired an investor certificate at a
market discount may elect to include market discount in income as the discount
accrues, either on a ratable basis or, if elected, on a constant interest rate
basis. The current inclusion election, once made, applies to all market discount
obligations acquired on or after the first day of the first taxable year to
which the election applies, and may not be revoked without the consent of the
IRS. If an investor certificateholder elects to include market discount in
income as it accrues, the foregoing rules with respect to the recognition of
ordinary income on sales, principal payments and certain other dispositions of
the investor certificates and the deferral of interest deductions on
indebtedness related to the investor certificates will not apply.
The Clinton Administration has proposed legislation that would require an
accrual method taxpayer that acquires an investor certificate at a market
discount to include such discount in income as it accrues, subject to certain
limitations. As proposed, this provision would apply to investor certificates
acquired on or after the date of enactment. No prediction can be made regarding
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 or tax basis of an
investor certificate held as a capital asset exceeds the sum of all amounts
payable on the investor certificate after the acquisition date (other than
payments of qualified stated interest), such excess may constitute amortizable
bond premium that the investor certificateholder may elect to amortize under the
constant interest rate method over the period from the investor
certificateholder's acquisition date to the investor certificate's maturity
date. Treasury Regulations specifically exclude debt instruments that are
subject to Section 1272(a)(6) of the Code from the amortizable bond premium
rules contained in such regulations. See discussion of Section 1272(a)(6) in "--
Original Issue Discount." Amortizable bond premium generally will be treated as
an offset to interest income on the investor certificate, rather than as a
separate interest deduction item subject to the investment interest limitations
of the Code. An investor certificateholder that elects to amortize bond premium
must generally reduce the tax basis in the related investor certificate by the
amount of bond premium used to offset interest income. If an investor
certificate purchased at a premium is redeemed in full prior to its maturity, an
investor certificateholder who has elected to amortize bond premium should be
entitled to a deduction for any remaining unamortized bond premium in the
taxable year of redemption.
Sales of Investor Certificates. In general, an investor certificateholder
will recognize gain or loss upon the sale, exchange, redemption or other taxable
disposition of an investor certificate measured by the difference between (i)
the amount of cash and the fair market value of any property received (other
than the amount attributable to, and taxable as, accrued but unpaid interest)
and (ii) the investor certificateholder's tax basis in the investor certificate
(as increased by any OID or market discount previously included in income by the
investor certificateholder and decreased by any deductions previously allowed
for amortizable bond premium and by any payments reflecting principal or OID
received with respect to such investor certificate).
Subject to the OID and market discount rules discussed above and to the
one-year holding period requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain or loss, provided the
investor certificate was held as a capital asset. The maximum federal income tax
rate applicable to capital gains and ordinary income for corporations is 35%.
The maximum ordinary federal income tax rate for individuals, estates and trusts
is 39.6%, whereas the maximum long-term capital gains rate for such taxpayers is
generally 20%.
FOREIGN INVESTOR CERTIFICATEHOLDERS
Set forth below is a general discussion of the United States federal income
and estate tax consequences of the purchase, ownership, sale or other
disposition of an investor certificate by an investor certificateholder that,
for United States federal income tax purposes, is (i) a foreign corporation,
(ii) a non-resident alien individual, (iii) a foreign estate or trust or (iv) a
foreign partnership, as such terms are defined in the Code (a "non-U.S.
Holder"). Some non-U.S. Holders (including certain residents of certain United
States possessions or territories) may be subject to special rules not discussed
herein.
Interest (including OID, if any) paid to a non-U.S. Holder of investor
certificates will not be subject to a required withholding of United States
federal income tax, provided that (i) such interest payments are
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effectively connected with the conduct of a trade or business of the non-U.S.
Holder within the United States and such non-U.S. Holder provides an appropriate
statement to such effect, or (ii)(a) the holder is not (1) a "10 percent
shareholder" of Greenwood or (2) a "controlled foreign corporation" with respect
to which Greenwood is a "related person" within the meaning of the Code and (b)
the beneficial owner (and, if relevant, a financial institution on the
beneficial owner's behalf) provides an appropriate statement, signed under
penalties of perjury, certifying that the beneficial owner of such investor
certificate is not a United States Person and providing the beneficial owner's
name and address. The statement generally must be provided in the year a payment
occurs or in either of the two preceding years. For years after 2000, Treasury
Regulations specify that the statement must be made on either a Form W-8BEN or a
Form W-8ECI and provided prior to payment.
A non-U.S. Holder generally will not be subject to United States federal
income tax on gain realized on the disposition of an investor certificate (other
than gain attributable to accrued interest or OID, which is addressed in the
preceding paragraph); provided that (i) the gain is not effectively connected
with the conduct of a trade or business within the United States by the non-U.S.
Holder and (ii) in the case of an individual holder, (A) the non-U.S. Holder is
not present in the United States for 183 days or more in the taxable year of the
sale, exchange or redemption or (B) (1) the non-U.S. Holder does not have a "tax
home" in the United States and (2) the gain is not attributable to an office or
other fixed place of business maintained in the United States by the non-U.S.
Holder.
If the interest or gain on an investor certificate held by a non-U.S.
Holder is effectively connected with the conduct of a trade or business within
the United States by the non-U.S. Holder, then the non-U.S. Holder (although
exempt from the withholding of tax previously discussed if the non-U.S. Holder
provides an appropriate statement) generally will be subject to United States
federal income tax on the interest (including OID, if any) or gain at regular
federal income tax rates in a similar fashion to a United States Person. See
"-- United States Investor Certificateholders." In addition, if the non-U.S.
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% of its "effectively connected earnings and profits" within the meaning of
the Code for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate under an applicable tax treaty.
An investor certificate held by an individual who at the time of death is a
non-U.S. Holder will not be subject to United States federal estate tax as a
result of such individual's death if, immediately before death, (i) the
individual was not a "10 percent shareholder" of Greenwood and (ii) interest on
such investor certificate was not effectively connected with the conduct of a
trade or business within the United States by the individual.
THE FOREGOING DESCRIPTION OF THE POTENTIAL UNITED STATES FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS IS NECESSARILY INCOMPLETE. NON-U.S.
HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE FOREGOING MATTERS TO THEM.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting requirements apply to certain payments of principal
of and interest on (and the amount of OID, if any, accrued on) an obligation,
and to proceeds of certain sales of an obligation before maturity, to certain
nonexempt investor certificateholders who are United States Persons. Payments to
certain entities, including, but not limited to, corporations and financial
institutions, are exempt from information reporting. In addition, a backup
withholding tax also may apply with respect to such amounts if such investor
certificateholders fail to provide correct taxpayer identification numbers and
other information. The backup withholding tax rate is 31%. Greenwood, or a
paying agent or a broker, as the case may be, will be required to withhold from
any payment that is subject to backup withholding unless the investor
certificateholder has provided the required certification in the manner
prescribed in applicable Treasury Regulations.
In the case of payments of principal of, and interest on (and the amount of
OID, if any, accrued on), investor certificates by Greenwood or its paying
agents to non-U.S. Holders, Treasury Regulations provide that backup withholding
and information reporting will not apply to payments with respect to which
either requisite certification has been received or an exemption has otherwise
been established (provided that neither
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Greenwood nor its paying agents has actual knowledge that the holder is a United
States Person or that the conditions of any other exemption are not in fact
satisfied). Payments of the proceeds of the sale of an investor certificate to
or through a foreign office of a United States broker or foreign brokers with
certain types of relationships to the United States, however, are subject to
certain information reporting requirements, unless the payee is an exempt
recipient or such broker has evidence in its records that the payee is not a
United States Person and no actual knowledge that such evidence is false and
certain other conditions are met. After 2000, unless exempt from information
reporting, such payments may be subject to backup withholding. Payments of the
proceeds of a sale to or through the United States office of a broker will be
subject to information reporting and backup withholding unless the payee makes
appropriate certifications (and no agent of the broker who is responsible for
receiving or reviewing such statement has actual knowledge that it is incorrect)
or an exemption is otherwise established.
Any amounts withheld under the backup withholding rules from a payment to
an investor certificateholder will be allowed as a refund or a credit against
such investor certificateholder's United States federal income tax.
The Treasury Department has promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. Special rules apply which permit the
shifting of primary responsibility for withholding to certain financial
intermediaries acting on behalf of beneficial owners. The final regulations are
generally effective for payments made after December 31, 2000, subject to
certain transition rules. Non-U.S. Holders are urged to consult their own tax
advisors with respect to these final regulations.
POSSIBLE CHARACTERIZATION OF THE INVESTOR CERTIFICATES
The foregoing discussion assumes that the investor certificates of a series
will be treated as indebtedness of Greenwood for federal income tax purposes.
However, although Tax Counsel will opine to such effect with respect to each
series of investor certificates, the matter is not free from doubt, and there
can be no assurance that the IRS or the courts will agree with Tax Counsel's
opinion. If the IRS were to contend successfully that the investor certificates
of a series are not indebtedness of Greenwood for federal income tax purposes,
it could find that the arrangement created by the Pooling and Servicing
Agreement and the related Series Supplement should be classified as a "publicly
traded partnership" taxable as a corporation or as a partnership that is not
taxable as a corporation.
If the investor certificates of a series were treated as interests in a
partnership, the partnership in all likelihood would be treated as a "publicly
traded partnership" 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
the investor certificateholders. See "State Tax Consequences." Under such
circumstances, the investor certificates may be treated as debt of an entity
taxable as a corporation or, alternatively, as equity of such an entity in which
latter case interest payments to investor certificateholders could be treated as
dividends and, if made to non-U.S. Holders, could be subject to United States
federal income tax and withholding at a rate of 30% (unless reduced by an
applicable tax treaty).
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), such partnership would not be subject to federal income
tax. Rather, the investor certificateholders of such series would be required to
include in income their share of the income and deductions generated by the
assets of the Trust, as determined under partnership tax accounting rules. In
such event, the amount, timing and character of the income required to be
recognized by an investor certificateholder could differ materially from the
amount, timing and character thereof if the investor certificates were
characterized as indebtedness of Greenwood. It also is possible that such a
partnership could be subject to tax in certain states where the partnership is
considered to be engaged in business, and that the investor
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certificateholders, as partners in such a partnership, could be taxed on their
share of the partnership's income in such states.
In addition, if such a partnership is considered to be engaged in a trade
or business within the United States, the partnership would be subject to a
withholding tax on distributions to (or, at its election, income allocable to)
non-U.S. Holders, and each such non-U.S. Holder would be credited for such
non-U.S. Holder's share of the withholding tax paid by the partnership.
Moreover, the non-U.S. Holder generally would be subject to United States
federal income tax at regular federal income tax rates, and possibly a branch
profits tax (in the case of a corporate non-U.S. Holder), as previously
described. See "-- Foreign Investor Certificateholders." Further, even if the
partnership is not considered to be engaged in a trade or business within the
United States, it appears that partnership withholding will be required in the
case of any such non-U.S. Holder that is engaged in a trade or business within
the United States to which the investor certificate income is effectively
connected. Although there may be arguments to the contrary, it appears that if
such a partnership is not considered to be engaged in a trade or business within
the United States and if income with respect to an investor certificate is not
otherwise effectively connected with the conduct of a trade or business within
the United States by a non-U.S. Holder, the non-U.S. Holder would be subject to
United States federal income tax and withholding at a rate of 30% (unless
reduced by an applicable treaty) on such non-U.S. Holder's distributive share of
the partnership's interest income.
Finally, with respect to a series having a class of subordinated
certificates, the IRS might contend that even though the Class A certificates
are properly classified as debt obligations for federal income tax purposes, the
Class B certificates are not properly classified as such. Under this approach,
the Class B certificates might be viewed as equity interests in an entity (such
as Greenwood or a joint venture consisting of Greenwood and the Class B
certificateholders), with the Class A certificates treated as debt obligations
of such entity. If such an entity were characterized as a partnership not
taxable as a corporation, the entity would not be subject to federal income tax,
although the Class B certificateholders would be subject to the tax consequences
previously described with respect to interests in a partnership that is not
taxable as a corporation. Alternatively, if such an entity were characterized as
a "publicly traded partnership" taxable as a corporation, the tax liability on
the income of the entity might, in certain circumstances, reduce distributions
on both the Class A certificates and the Class B certificates, and the Class B
certificateholders would be subject to the tax consequences previously described
with respect to interests in a "publicly traded partnership" taxable as a
corporation. In addition, any non-U.S. Holder of a Class A certificate who is
the actual or constructive owner of 10% or more of the outstanding principal
amount of the Class B certificates may be treated as a "10 percent shareholder."
See "-- Foreign Investor Certificateholders."
Based on Tax Counsel's advice as to the likely treatment of the investor
certificates for federal income tax purposes, Greenwood and the Trust will not
attempt to cause the arrangement created by the Pooling and Servicing Agreement
and the Series Supplement with respect to a series to comply with the federal or
state income tax reporting requirements applicable to partnerships or
corporations. If such arrangement were later held to constitute a partnership or
corporation for federal income tax purposes, the manner of bringing it into
compliance with such requirements is unclear.
It is recommended that prospective investor certificateholders consult
their own tax advisors as to the risk that the investor certificates will not be
treated as indebtedness of Greenwood, and the possible tax consequences of
potential alternative treatments.
STATE TAX CONSEQUENCES
The following summary of state tax consequences with respect to the
investor certificates of a series is based on the opinion of Tax Counsel as
counsel to Greenwood insofar as it constitutes summaries of matters of state
income or franchise tax law or conclusions with respect thereto. This discussion
is based upon currently applicable statutes, regulations and judicial and
administrative rulings and decisions of certain states. There can be no
assurance that the taxing authorities of such states will not take a contrary
view, and no ruling therefrom has been or will be sought. Legislative, judicial
or administrative changes may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations
may
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or may not be retroactive and could affect the tax consequences to investor
certificateholders of such series. Except as set forth below, this discussion of
state tax consequences assumes that the investor certificates of a series will
be treated as indebtedness of Greenwood for federal tax purposes.
State tax consequences to each investor certificateholder will depend upon
the provisions of the state tax laws to which the investor certificateholder is
subject. Most states modify or adjust the taxpayer's federal taxable income to
arrive at the amount of income potentially subject to state tax. Resident
individuals usually pay state tax on 100% of such state-modified income, while
corporations and other taxpayers generally pay state tax only on that portion of
state-modified income assigned to the taxing state under the state's own
apportionment and allocation rules. Because each state's tax laws vary, it is
impossible to predict the tax consequences to the investor certificateholders in
all of the state taxing jurisdictions in which they are already subject to tax.
Delaware is the location of Greenwood's headquarters, where Greenwood
originates and owns the Accounts and services the Receivables pursuant to the
Pooling and Servicing Agreement. Unless otherwise specified in the related
Prospectus Supplement, Tax Counsel will advise Greenwood with respect to a
series, that, in their opinion, although the matter is not free from doubt, the
investor certificates of such series will be treated as indebtedness of
Greenwood for purposes of the Delaware income tax. Accordingly, although the
matter is not free from doubt, if the investor certificates of a series are
treated as indebtedness of Greenwood in Delaware, investor certificateholders
not otherwise subject to taxation in Delaware will not become subject to the
Delaware income tax solely because of their ownership of the investor
certificates.
Generally, an investor certificateholder is required to pay, in states in
which such investor certificateholder already is subject to state tax,
additional state tax as a result of interest earned on such holder's investment
in investor certificates. Moreover, a state could claim that the Trust has
undertaken activities therein and is subject to taxation by that state. Were any
state to make and sustain that claim, the treatment of the investor certificates
for purposes of such state's tax laws would be determined thereunder, and there
can be no assurance that the investor certificates would be treated as
indebtedness of Greenwood for purposes of such state taxation.
If such investor certificates of a series were treated as interests in a
partnership or a corporation, the state tax consequences to the investor
certificateholders of such series could be materially different, especially in
states which may be considered to have a business connection with the
Receivables. See "Federal Income Tax Consequences -- Possible Characterization
of the Investor Certificates."
THE FOREGOING DESCRIPTION OF THE POTENTIAL STATE TAX CONSEQUENCES IS
INCOMPLETE. IT IS RECOMMENDED THAT INVESTORS CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE APPLICATION OF THE FOREGOING MATTERS TO THEM.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans, including
Individual Retirement Accounts and Individual Retirement Annuities (collectively
"IRAs"), to which they apply ("Plans") and on fiduciaries of those Plans. In
accordance with ERISA's general fiduciary standards, before investing in
investor certificates, a Plan fiduciary should determine whether such an
investment is permitted under the governing Plan instruments. Additionally, the
Plan fiduciary should determine if the investor 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 investor certificates should also consider
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whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or the Code.
Certain transactions involved in the operation of the Trust might be deemed
to constitute prohibited transactions under ERISA and the Code, if assets of the
Trust were deemed to be assets of an investing Plan. ERISA and the Code do not
define "plan assets." The U.S. Department of Labor (the "DOL") has published a
regulation (the "Regulation"), which defines when a Plan's investment in an
entity will be deemed to include an interest in the underlying assets of such
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
such entity will not be considered assets of the Plan under the Regulation.
Under the Regulations, 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 (discussed
below) 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 Regulation, assets of the Trust were not considered
assets of Plans holding investor certificates.
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 the servicing, management and operation of the
Trust. No assurance can be given, 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
(a) 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
such series, or (b) any affiliate of any of the foregoing (collectively, the
"Restricted Group").
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 (1) the Class A certificates cannot be
subordinated to any other similar interests in the Trust, (2) the Class A
certificates must be rated, at the time of their acquisition by the Plan, 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, have the highest short-term rating) and
have certain specified levels of credit support, (3) certain other rating agency
conditions must be satisfied, (4) the series of investor certificates must be
subject to early amortization or cash accumulation under certain circumstances,
(5) any interest rate swaps and caps must meet certain conditions, (6) 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, (7)
such 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 (8) 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
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conditions of the Exemption relating to the terms and conditions of such Class A
certificates will be satisfied at the time of initial issuance of the investor
certificates, the Prospectus Supplement will state that Plans are generally
permitted to purchase Class A certificates.
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 Plan must itself determine whether these conditions are satisfied. These
conditions include but are not limited to the following:
1. The acquisition of Class A certificates must be on terms (including
price) that are at least as favorable to the Plan as such terms would be in
an arm's length transaction with an unrelated party.
2. 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.
3. The Plan must be an "accredited investor" as defined in Rule
501(a)(1) of Regulation D under the Securities Act.
4. 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, such
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.
5. 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 certain 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, prior to making an investment 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 REGULATION
The 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 (i) freely transferable, (ii) part of a class of securities that is
owned by 100 or more investors independent of the issuer and of one another by
the conclusion of the offering and (iii) either is (A) part of a class of
securities registered under section 12(b) or 12(g) of the Securities Exchange
Act of 1934, or (B) sold to the Plan as part of an offering of securities to the
public pursuant to an effective registration statement under the Securities Act
of 1933 and the class of securities of which such security is a part is
registered under the Securities Exchange Act of 1934 within 120 days (or such
later time as may be allowed by the Securities and Exchange Commission) after
the end of the fiscal year of the issuer during which the offering of the
securities to the public occurred.
If the investor certificates of a series are expected to meet the criteria
of publicly-offered securities, such information will be set forth in the
related Prospectus Supplement. If the investor certificates of a series do meet
the criteria of publicly-offered securities certain prohibited transactions
would not arise even if the Exemption did not apply.
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If the investor certificates are deemed to be debt and not equity interests
for ERISA purposes, the purchase of the investor certificates by a Plan with
respect to which Greenwood or one of its affiliates is a "party in interest" or
"disqualified person" might be considered a prohibited transaction under Section
406 of ERISA and Section 4975 of the Code unless an exemption is applicable.
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 investor
certificates for the Plan: DOL Prohibited Transaction Exemption ("PTE") 84-14
(Class Exemption for Plan Asset Transactions determined by Independent Qualified
Professional Asset Managers); PTE 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds); PTE 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts); 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 investor certificates are debt or equity for ERISA
purposes, a possible violation of the prohibited transaction rules could occur
if the investor certificates were purchased during the offering with assets of a
Plan if Greenwood, the Trustee, any Underwriter or any of their affiliates were
a fiduciary with respect to such Plan. Under ERISA and the Code, a person is a
"fiduciary" with respect to a Plan to the extent (i) he exercises any
discretionary authority or discretionary control respecting management of such
Plan or exercises any authority or control respecting management or disposition
of its assets, (ii) he renders investment advice for a fee or other
compensation, direct or indirect, with respect to any moneys or other property
of such Plan, or has any authority or responsibility to do so or (iii) he has
any discretionary authority or discretionary responsibility in the
administration of such Plan. Accordingly, the fiduciaries of any Plan should not
purchase the investor certificates during the offering with assets of any Plan
if Greenwood, the Trustee, the Underwriters or any of their affiliates is a
fiduciary with respect to the Plan.
In light of the foregoing, fiduciaries of Plans considering the purchase of
the investor certificates should consult their own benefits counsel or other
appropriate counsel regarding the application of ERISA and the Code to their
purchase of the investor 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 such reasoning a purchase of investor 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
(discussed above) has been designated by the Department of Labor as an
"Underwriter Exemption" for purposes of Section V(h) of Prohibited Transaction
Exemption 95-60.
PLAN OF DISTRIBUTION
Greenwood may sell investor certificates (i) through underwriters or
dealers; (ii) directly to one or more purchasers; or (iii) through agents. Any
such underwriters, dealers or agents in the United States may include MS & Co.,
MSIL or DWR. The related Prospectus Supplement will set forth the terms of the
offering of such investor certificates, including the name or names of any
underwriters, the purchase price of such investor certificates and the proceeds
to Greenwood from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial offering price, any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which such investor certificates may be listed. Only
underwriters so named in the related Prospectus Supplement shall be deemed to be
underwriters in connection with the investor certificates offered thereby.
MS & Co., MSIL and DWR are affiliates of Greenwood. Following the initial
distribution of a series of investor certificates, MS & Co., MSIL, DWR and other
affiliates of Greenwood may offer and sell previously issued investor
certificates in the course of their businesses as broker-dealers. MS & Co.,
MSIL, DWR and such other affiliates may act as a principal or agent in such
transactions. This Prospectus and the accompanying Prospectus Supplement may be
used by MS & Co., MSIL, DWR and such other affiliates in
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connection with such transactions. Such sales, if any, will be made at varying
prices relating to market prices prevailing at the time of sale.
If underwriters are used in the sale, the investor certificates will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed price or at varying prices determined at the time of sale or at negotiated
prices. Such investor certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. The obligations of the underwriters to purchase such
investor certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the investor certificates of the
series offered by the related Prospectus Supplement if any of such investor
certificates are purchased. Any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers may be changed from time
to time.
Investor certificates may also be sold directly by the Company or through
agents designated by Greenwood from time to time. Any agent involved in the
offering and sale of the investor certificates will be named, and any
commissions payable by Greenwood to such agent will be set forth, in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, any such agent is acting solely as an agent for the period of its
appointment.
If so indicated in the related Prospectus Supplement, Greenwood will
authorize agents, underwriters or dealers to solicit offers by certain
institutional investors to purchase investor certificates providing for payment
and delivery on a future date specified in the related Prospectus Supplement.
There may be limitations on the minimum amount which may be purchased by any
such institutional investor or on the portion of the aggregate principal amount
of the particular investor certificates which may be sold pursuant to such
arrangements. Institutional investors to which such offers may be made, when
authorized, include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and such
other institutions as may be approved by Greenwood. Unless otherwise specified
in the related Prospectus Supplement, the obligations of any such purchasers
pursuant to such delayed delivery and payment arrangements will not be subject
to any conditions except (i) the purchase by an institution of the particular
investor certificates shall not at the time of delivery be prohibited under the
laws of any jurisdiction of the United States to which such institution is
subject, and (ii) if the particular investor certificates are being sold to
underwriters, Greenwood shall have sold to such underwriters the total principal
amount of such investor certificates less the principal amount thereof covered
by such arrangements. Underwriters will not have any responsibility in respect
of the validity of such arrangements or the performance of Greenwood or such
institutional investors thereunder.
Underwriters, dealers and agents that participate in the distribution of
the investor certificates may be deemed to be underwriters, and any discounts or
commissions received by them from Greenwood and any profit on the resale of the
investor certificates by them may be deemed to be underwriting discounts and
commissions, under the Securities Act of 1933, as amended. Under arrangements
which may be entered into by Greenwood, underwriters, dealers and agents that
participate in the distribution of investor certificates may be entitled to
indemnification by Greenwood against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribution
with respect to payments that the underwriters, dealers or agents may be
required to make with respect thereto. Underwriters, dealers and agents may
engage in transactions with, or perform services for, Greenwood in the ordinary
course of their respective businesses.
The investor certificates may or may not be listed on a national securities
exchange. There is no assurance that a secondary market will develop for the
investor certificates or, if it does develop, that it will continue.
The distribution of investor certificates will conform to the requirements
set forth in Rule 2720 of the National Association of Securities Dealers, Inc.
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LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, the
legality of the investor certificates and certain legal matters relating to the
tax consequences of the issuance of the investor certificates will be passed
upon for Greenwood by Latham & Watkins and certain matters concerning creditors'
rights will be passed upon for Greenwood by Latham & Watkins and Young Conaway
Stargatt & Taylor, LLP. Unless otherwise specified in the related Prospectus
Supplement, the legality of the investor certificates will be passed upon for
any Underwriters by Cadwalader, Wickersham & Taft.
AVAILABLE INFORMATION
Greenwood, as originator of the Trust, has filed a Registration Statement
under the Securities Act of 1933 with the Securities and Exchange Commission
(the "Commission") on behalf of the Trust with respect to the investor
certificates offered pursuant to this Prospectus and the related Prospectus
Supplement. For further information, reference is made to the Registration
Statement and amendments thereof and exhibits thereto and the reports and other
documents incorporated herein by reference as described previously under
"Incorporation of Certain Documents by Reference," which are available for
inspection without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 7 World
Trade Center, Suite 1300, New York, New York 10048; and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Such
reports and other documents may also be obtained from the web site that the
Commission maintains at http://www.sec.gov. The Trust is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith, Greenwood, on behalf of the Trust, will file reports and
other information with the Commission. Copies of the Registration Statement and
amendments thereof and exhibits thereto, as well as such materials relating to
the Trust, may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Monthly Update of Certain Information. Each month, Greenwood intends to
make available a Current Report on Form 8-K (each, a "Form 8-K") describing the
performance of the Receivables in the Accounts. A copy of the most recent
monthly report to the Investor Certificateholders will be included in each Form
8-K filed with the Securities and Exchange Commission.
Annual Update of Certain Information. Information contained in the "The
Discover Card Business" and "Composition and Historical Performance of the
Discover Card Portfolio" sections of the Prospectus Supplement and the "Risk
Factors -- Consumer Protection Laws and Regulations; Litigation," "--
Legislation," "Federal Income Tax Consequences," "State Tax Consequences" and
"ERISA Considerations" sections of the Prospectus will be updated in each Annual
Report on Form 10-K filed on behalf of the Trust with the Securities and
Exchange Commission.
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GLOSSARY OF TERMS
Investor certificates will be issued pursuant to the Pooling and Servicing
Agreement and a Series Supplement. The following Glossary of Terms does not
purport to be complete and, with respect to any series of investor certificates
issued by the Trust, is subject to, and is qualified in its entirety by
reference to, the Pooling and Servicing Agreement and the related Series
Supplement. A copy of the Pooling and Servicing Agreement is filed as an exhibit
to the Registration Statement of which this Prospectus is a part. Certain
definitions contained in this Glossary of Terms are applicable only to certain
series of investor certificates offered pursuant to the related Prospectus
Supplement and are not necessarily applicable to other series of investor
certificates that may be issued by the Trust. On written request to the Trustee
at its corporate trust office, the Trustee will provide to investor
certificateholders without charge a copy of the Pooling and Servicing Agreement
(without exhibits and schedules) and a related Series Supplement (without
exhibits). Unless the context requires otherwise, capitalized terms used in this
Prospectus and Glossary of Terms relate separately to individual series of
investor certificates issued by the Trust.
"Account" will mean (i) a Discover Card account established pursuant to a
Credit Agreement between Greenwood and any Person, receivables under which are
transferred to the Trust pursuant to the Pooling and Servicing Agreement or
pursuant to an Assignment of Additional Accounts (a "Greenwood Discover Card
Account"); (ii) a Discover Card account established pursuant to a Credit
Agreement between an Additional Seller and any Person, receivables under which
are transferred to the Trust pursuant to an Assignment of Additional Accounts;
and (iii) a credit account (that is not a Discover Card account) established
pursuant to a Credit Agreement between Greenwood or an Additional Seller and any
Person, receivables under which are transferred to the Trust pursuant to an
Assignment of Additional Accounts. No Account will be a Charged-Off Account as
of (i) the Account Selection Date, with respect to Accounts the Receivables in
which are transferred to the Trust on the Initial Closing Date or (ii) the date
an Account is selected for addition to the Trust, with respect to Accounts the
Receivables in which are transferred to the Trust pursuant to an Assignment of
Additional Accounts. The definition of an Account will include a surviving
credit account (a "Surviving Account") in the event that (i) an Account or
another credit account is combined with an Account pursuant to the Credit
Guidelines for such Account (an "Account Combination") and (ii) the surviving
Account of such Account Combination was an Account prior to such combination.
The term "Account" will be deemed to refer to an Additional Account only from
and after the Addition Date with respect thereto. The definition of Account will
not include any Account removed from the Trust after it has been reassigned to
the Holder of the Seller Certificate.
"Account Selection Date" will mean, for any Account transferred to the
Trust on the Initial Closing Date, January 22, 1993, July 14, 1993 or September
22, 1993 and, for any Additional Account, the date such account was selected to
be transferred to the Trust.
"Accumulation Period," if applicable, will mean the period, unless an
Amortization Event or, if applicable, an Early Accumulation Event has occurred
during the Revolving Period, from the Principal Commencement Date until the
earliest of (i) the payment in full of the Series Invested Amount, (ii) the
Amortization Commencement Date, (iii) if applicable, the Early Accumulation
Commencement Date and (iv) the Series Termination Date.
"Addition Date" will mean each date as of which Additional Accounts will be
included as Accounts or as of which Participation Interests will be conveyed to
the Trust.
"Additional Account Cut-Off Date" will mean, for any Additional Account,
the date specified as such in the Assignment of Additional Accounts for such
Additional Account.
"Additional Accounts" will mean credit accounts originated by Greenwood or
affiliates of Greenwood, receivables under which are added to the Trust after
the Initial Closing Date.
"Additional Funds" will have the meaning set forth in "Description of the
Investor Certificates -- Additional Funds." The initial amount of Additional
Funds, if any, will be as set forth in the related Prospectus Supplement.
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"Additional Seller" will mean an affiliate of Greenwood that is included in
the same "affiliated group" as Greenwood for United States federal income tax
purposes and that transfers Receivables in Additional Accounts to the Trust.
"Aggregate Invested Amount" will mean at any time the sum of the Series
Invested Amounts of all series of investor certificates then issued and
outstanding.
"Aggregate Investor Interest" will mean at any time the sum of the Series
Investor Interests of all series of investor certificates then issued and
outstanding.
"Aggregate Investor Percentage" will mean at any time the sum of the Series
Percentages of all series of investor certificates then issued and outstanding.
"Amortization Commencement Date" will mean the date on which an
Amortization Event is deemed to occur.
"Amortization Event" will mean, unless otherwise specified in the related
Prospectus Supplement, any event specified as such in the Pooling and Servicing
Agreement or the applicable Series Supplement. See "The Certificates --
Amortization Events" in the related Prospectus Supplement.
"Amortization Period" will mean the period from, and including, the
Amortization Commencement Date to, and including, the earlier of (i) the date of
the payment in full of the Series Invested Amount and (ii) the Series
Termination Date. Unless otherwise specified in the related Prospectus
Supplement, the first Distribution Date of the Amortization Period will be the
Distribution Date in the calendar month following the Amortization Commencement
Date.
"Applicable State" will mean, with respect to any Receivable, the state in
which the chief executive office of the Seller with respect to such Receivable
is located and with respect to any Seller, the state in which the chief
executive office of such Seller is located.
"Book-Entry Certificates" will mean certificates evidencing a beneficial
interest in the investor certificates, ownership and transfers of which will be
made through book entries by a Clearing Agency; provided, that after the
occurrence of a condition whereupon book-entry registration and transfer are no
longer permitted and Definitive Certificates are to be issued to the certificate
owners, the investor certificates will no longer be "Book-Entry Certificates."
"Business Day" will mean any day other than a Saturday, a Sunday or a day
on which banking institutions in (i) New York, New York, (ii) the County of New
Castle, Delaware, (iii) the city in which the Corporate Trust Office is located,
(iv) the city in which the principal executive offices of any Additional Seller
is located or (v) the city in which the principal banking or executive offices
of any Credit Enhancement Provider is located, are authorized or obligated by
law or executive order to be closed.
"CCA Investor Interest," if applicable, shall have the meaning set forth in
the applicable Series Supplement.
"Certificate" will mean any certificated Seller Certificate or any investor
certificate of any series of investor certificates then issued and outstanding.
"Certificate Interest" will mean the amount of interest that is payable to
or for the benefit of the investor certificateholders of any class on any
Distribution Date, based on the Class Invested Amount for such class, calculated
in the manner set forth in the related Prospectus Supplement.
"Certificate Owner" will mean, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency).
"Certificate Principal" will mean, with respect to each class of any
series, the principal payable in respect of such class.
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"Certificate Rate" will mean, with respect to any class, the interest rate
set forth in the related Prospectus Supplement with respect to the series to
which such class belongs.
"Certificate Register" will mean the register maintained pursuant to the
Pooling and Servicing Agreement providing for the registration of Investor
Certificates in fully registered form and transfers and exchanges thereof.
"Certificateholder" or "Holder" will mean an investor certificateholder, a
Person in whose name a Certificate is registered in the Certificate Register or
a Person in whose name ownership of the uncertificated Seller Certificate is
recorded in the books and records of the Trustee.
"Charged-Off Account" will mean each Account with respect to which the
Servicer has charged off the Receivables in such Account as uncollectible.
"Charged-Off Amount" will mean, with respect to any Distribution Date or
Trust Distribution Date, the aggregate amount of Receivables in Accounts that
become Charged-Off Accounts in the related Due Period, less (i) the cumulative,
uncollected amount previously billed by the Servicers to Accounts that became
Charged-Off Accounts during the related Due Period with respect to finance
charges, cash advance fees, annual membership fees, 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
and (ii) the full amount of any such Receivables that have been repurchased by
Greenwood.
"Class" will mean all the investor certificates designated by the same
letter of the alphabet, pursuant to the Series Supplement for the series.
"Class Finance Charge Collections" will be as specified in the related
Prospectus Supplement.
"Class Initial Investor Interest" will be the initial Class Investor
Interest as specified in the related Prospectus Supplement.
"Class Invested Amount" will be as specified in the related Prospectus
Supplement.
"Class Investor Interest" will be as specified in the related Prospectus
Supplement.
"Class Monthly Servicing Fee" will mean, for any Distribution Date, an
amount equal to the product of (i) a fraction the numerator of which is the
Class Investor Interest and the denominator of which is the Series Investor
Interest, in each case on the first day of the related Due Period and (ii) the
amount of the Investor Servicing Fee for the related Due Period.
"Class Percentage" will be as specified in the related Prospectus
Supplement.
"Clearing Agency" will mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Collections" will mean (i) all payments by or on behalf of an Obligor
received by a Servicer in respect of Receivables in the form of cash, checks,
wire transfers or other forms of payment in accordance with the relevant Credit
Agreement in effect from time to time and (ii) amounts treated as Collections
pursuant to the terms of the Pooling and Servicing Agreement or the applicable
Series Supplement. A Collection will be deemed to have been received at the end
of the day on the Date of Processing of such Collection.
"Collections Account" will mean the non-interest bearing segregated trust
account established and maintained by the Trustee with an office or branch of
the Trustee or a Qualified Institution for the benefit of the
certificateholders.
"Controlled Liquidation Period," if applicable, will mean, unless an
Amortization Event or, if applicable, an Early Accumulation Event has occurred
during the Revolving Period, the period from the Principal Commencement Date
until the earliest of (i) the payment in full of the Series Invested Amount,
(ii) the Amortization Commencement Date, (iii) if applicable, the Early
Accumulation Commencement Date and (iv) the Series Termination Date.
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"Corporate Trust Office" will mean the principal office of the Trustee at
which at any particular time its corporate trust business will be administered,
which office currently is located at 111 East Wacker Drive, Suite 3000, Chicago,
Illinois 60601 Attention: Corporate Trust Department.
"Credit Agreement" will mean, with respect to an Account, the contract
governing such Account.
"Credit Enhancement" will mean any credit enhancement obtained by the
Master Servicer in accordance with the applicable Series Supplement.
"Credit Enhancement Account" will mean any non-interest bearing segregated
trust account established and maintained by the Trustee with an office or branch
of the Trustee or a Qualified Institution with respect to the Credit
Enhancement.
"Credit Enhancement Agreement" will mean any Agreement among the Sellers,
the Master Servicer, the Trustee and a Credit Enhancement Provider with respect
to any Credit Enhancement.
"Credit Enhancement Provider" will mean, unless otherwise specified in the
related Prospectus Supplement, collectively, the one or more lenders that will
make a loan in order to provide the initial funds on deposit in the Credit
Enhancement Account.
"Credit Guidelines" will mean, with respect to any Account, the policies
and procedures relating to the operation of such Account and similar accounts
administered by the Servicer of such Account, including, without limitation, the
written policies and procedures and the exercise of judgment by employees of the
Servicer with respect to such accounts in accordance with such Servicer's normal
practice for determining the creditworthiness of customers holding such
accounts, the extension of credit to customers, and relating to the maintenance
of such accounts and the collection of receivables with respect to such
accounts, as such policies and procedures may be amended from time to time by
the Servicer of such accounts, and as such policies and procedures may be
implemented by any Person to whom such Servicer has delegated any of its duties.
"Cut-Off Date" will mean October 1, 1993.
"Date of Processing" with respect to any transaction will mean the date on
which such transaction is first recorded on the cardmember master file of the
accounts maintained by or on behalf of the relevant Servicer (without regard to
the effective date of such recordation).
"Deficit Accumulation Amount," if applicable, will be as specified in the
related Prospectus Supplement.
"Deficit Liquidation Amount," if applicable, will be as specified in the
related Prospectus Supplement.
"Discover Card," when used to modify the term "account," will mean that
access to such account is afforded by, among other means, a card bearing on its
face the DISCOVER service mark or, if the use of such service mark is suspended
and another service mark is substituted therefor, a card bearing such substitute
service mark.
"Distribution Date" will be as specified in the related Prospectus
Supplement.
"Due Period" will mean, with respect to any Trust Distribution Date or
Distribution Date, the calendar month next preceding the calendar month in which
such Trust Distribution Date or Distribution Date occurs.
"Early Accumulation Commencement Date," if applicable, will be as specified
in the related Prospectus Supplement.
"Early Accumulation Event," if applicable, will be as specified in the
related Prospectus Supplement.
"Early Accumulation Period," if applicable, will be as specified in the
related Prospectus Supplement.
"Eligible Receivable" will mean each Receivable: (i) which is payable in
United States dollars; (ii) which was created in compliance, in all material
respects, with all Requirements of Law applicable to the Seller and the Servicer
with respect to such Receivable, and pursuant to a Credit Agreement that
complies, in all material respects, with all Requirements of Law applicable to
such Seller and Servicer; (iii) as to which, if such Receivable was created
before the Initial Closing Date or the relevant Addition Date, as applicable,
(a) at the time of the creation of such Receivable, the Seller with respect to
such Receivable had good and marketable title thereto free and clear of all
Liens arising under or through such Seller, and (b) at the time of the
conveyance of such Receivable to the Trust, such Seller had, or the Trust will
have, good and marketable title free and clear of all Liens arising under or
through such Seller; (iv) as to which, if such Receivable was
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created on or after the Initial Closing Date or the relevant Addition Date, as
applicable, at the time of the creation of such Receivable, the Trust will have
good and marketable title thereto free and clear of all Liens arising under or
through the Seller with respect to such Receivable; and (v) which constitutes an
"account" or "general intangible" under and as defined in Article 9 of the UCC
as then in effect in the Applicable State with respect to such Receivable.
"Expected Final Payment Date" will mean, for any class, the date specified
in the related Prospectus Supplement as the day on which the investor
certificates of such class are expected to mature.
"FDIC" will mean the Federal Deposit Insurance Corporation acting through
either the Savings Association Insurance Fund or the Bank Insurance Fund.
"Final Trust Termination Date" will mean 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.
"Finance Charge Collections" with respect to any Due Period will mean the
sum of (i) the lesser of the aggregate amount of Finance Charge Receivables for
the preceding Due Period and Collections actually received in such Due Period
and (ii) all Recovered Amounts received during such Due Period.
"Finance Charge Receivables" will mean, with respect to any Account for any
Due Period, the net amount billed by the Servicer during such Due Period as
periodic finance charges on such Account and cash advance fees, annual
membership fees, if any, fees for transactions that exceed the credit limit on
such Account, late payment charges billed during such Due Period to such Account
and any other charges that the Servicer may designate as "Finance Charge
Receivables" from time to time (provided that the Servicer shall not designate
amounts owing for the payment of goods and services or cash advances as "Finance
Charge Receivables"), less, in the event that such Account becomes a Charged-Off
Account during such Due Period, the cumulative, uncollected amount previously
billed by the Servicer to such Account as periodic finance charges, cash advance
fees, annual membership fees, if any, fees for transactions that exceed the
credit limit on such Account, late payment charges and any other type of charges
that the Servicer has designated as "Finance Charge Receivables" with respect to
Accounts that are not Charged-Off Accounts.
"Fixed Principal Allocation Event" will be as specified in the related
Prospectus Supplement.
"Fractional Undivided Interest" will mean the fractional undivided interest
in the Trust evidenced by an investor certificate and expressed as a portion of
the Aggregate Invested Amount.
"Governmental Authority" will mean the United States of America or any
state or other political subdivision thereof.
"Greenwood" will mean Greenwood Trust Company, a Delaware banking
corporation, and its successors and assigns.
"Group" will mean, collectively, at any time, the one or more series of
investor certificates designated as part of the same Group at that time, whether
by the Series Supplements establishing such series or as a result of the
movement of a series from one Group to another pursuant to the provisions of the
Pooling and Servicing Agreement.
"Group Collections Account" will mean the non-interest bearing segregated
trust account for Collections allocated to each Group established and maintained
by the Trustee with an office or branch of the Trustee or a Qualified
Institution for the benefit of the investor certificateholders of each series
that is a member of such Group.
"Holder of the Seller Certificate" will mean, at any specified time, the
holder or owner of the Seller Certificate, each of which, if there is more than
one such holder or owner, will be a party to the Seller Certificate Ownership
Agreement, with the respective interests granted to each of such parties
pursuant to the Seller Certificate Ownership Agreement. The initial Holder of
the Seller Certificate will be Greenwood.
"Ineligible Receivable" will mean any Receivable that was not, at the time
of its transfer, an Eligible Receivable and the transfer of which to the Trust
had a material adverse effect on the certificateholders' interest in the
Receivables as a whole that was not cured within 60 days of the earlier of (i)
actual knowledge of such event by the relevant Seller and (ii) receipt by such
Seller of written notice of any such event given by the Trustee.
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"Initial Closing Date" will mean October 27, 1993.
"Interest Payment Dates" will be as specified in the related Prospectus
Supplement.
"Internal Revenue Code" will mean the United States Internal Revenue Code
of 1986, as amended from time to time.
"Investor Accounts" will mean, in addition to Investor Accounts established
pursuant to the Pooling and Servicing Agreement, any other segregated trust
accounts specified as Investor Accounts in any Series Supplement. See "The
Certificates -- Other Investor Accounts" in the related Prospectus Supplement.
"Investor Certificateholder" will mean the Person in whose name an investor
certificate is registered in the Certificate Register.
"Investor Certificates" will mean the investor certificates offered in
connection with the related Prospectus Supplement.
"Investor Servicing Fee" will mean, with respect to each series and any
Distribution Date, an amount equal to the product of the Investor Servicing Fee
Percentage and the Series Investor Interest on the first day of the Due Period
related to such Distribution Date (or in the case of the first Distribution Date
for the series, the Series Initial Investor Interest).
"Investor Servicing Fee Percentage" will mean 2.0% per annum, calculated on
the basis of a 360-day year of twelve 30-day months, unless otherwise specified
in the related Prospectus Supplement.
"Lien" will mean any mortgage, deed of trust, pledge, hypothecation,
encumbrance, lien or other security agreement, including, without limitation,
any conditional sale or other title retention agreement, and any financing lease
having substantially the same economic effect as any of the foregoing.
"Master Servicer" will mean initially Greenwood and thereafter any Person
appointed as the successor Master Servicer as herein provided.
"Master Servicing Agreement," if applicable, will mean the agreement
entered into by Greenwood as Master Servicer and Servicer and any additional or
successor Servicer or Servicers, as such agreement may be amended or
supplemented from time to time.
"Minimum Principal Receivables Balance" will mean, on any date of
determination, an amount equal to the sum of the Series Minimum Principal
Receivables Balance for each series then outstanding.
"Moody's" will mean Moody's Investors Service Inc.
"New Issuance" will mean the issuance of an additional series of investor
certificates from the Trust.
"Obligor" will mean with respect to any Account, the Person or Persons
obligated to make payments with respect to such Account, including any guarantor
thereof.
"Opinion of Counsel" will mean a written opinion of counsel, who may be
counsel for or an employee of any Seller or Greenwood or any of their
affiliates.
"Participation Interests" will mean participations representing undivided
interests in a pool of assets primarily consisting of receivables in revolving
credit card accounts and collections thereon.
"Payment Date" will mean any Interest Payment Date, any Principal Payment
Date, if applicable, and any Special Payment Date.
"Permitted Investments" will mean:
(i) negotiable instruments or securities represented by instruments in
bearer or registered form which evidence: (a) obligations issued or fully
guaranteed, as to timely payment, by the United States of America or any
instrumentality or agency thereof when such obligations are backed by the
full faith and credit of the United States of America; (b) time deposits
in, or bankers' acceptances issued by, any depository institution or trust
company incorporated under the laws of the United States of America or
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any state thereof (or any domestic branch of a foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term
deposits or commercial paper or, in the absence of a rating on the
short-term deposits or commercial paper of such depository institution or
trust company, the long-term unsecured debt obligations of such depository
institution or trust company will have the Highest Rating; (c) commercial
paper or other short-term obligations having, at the time of the Trust's
investment or contractual commitment to invest therein, the Highest Rating;
or (d) investments in money market funds having the Highest Rating;
(ii) demand deposits in the name of the Trust or the Trustee in any
depository institution or trust company referred to in clause (i) (b)
above;
(iii) securities not represented by an instrument, which are
registered in the name of the Trustee upon books maintained for that
purpose by or on behalf of the issuer thereof and identified on books
maintained for that purpose by the Trustee as held for the benefit of the
Trust or the Certificateholders, and consisting of shares of an open end
diversified investment company which is registered under the Investment
Company Act of 1940, as amended, and which (a) invests its assets
exclusively in obligations of or guaranteed by the United States of America
or any instrumentality or agency thereof having in each instance a final
maturity date of less than one year from their date of purchase or other
Permitted Investments, (b) seeks to maintain a constant net asset value per
share and (c) has aggregate net assets of not less than $100,000,000 on the
date of purchase of such shares, and which will not result in a reduction
or withdrawal of the rating of any class of any series then outstanding as
confirmed in writing by the Rating Agencies;
(iv) a guaranteed investment contract (guaranteed as to timely
payment), the terms of which meet the criteria of the Rating Agencies and
with an entity whose credit standards meet the criteria of the Rating
Agencies necessary to preserve the rating of each class of each series then
outstanding; and
(v) repurchase agreements transacted with either
(a) an entity subject to the United States federal bankruptcy code,
provided that (1) the term of the repurchase agreement is consistent
with the requirements set forth in Section 4.02(c) of the Pooling and
Servicing Agreement with regard to the maturity of Permitted Investments
or is due on demand, (2) the Trustee or a third party acting solely as
agent for the Trustee has possession of the collateral, (3) as evidenced
by a certificate of a Servicing Officer of the Master Servicer delivered
to the Trustee, the Trustee on behalf of the Trust has a perfected first
priority security interest in the collateral, (4) the market value of
the collateral is maintained at the requisite collateral percentage of
the obligation in accordance with the standards of the Rating Agencies,
(5) the failure to maintain the requisite collateral level will obligate
the Trustee to liquidate the collateral immediately, (6) the securities
subject to the repurchase agreement are either obligations of, or fully
guaranteed as to principal and interest by, the United States of America
or an agency thereof, certificates of deposit or bankers acceptances and
(7) as evidenced by a certificate of a Servicing Officer of the Master
Servicer delivered to the Trustee, the securities subject to the
repurchase agreement are free and clear of any third party lien or
claim; or
(b) a financial institution insured by the FDIC, or any
broker-dealer with "retail customers" that is under the jurisdiction of
the Securities Investors Protection Corp. ("SIPC"), provided that (1)
the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with the standards
of the Rating Agencies, (2) the Trustee or a third party acting solely
as agent for the Trustee has possession of the collateral, (3) as
evidenced by a certificate of a Servicing Officer of the Master Servicer
delivered to the Trustee, the Trustee on behalf of the Trust has a
perfected first priority security interest in the collateral, (4) as
evidenced by a certificate of a Servicing Officer of the Master Servicer
delivered to the Trustee, the collateral is free and clear of third
party liens; and, in the case of an SIPC broker, was not acquired
pursuant to a repurchase or reverse repurchase agreement and (5) failure
to maintain the requisite collateral percentage will obligate the
Trustee to liquidate the collateral;
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provided, however, that at the time of the Trust's investment or
contractual commitment to invest in any such repurchase agreement, the
short-term deposits or commercial paper rating or, in the absence of a
rating on the short-term deposits or commercial paper of such entity or
institution, the long-term unsecured debt obligations of such entity or
institution will have a credit rating not lower than the Highest Rating.
Permitted Investments will include, without limitation, securities of
Greenwood or any of its affiliates which otherwise qualify as a Permitted
Investment under clause (i), (ii), (iii), (iv) or (v) above. For purposes
of this definition of Permitted Investments, "Highest Rating" will mean,
with respect to Moody's, P-1 or Aaa, and, with respect to Standard &
Poor's, A-1+ or AAA, or with respect to either Standard & Poor's or
Moody's, any rating category which will not cause a reduction in or
withdrawal of the rating of any class of any series then outstanding, as
confirmed in writing by the applicable Rating Agency.
"Person" will mean an individual, a partnership or a Corporation. The term
"Corporation" for the purposes of the preceding sentence only will mean a
corporation, joint stock company, business trust or other similar association.
"Pooling and Servicing Agreement" will mean that certain Pooling and
Servicing Agreement dated as of October 1, 1993, by and between Greenwood Trust
Company, as Master Servicer, Servicer and Seller, and 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 such agreement may be amended or supplemented from time to time.
"Principal Collections" will mean, with respect to any Due Period, all
Collections other than Finance Charge Collections.
"Principal Commencement Date" will mean the first day of the Controlled
Liquidation Period or the scheduled first day of the Accumulation Period (if the
Master Servicer does not elect to delay the start of the Accumulation Period),
as applicable.
"Principal Receivable" will mean each Receivable other than Finance Charge
Receivables.
"Qualified Institution" will mean a depository institution organized under
the laws of the United States of America or any one of the states thereof that
at all times has a short-term certificate of deposit rating of A-1 or better by
Standard & Poor's and P-1 or better by Moody's and whose deposits are insured by
the FDIC.
"Rating Agency" will mean Moody's or Standard & Poor's, and "Rating
Agencies" will mean Moody's and Standard & Poor's.
"Receivable" will mean any amounts owing by the Obligor under an Account
from time to time, including, without limitation, amounts owing for the payment
of goods and services, cash advances, finance charges and other charges, if any.
A Receivable will be deemed to have been created at the end of the day on the
Date of Processing of such Receivable. A Receivable will not include any amount
owing under a Charged-Off Account or an Account the Receivables in which have
been repurchased pursuant to the Pooling and Servicing Agreement. 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.
"Record Date" will mean, for any Distribution Date, the last day of the
preceding calendar month.
"Recovered Amounts" will mean all amounts received with respect to
receivables that have previously been charged-off as uncollectible, including
without limitation all proceeds from sales of such receivables by the Trust to
third parties pursuant to the Pooling and Servicing Agreement.
"Removed Accounts" will mean Accounts, the Receivables in which have been
designated for deletion and removal from the Trust.
"Required Daily Deposit" will be as specified in the related Prospectus
Supplement.
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"Requirements of Law" for any Person will mean the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any requirement of any law, rule or regulation or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including, without
limitation, usury laws, the Federal Truth in Lending Act and Regulation Z and
Regulation B of the Board of Governors of the Federal Reserve System); provided,
however, that any such requirement will not be deemed a Requirement of Law if
the enforcement of such requirement would not have a material adverse effect
upon the collectibility of the Receivables taken as a whole.
"Revolving Period" will mean, with respect to each series, the period from,
and including, the Series Cut-Off Date to, but not including, the earlier to
occur of (i) the Principal Commencement Date, (ii) the Amortization Commencement
Date with respect to such series and (iii) if applicable, the Early Accumulation
Commencement Date with respect to such series.
"Seller," when used with reference to specific Receivables, will mean the
Person or Persons conveying such Receivables to the Trust.
"Seller Certificate" will mean (i) if a Seller elects to evidence its
fractional undivided 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 (ii) an uncertificated fractional undivided
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 investor certificates of any series.
"Seller Certificate Ownership Agreement" will mean, if applicable, the
agreement entered into by Greenwood, as Seller, and any Additional Seller, as
such agreement may be amended or supplemented from time to time.
"Seller Interest" will mean, with respect to any Trust Distribution Date or
Distribution Date, the aggregate amount of Principal Receivables in the Trust at
the end of the related Due Period minus the Aggregate Investor Interest at the
end of such day; provided, however, that the Seller Interest will in no event be
less than zero.
"Seller Percentage" will mean, on any date of determination, with respect
to any specified category, an amount equal to 100% of such category minus the
applicable Aggregate Investor Percentage.
"Seller Servicing Fee" will mean, for any Trust Distribution Date, an
amount equal to the product of (i) the product of 2.0% per annum calculated on
the basis of a 360-day year of twelve 30-day months and the amount of Principal
Receivables in the Trust as of the first day of the Due Period related to such
Trust Distribution Date (or in the case of the first Trust Distribution Date,
the amount of Principal Receivables in the Trust on the Cut-Off Date) and (ii) a
fraction the numerator of which is the amount of the Seller Interest and the
denominator of which is the greater of the amount of Principal Receivables in
the Trust and the Aggregate Investor Interest.
"Sellers" will mean Greenwood and any Additional Sellers.
"Series" will mean the series of investor certificates offered in
connection with the related Prospectus Supplement.
"Series Closing Date" will mean the day the investor certificates of the
series are initially issued.
"Series Collections Account" will be as specified in the related Prospectus
Supplement.
"Series Cut-Off Date" will mean the first day of the calendar month in
which the Series Closing Date specified in the related Prospectus Supplement
occurs.
"Series Distribution Account" will be as specified in the related
Prospectus Supplement.
"Series Finance Charge Collections" will be as specified in the related
Prospectus Supplement.
"Series Initial Investor Interest" for any series will mean the Series
Investor Interest on the Series Closing Date, as specified in the related
Prospectus Supplement.
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"Series Interest Funding Account" will be as specified in the related
Prospectus Supplement.
"Series Invested Amount" will be as specified in the related Prospectus
Supplement.
"Series Investor Interest" will be as specified in the related Prospectus
Supplement.
"Series Minimum Principal Receivables Balance" will be as specified in the
related Prospectus Supplement.
"Series Percentage" will be as specified in the related Prospectus
Supplement.
"Series Principal Collections" will be as specified in the related
Prospectus Supplement.
"Series Supplement" will mean the applicable supplement to the Pooling and
Servicing Agreement that establishes each series of investor certificates.
"Series Termination Date" will be as specified in the related Prospectus
Supplement.
"Series Yield Collections" will be as specified in the related Prospectus
Supplement.
"Servicer" will mean initially (i) with respect to Greenwood Discover Card
Accounts, Greenwood and (ii) with respect to any other Accounts, the Person who
is designated as the Servicer with respect to such Accounts in the Assignment of
Additional Accounts relating to such Accounts; and thereafter any Person
appointed as a successor Servicer to any such Servicer. The term "Servicer,"
when used to refer to actions to be taken with respect to any Accounts, will
refer to one or more Servicers, as applicable, and to any particular Servicer
only with respect to Accounts serviced by such Servicer.
"Servicing Officer" will mean any employee of the Master Servicer or of any
Servicer, as applicable, involved in, or responsible for, the administration and
servicing of the Receivables whose name appears on a list of servicing officers
furnished to the Trustee by the Master Servicer and each Servicer, as such lists
may from time to time be amended.
"Standard & Poor's" will mean Standard & Poor's Ratings Services.
"Subordinate Series" will mean any series that is subordinated in right of
payment, in whole or in part, pursuant to the Series Supplement with respect to
such series, to one or more series.
"Trust" will mean the trust created by the Pooling and Servicing Agreement,
the corpus of which consists of the Receivables existing as of the Cut-Off Date
or thereafter created and all monies due or to become due with respect thereto,
all proceeds (as defined in Section 9-306 of the UCC as in effect in the
Applicable State with respect to each such Receivable) of the Receivables, such
funds as from time to time are deposited in the Investor Accounts and the
benefits of any Credit Enhancement with respect to any series then outstanding.
"Trust Distribution Date" will mean November 10, 1993 and the tenth day of
each calendar month thereafter, or, if such tenth day is not a Business Day, the
next succeeding Business Day.
"Trustee" will mean U.S. Bank National Association (formerly First Bank
National Association, successor trustee to Bank of America Illinois, formerly
Continental Bank, National Association), the institution executing the Pooling
and Servicing Agreement and Series Supplement as Trustee, or its successor in
interest, or any successor trustee appointed as provided in the Pooling and
Servicing Agreement.
"UCC" will mean the Uniform Commercial Code, as amended from time to time,
as in effect in any specified jurisdiction.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered investor
certificates (collectively, the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Clearstream
Banking or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Clearstream Banking and Euroclear will be conducted in the ordinary way
in accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice.
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream Banking or Euroclear and
DTC Participants holding investor certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of
Clearstream Banking and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Clearstream Banking and Euroclear
will hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior Trust issues. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Clearstream
Banking or Euroclear accounts will follow the settlement procedures applicable
to conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds using the procedures applicable
to prior Trust issues.
Trading between Clearstream Banking Customers and/or Euroclear
Participants. Secondary market trading between Clearstream Banking Customers or
Euroclear Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading between DTC seller and Clearstream Banking or Euroclear
purchaser. When Global Securities are to be transferred from the account of a
DTC Participant to the account of a Clearstream Banking Customer or a Euroclear
Participant, the purchaser will send instructions to Clearstream Banking or
Euroclear
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through a Clearstream Banking Customer or Euroclear Participant at least one
business day prior to settlement. Clearstream Banking or Euroclear will instruct
the respective Depositary, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date, on the basis of actual days elapsed and a 360 day year. Payment will then
be made by the respective Depositary to the DTC Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Clearstream
Banking Customer's or Euroclear Participant's account. The Global Securities
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Global Securities will accrue from, the
value date (which would be the preceding day when settlement occurred in New
York). If settlement is not completed on the intended value date (i.e., the
trade fails), the Clearstream Banking or Euroclear cash debit will be valued
instead as of the actual settlement date.
Clearstream Banking Customers and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream Banking or Euroclear.
Under this approach, they may take on credit exposure to Clearstream Banking or
Euroclear until the Global Securities are credited to their accounts one day
later.
As an alternative, if Clearstream Banking or Euroclear has extended a line
of credit to them, Clearstream Banking Customers or Euroclear Participants can
elect not to pre-position funds and allow that credit line to be drawn upon to
finance the settlement. Under this procedure, Clearstream Banking Customers or
Euroclear Participants purchasing Global Securities would incur overdraft
charges for one day, assuming they cleared the overdraft when the Global
Securities were credited to their accounts. However, interest on the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period may
substantially reduce or offset the amount of such overdraft charges, although
this result will depend on each Clearstream Banking Customer's or Euroclear
Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Clearstream Banking Customers or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participant a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Clearstream Banking or Euroclear seller and DTC
purchaser. Due to time zone differences in their favor, Clearstream Banking
Customers and Euroclear Participants may employ their customary procedures for
transactions in which Global Securities are to be transferred by the respective
clearing system, through the respective Depositary, to a DTC Participant. The
seller will send instructions to Clearstream Banking or Euroclear through a
Clearstream Banking Customer or Euroclear Participant at least one business day
prior to settlement. In these cases, Clearstream Banking or Euroclear will
instruct the respective Depositary, as appropriate, to deliver the bonds to the
DTC Participant's account against payment. Payment will include interest accrued
on the Global Securities from and including the last coupon payment date to and
excluding the settlement date on the basis of actual days elapsed and a 360 day
year. The payment will then be reflected in the account of the Clearstream
Banking Customer or Euroclear Participant the following day, and receipt of the
cash proceeds in the Clearstream Banking Customer's or Euroclear Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the Clearstream Banking
Customer or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
Clearstream Banking Customer's or Euroclear Participant's account would instead
be valued as of the actual settlement date.
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Finally, day traders that use Clearstream Banking or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Clearstream
Banking Customers or Euroclear Participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Clearstream Banking or Euroclear for one day
(until the purchase side of the day trade is reflected in their Clearstream
Banking or Euroclear accounts) in accordance with the clearing system's
customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Clearstream Banking or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Clearstream
Banking Customer or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Clearstream Banking or Euroclear (or through DTC if the holder has an address
outside the U.S.) will be subject to the U.S. withholding tax that generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (i) each clearing system, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business in the chain of intermediaries between such
beneficial owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes one
of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Holders (Form W-8). Beneficial owners of investor
certificates that are non-U.S. Holders can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the beneficial owner becomes a United States citizen or resident during the
period to which the statement relates, or certain other changes in circumstances
occur, such change must be communicated to the appropriate party within 30 days
thereof. Form W-8 is generally effective for three calendar years, but a new
certificate may be required to be filed by the recipient each time a payment is
made.
Exemption for non-U.S. Holders with effectively connected income (Form
4224). A non-U.S. Holder, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected With the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Holders resident in treaty countries
(Form 1001). Non-U.S. Holders that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption, or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Holders (Form W-9). U.S. Holders can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, its agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency) an investor certificate.
Treasury Regulations, which will be applicable to payments made after 2000
(with certain transition rules), provide for the unification and simplification
of certain current certification procedures. Under these regulations, a Form
W-8BEN will replace Form 1001 and a Form W-8ECI will replace Form 4224 and
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become the necessary forms to obtain a withholding exemption or reduction for
non-U.S. Holders. Further, pursuant to these new regulations, special rules
permit the shifting of primary responsibility for withholding to certain
financial intermediaries acting on behalf of beneficial owners. Although a
beneficial owner will be required to submit a Form W-8BEN or a Form W-8ECI to
such an intermediary, such intermediary generally will not be required to
forward the Form W-8BEN or Form W-8ECI received from such beneficial owner to
the withholding agent. Both U.S. Holders and non-U.S. Holders are urged to
consult their own tax advisors with respect to these new regulations.
The term "U.S. Holder" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any state, (iii) an estate the income of which is includible in
gross income for United States tax purposes, regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more United States
persons have the authority to control all substantial decisions of the trust
(or, under certain circumstances, a trust the income of which is subject to
United States federal income taxation regardless of its source).
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to U.S. or non-U.S. Holders of the Global
Securities. Investors are advised to consult their own tax advisors for specific
tax advice concerning their holding and disposing of the Global Securities.
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